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Office Depot settles SEC case for $1m

Associated Press / October 22, 2010

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WASHINGTON — Office Depot Inc. has agreed to pay $1 million to settle Securities and Exchange Commission charges that it overstated earnings.

Office Depot neither admitted to nor denied the allegations.

The Boca Raton, Fla., company was accused of overstating earnings from mid-2006 through mid-2007 and of letting select investors and analysts know that it would not meet earnings estimates for the second quarter of 2007.

In addition to the company paying a fine, chief executive Stephen Odland and former chief financial officer Patricia McKay will pay civil penalties of $50,000.

In the second quarter of 2007, Office Depot executives made a series of one-on-one calls to analysts, the SEC said in a federal lawsuit filed in Miami. The executives did not directly say Office Depot wouldn’t meet expectations, but signaled as much by referring to public statements by companies in a similar situation, according to the SEC.

Analysts lowered their earnings estimates in response to the calls.

The SEC said the executives encouraged the company to conduct the calls but did not participate in them directly. Others made the calls even after McKay was told some analysts had concerns about the lack of public disclosure, the SEC said.

Six days after the calls began, Office Depot filed documents with the SEC saying that earnings would be reduced because of weakness in the economy.

The selective sharing of information “gave an unfair advantage to favored investors at the expense of other investors and, as today’s action shows, is illegal,’’ SEC enforcement director Robert Khuzami said.