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Student books cost extra at SPC Clearwater campus

ST. PETERSBURG — Bob Stubblefield started this war. For two years, the manager of St. Petersburg College's Clearwater bookstore beat his head against the wall and got nowhere.

He accused his bosses at Follett Higher Education Group, the largest textbook seller in North America, of systematically overcharging SPC students.

"The students and other customers have never been compensated for this scam," he wrote to company managers. "Follett senior management involved … in these overpricing procedures should be ashamed of themselves and severely punished. …"

His bosses never told him he was wrong; they just ordered him to stop complaining. When he kept on, they fired him for insubordination.

Next, he met with top SPC administrators and lawyers. He walked them through internal Follett documents, and he invited them to call with questions.

"It was a lot of numbers, and I can understand being baffled," he said. "But in 10 months, not one question?"

Stubblefield next brought his documents to the St. Petersburg Times. They show:

• For seven years, Follett charged more than the 25 percent profit margin allowed by its contract with SPC. Book by book the overcharges ranged from less than $1 to more than $14. Multiplied by thousands of students across seven years, the overcharges totaled more than $800,000.

• SPC made extra as well, because it got commissions on each sale. In all, SPC made about $80,000 extra off its students.

• Several other colleges in Florida have limited Follett to 25 percent profit and not accepted contract language that would require students to pay for shipping and other charges, but SPC has not. Its latest contract allows Follett to make 30 percent profit, plus 2.5 percent for shipping.

"Many of our students work minimum wage jobs and go to college on loans," Stubblefield said. "Overcharging them for textbooks that are already so expensive really eats at me."

Follett spokesman Tom Kline said the company investigated Stubblefield's complaints and determined them to be unfounded. He said Follett's contract with SPC allowed extra freight charges. He said the Times doesn't understand the textbook-selling business and is compounding Stubblefield's error by giving credence to his unfounded allegations.

Follett honors all its agreements, Kline said, and specifically, "Follett honored each agreement with St. Petersburg College."

SPC said the same: "The college did not confirm any violation of the contract," said spokesman Mike O'Keeffe.

"The losers are the students,'' Stubblefield said, "which surely matters to someone besides me."

• • •

Stubblefield's allegations were not the first. Follett had faced related issues at other schools.

In 1998, at the university's request, Follett paid the University of Tennessee $380,000 for nine years of contract violations, which the company blamed on an area manager. In 2003, the manager of a Follett bookstore near Purdue University was convicted of price-fixing. In 2006, students at Daytona Beach Community College filed a federal lawsuit, later dismissed, that accused the bookseller and the college of violating their contract and increasing profits on the backs of students.

Stubblefield alleged the same at SPC.

Now 69, he is a lifetime removed from his 40s, when he was president of Medallion, a Miami-based patio furniture manufacturer. Then, he made six figures and jetted to company showrooms in Los Angeles, New York and Chicago. He drove a Porsche convertible and drank Stinger nightcaps.

By the late 1980s, divorced with a grown daughter, he quit his job and moved to Tallahassee, where his sister lived, to lead what he calls "a sober and examined life." Once or twice a day for 10 years, he attended Alcoholics Anonymous meetings.

According to his AA sponsor of more than 20 years, Stubblefield started each day meditating at 4 a.m., then worked out in the gym and reported to his new job at the Follett bookstore in the Student Activities Center at Florida State University. He managed the bestseller novel section.

His bosses saw that their $7-an-hour employee was an ace at running a retail business. In 1993, Follett promoted Stubblefield to branch manager of SPC Clearwater and paid for him to relocate. He was 53.

Within a few years, the company was sending potential managers to train in Stubblefield's store.

In 1998, after Follett's $380,000 payment to the University of Tennessee for underpaying students who sold back books, Stubblefield says company auditor Greg Leppert told him about overpricing. Leppert, who had come to St. Petersburg to audit the bookstores, said that Follett was taking profits beyond what the SPC contract allowed and that he was taking the problem to Follett management, according to Stubblefield. Later, director of auditing John Haynes told Stubblefield he was in St. Petersburg with Leppert in 1998 and supervised Leppert's work.

(The Times tried to reach Haynes and Leppert, who are still with Follett, but Kline said all comment had to come from him.)

Three Follett documents show that prices were lowered.

A June 1999 e-mail from Follett's regional manager told SPC store managers that "the shift in margin should now take effect … converted down." A budget report said the 2000 budget "reflects adjustments for change in text pricing policy (1%). …'' A purchase analysis report showed 26 percent profit margins decreased to 25 percent.

Follett declined to comment about the reductions.

The lower prices didn't last. By 2001, according to purchase reports and invoices, the profit margin climbed back up beyond 25 percent.

Between 2001 and August 2004, according to calculations based on Follett company documents, the overcharges to students totaled more than $600,000. Added to the 1995-1999 overcharges of about $50,000 a year, Follett took $800,000 more than the contract allowed.

Students getting a two-year degree at SPC between 1995 and 1999 on average overpaid about $25 for textbooks. Students there for a two-year degree between 2001 and mid 2004 overpaid for textbooks by an average of about $60.

Kline said the company got only what its contract with SPC allowed.

At the heart of the dispute is whether Follett was allowed to charge extra for freight, beyond the 25 percent cap.

The contract from 1995 to mid 2004 said: "All books are sold at a price no higher than the publisher's list price, or a 25% gross profit margin. …''

And: "The Company agrees that the selling price of all new textbooks and used books will include all transportation and handling costs. …"

Kline said that meant transportation costs were not included and could be added to the 25 percent cap on profit: "Follett was authorized to add freight and handling charges to the 25% margin as allowed under the pricing provisions of the contract,'' Kline said.

Said Stubblefield: "The contract says the exact opposite — that these charges must be included in the 25 percent cap, which is the selling price."

• • •

Kline said that if there were any doubt that transportation costs were not included and could be added, a letter from Follett president Jim Baumann, dated June 27, 2000, made it "absolutely clear.'' Addressed to SPC administrator Sylvia Wren, it began: "A change in our textbook pricing policy is the subject of this letter.'

"Since our business cannot continue to absorb costs that result in lower margins … we have decided to adopt the retail standard of including freight … in our calculation of retail price,'' Baumann wrote.

Kline said the Baumann letter in 2000, which said the company would add freight charges, proved that the contract already allowed it.

"The letter made absolutely clear that Follett was authorized to add freight and handling charges to the 25 percent margin as allowed under the pricing provisions of the contract,'' Kline said.

The college could not locate the Baumann letter, which Follett provided to the Times. SPC said Wren didn't respond to it.

• • •

In May 2001, Follett chose Stubblefield over 300 community college store managers for its "most prestigious award,'' the P.R. Litzsinger Store Manager of the Year Award. At Follett's annual convention, at Disney World's Coronado Springs Resort, the company presented him a marble plaque and an 18-carat gold and stainless steel Rolex.

• • •

Three years after Baumann's letter, SPC administrators were confused about pricing. In October 2003, an SPC administrator wrote Follett's regional manager asking why a book that should cost $82.66 was selling for $84.50.

The Follett manager answered that the extra 2 percent was for freight.

"I was aware of the 25 percent retail margin,'' the SPC administrator wrote back, "but am not familiar with the freight initiative."

In July 2004, a parent complained to SPC about high textbook prices. The purchasing director at SPC e-mailed a Follett regional manager that a chemistry book was bringing a 30 percent profit. It cost $218; under the 25 percent cap it should have cost $203.06. "I don't understand this," he wrote.

The Follett manager replied: "If the desired margin is 30%, divide the cost price by .70."

The bookseller and college signed a new contract in August 2004, which is still in effect today, with a few amendments. It said Follett could make 30 percent on most textbooks, plus the "freight initiative.''

Since 2004, other Florida colleges have limited the bookseller to its standard 25 percent profit cap and refused to sign Follett contracts that pass onto students the costs of freight, text packages and books that don't sell. Among them: Florida State College, Tallahassee Community College and the universities of Florida, Florida State, Miami and North Florida.

O'Keeffe, the SPC spokesman, said letting Follett charge students more than the 25 percent cap "reflected the trends that were occurring."

• • •

On Sept. 25, 2006, two Daytona Beach Community College students filed a federal class action lawsuit that said Follett overpriced its books.

The students said the college looked the other way because overpricing meant the school got more commission money.

"Defendant Follett and Defendant College have been unjustly enriched by Defendant Follett's systematically overcharging and underpaying Plaintiffs and the Class, which consists primarily of students,'' their initial complaint said.

Follett asked Stubblefield to reassure SPC administrators that nothing similar was happening there. Stubblefield refused.

The judge dismissed the Daytona case in 2007, ruling that the students did not show they had standing to sue over the contract between the college and the bookseller.

• • •

In an August 2007 e-mail to the Follett area manager, Stubblefield called Follett's new head of the SPC bookstores "a jerk." A Follett vice president messaged Stubblefield that name-calling was "very unprofessional."

Stubblefield responded that what was "unprofessional" was the years the company overcharged SPC students. In October 2007, Follett put him on probation for "a developing pattern of insubordination'' and suggested he see a company psychologist.

Stubblefield requested an investigation of what he termed his "discriminatory treatment" and years of "unacceptable and illegal billing practices" at SPC. A human resources manager wrote back that his complaints about discrimination were not substantiated. She did not address the billing practices.

"No one at Follett ever told me I was wrong about the price gouging," Stubblefield says. "They just ignored it or told me to shut up."

Kline, the company spokesman, said that's not true. "Far from attempting to bury Mr. Stubblefield's concerns, Follett conducted vigorous inquiries and found his accusations to be unfounded."

• • •

In September 2008, Stubblefield again e-mailed Follett senior managers about what he said were improper pricing practices and copied John Haynes, the auditing supervisor who knew about pricing issues at SPC at least since 1993, when Stubblefield arrived.

Now the company's auditing director, Haynes wrote Stubblefield back and included a Follett Values award for "integrity." It said: "I commend Mr. Stubblefield on the recent e-mail that I received concerning past pricing issues at his location. It took a lot of courage and dedication to report this prior practice."

Stubblefield saw the award as significant: "The director of auditing at Follett, who knew the details of the billing practices, was supporting me. He was saying I knew exactly what I was talking about."

Kline said rewarding Stubblefield for stepping forward shows that the company did not ignore his complaints. They honored him for his intentions, even though he was wrong.

Stubblefield says he knew his fellow bookstore managers had heard about his troubles, and he wanted them to see the auditor's award, which he took as vindication. He e-mailed copies to 16 other managers.

A Follett vice president ordered him to stop disrupting company operations, and a company attorney wrote that he had "sufficiently lodged his concerns about pricing'' and "no further action is required.''

Six weeks later, Stubblefield e-mailed a Follett human resources executive that for 15 months he had alerted "numerous individuals at Follett" about the company overcharging for textbooks, but the company had never made good. "The thousands of students at SPC deserve better.''

At the same time, he also wrote nine SPC administrators, including president Carl Kuttler. The e-mail subject line said: "Follett St. Petersburg College Bookstores Overcharge Students on Textbooks."

Follett fired him two days later.

A week after that, at SPC's request he met with two college lawyers, a college vice president and an associate vice president. He walked them through Follett documents that showed profit margins beyond 25 percent. He showed them a 1995 invoice with higher profit margins and two purchase analysis reports that showed the practice continuing until 1999.

He showed them a 1999 e-mail from Follett's regional manager ordering the overcharge to stop. He showed them his 2008 "integrity award'' from the chief auditor, commending him for stepping forward about "past pricing issues." He asked SPC officials to compare the documents and the contract and to call if they had questions. They thanked him. Nobody contacted him.

O'Keeffe, the SPC spokesman, said, "We have not seen any evidence that Follett got more than the 25 percent profit allowed."

He added: "If students were overcharged, it is the college's position that if Mr. Stubblefield had told us (at the time it happened), the matter would have been addressed immediately.''

In September, the Times asked if SPC administrators wanted to see documents that reflected further overcharging between 2001 and 2004. O'Keeffe relayed the reply from college attorney Syd McKenzie: "No."

• • •

How does SPC spend its share of the textbook money?

Textbook sales accounted for more than $2.6 million in commission money to the college for two fiscal years, 2007 and 2008. Half, about $1.3 million, covered a deficit for the Palladium Theater in downtown St. Petersburg; $600,000 went for student assistant salaries; more than $90,000 helped administrators, staff and students take "international initiatives.''

In 2008, some of the money helped send SPC president Kuttler, International Studies director Violetta Sweet and board of trustees chairman Deveron Gibbons to Russia, Italy and Puerto Rico.

O'Keeffe said the college keeps $4.2 million of its textbook commission money in a reserve fund "to benefit the students.''

• • •

In July, SPC extended its contract with Follett until 2011. Follett agreed to a book exchange and a rental program for SPC students. The contract allowed Follett "no more than a 30% gross margin plus a freight pass-through (2.5%)" and prices "rounded up to the nearest quarter."

A recent SPC audit found the bookseller "in accordance with the contract."

In 1998, an ethics textbook for a required course cost $52.70. Last year it cost $74.50. Now it's $118.75.

In late August, Stubblefield e-mailed SPC administrators that to help students, the college could insist on the 25 percent profit margin cap on new textbooks, as do some other Florida schools. He received no reply.

Kline, the Follett spokesman, wrote the Times in late October: "We are proud of our long relationship with the college and the community and trust both to recognize the truth in this matter."

Times researcher Caryn Baird contributed to this report. Meg Laughlin can be reached at mlaughlin@sptimes.com or (727) 893-8068.

Follett

by the numbers

800+

number of

Follett bookstores

$2.5 billion

annual sales

68

number of Follett

bookstores in Florida

$12 million

2008 sales on the five St. Petersburg College campuses, plus one virtual campus

$1.2 million approximate amount of SPC's commission in 2008

Follett's profits

From the 1995-2004 St. Petersburg College contract with Follett: "All books are sold at a price no higher than the publisher's list price or a 25% gross profit margin. … " Company documents show that for seven years Follett took profits higher than 25 percent:

1995: Six invoices for new texts at SPC Clearwater show overcharges beyond the 25 percent profit.

1996: A purchase report for new texts at SPC Clearwater shows profits at 26.1 percent.

1997: A purchase report for new texts at SPC Clearwater shows profits at 26.7 percent.

1998: A purchase report for new texts at SPC Clearwater shows profit margins at 26.7 percent.

1999: A monthly purchase report for new texts at SPC shows 24 different texts sold at a 26 percent profit.

2000: A budget report shows SPC text prices lowered by 1 percent. Bob Stubblefield said this reduction occurred because of auditors' requests.

2001: An audit shows profit for an order for textbooks above 26 percent.

2002-2004: A purchase summary report for new texts at SPC Clearwater between April 1, 2002, and March 31, 2004, shows profits at 27.5 percent.

July 31, 2004: An income statement shows profits on new texts as high as 36 percent.

SPC isn't alone

A Follett new-text profit margin report dated March 31, 1996, shows profits at eight Florida colleges beyond 25 percent:

St. Petersburg College, Clearwater: 26.9 percent

St. Petersburg College, St. Petersburg: 26.3

St. Petersburg College, Tarpon Springs: 26.3

Edison College, Naples: 25.4

Polk Community College, Lakeland: 25.6

Lake Sumter Community College, Leesburg: 25.6

Barry University, Miami: 26

Saint Leo University, St. Leo: 26.1

St. Thomas University, Miami: 26.2

Rollins College, Winter Park: 27

The public schools on the list — Edison, Polk, Lake Sumter and SPC — had contracts that limited profits to 25 percent, which Follett called "the industry standard." The private colleges — Barry, Saint Leo, St. Thomas and Rollins — did not share contract information.



"Follett senior management involved in establishing and implementing these overpricing procedures should be ashamed of themselves and severely punished or terminated for putting store management and other personnel in this position and jeopardizing their jobs as well as the contract with the college. As you can see from the attachments to this e-mail, this act of defrauding the students and others was intentional and carried out over a long period of time."

Bob Stubblefield, alleging overcharging in an e-mail to Follett executives on Sept. 10, 2007

"We have given you several opportunities to modify your behavior. As a result of your repeated insubordination, disruptive behavior, and general disregard for management and policies, the company has no choice but to terminate you effective today, December 3, 2008.''

Follett, in a letter to Bob Stubblefield

Student books cost extra at SPC Clearwater campus 11/29/09 [Last modified: Sunday, November 29, 2009 1:17pm]
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