Archive for November, 2010

Friday, November 12th, 2010

Office Depot last month agreed to pay $1 million to
settle charges by the Security and Exchange Commission
(SEC) that it selectively signaled to analysts
that its earnings would fall short of earnings estimates
ahead of their official public release.
In addition, CEO Steve Odland and the company’s
then-chief financial officer Patricia McKay also agreed
to pay $50,000 each to settle with the SEC. Office
Depot, Odland and McKay agreed to the settlement
without admitting or denying wrongdoing.
The SEC’s charges relate to calls made to analysts
and investors near the end of Office Depot’s second
quarter in 2007.
The SEC charged that Odland and McKay discussed
at that time how to encourage analysts to revisit their
analysis of the company.
Office Depot then made a series of one-on-one calls
to analysts and while not directly stating that it would
not meet analysts’ expectations, this message was
signaled with references to recent public statements
of comparable companies about the impact of the
slowing economy on their earnings, the SEC charged.
Analysts also were reminded of Office Depot’s prior
cautionary public statements.
Analysts promptly lowered their estimates for the period
in response to the calls. Office Depot did not regularly
initiate these types of calls to all analysts
covering the company, the SEC said.
“Office Depot executives selectively shared information
with analysts and the company’s largest shareholders
in order to manage earnings expectations,”
said Robert Khuzami, director of the SEC’s Division of
Enforcement. “This gave an unfair advantage to favored
investors at the expense of other investors and,
as today’s action shows, is illegal.”
The SEC also charged Office Depot with overstating
net earnings in its financial statements for the third
quarter of 2006 through the second quarter of 2007
as a result of accounting violations.
The SEC said Office Depot prematurely recognized
approximately $30 million in funds received from vendors
in exchange for the company’s merchandising
and marketing efforts, instead of recognizing the
funds over the relevant reporting periods in a manner
consistent with Generally Accepted Accounting Principles.
In November 2007, the company restated those financials
and announced a material weakness in its internal
controls over financial reporting, the SEC said.
Four days after details of the settlement were disclosed,
Odland resigned from the company, “by mutual
agreement” with the board. No further details
were provided in the announcement on the reasons
for his departure.
NOVEMBER

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