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Governments audit Office Depot in search of overbilling

CLEARWATER — From a modest Fort Myers apartment with bare concrete floors, an obsessed whistle-blower named David Sherwin is waging a one-man crusade against his former employer, Office Depot.

He's relentlessly faxing and e-mailing government officials, accusing the Fortune 500 company of ripping off taxpayers by stealthily overbilling local governments for office supplies.

Office Depot says this is all nonsense, and that Sherwin is nothing but a disgruntled ex-employee who got canned for workplace misconduct. Sherwin himself admits that he was fired after he drunkenly sent an e-mail to the company's chief executive saying, "I would like to kick your corrupt ass out of Florida."

But the thing is, more governments are starting to listen to him.

The Florida Attorney General's Office has been investigating Office Depot for a year and a half. Other states are, too. Government agencies in Fort Myers and Naples were refunded more than $130,000 after confronting the company. California got $2.5 million.

In the latest development, Clearwater is now demanding a $166,000 refund. It's the first government in the Tampa Bay area to take action against Office Depot, which sells a lot of pens, paper and printer cartridges to cities, counties and schools in this region.

"We reviewed the purchases we made from them and determined that we've been overcharged due to different pricing schemes," said Clearwater's auditor, Robin Gomez.

Clearwater's audit of its Office Depot purchases has not yet been made public. But the company is firing back, saying the audit is "replete with inaccurate, misinformed and inappropriate statements that are misleading to the public and very damaging to Office Depot's business."

Clearwater says it's willing to sue if necessary.

Might other local cities follow in its footsteps?

"The key is how many other governments have done an audit," said Clearwater City Manager Bill Horne.

Allegations of fraud

Sherwin, who used to be Office Depot's manager of government accounts for Southwest Florida, accuses the company of using bait-and-switch tactics in government purchasing contracts.

Thousands of government agencies across the country buy supplies from Office Depot through an agreement known as the U.S. Communities plan, in which they're guaranteed to pay the company's lowest prices.

In 2006, the company introduced a second pricing option to this contract. Sherwin got his clients to switch to it.

But he says he eventually became convinced that his own company was duping governments, charging them steeper prices and hiding it with a complicated array of pricing plans, jargon and accounting tricks.

It bothered him, he says, because he spent years as an auditor and fraud investigator for the Air Force and Florida. The way he tells it, his inner conflict led to a downward spiral of drinking, insomnia and loathing for his employer, until he finally sent the caustic e-mail that got him fired last year.

"Now I do this full time," he said of his whistle-blowing efforts. "I've contacted over 2,000 agencies across the country."

'Defamatory claims'

Office Depot says Sherwin has made "a host of inaccurate and defamatory claims" against it. It believes that his efforts are being funded by its competitors.

The Boca Raton company denies that its pricing practices are fraudulent in any way. It says the second option of its U.S. Communities purchasing plan was created based on governments' requests for a simpler way to check prices online.

On the "investor relations" page of its corporate Web site, it has posted a lengthy Q&A beginning with the question, Who is David Sherwin?

The rest of the Q&A tackles allegations that have been raised in several states. Office Depot matter-of-factly acknowledges that it's being investigated by Florida, California, Colorado, Missouri, Ohio and Texas, as well as three federal agencies — the departments of Defense and Education and the General Services Administration.

In several cases, the company has returned money to governments, but it says these payments aren't refunds.

"Whenever an issue arises with a customer, Office Depot's primary goal is to satisfy the customer," said company spokesman Jason Shockley. "In some cases, that means that Office Depot has extended credits, not because they were required either by law or contract, but rather as a gesture of goodwill."

That means little to officials like Chuck Short, audit director for the Lee County clerk of court in Fort Myers. Since he found that Lee County had been overcharged $58,000, Office Depot has been paying it back.

"They say it's not a refund," Short said. "Whatever they want to call it, I don't care as long as we get the money back."

The school districts in Fort Myers and Naples have launched investigations.

In the Tampa Bay area, the Pinellas and Hillsborough school districts say they've looked into this, but they don't believe they've been defrauded by Office Depot. The same goes for Hillsborough County's government.

Sherwin claims they're not looking hard enough.

"It's difficult to take the volume of purchases that we're talking about and go through it invoice by invoice," said Short, the Lee County official who has launched a second audit and expects to find more overcharges.

"It takes time. It's a mind-boggling situation. But that's why you have auditors."

Mike Brassfield can be reached at brassfield@sptimes.com or (727) 445-4160.

Governments audit Office Depot in search of overbilling 11/28/09 [Last modified: Saturday, November 28, 2009 10:35pm]
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