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Office Depot pays millions over high prices

Santa Clara County is to receive $3 million as its share of a $68.5 million statewide settlement of a dispute with the chain Office Depot about alleged overcharges for office supplies, county officials said Wednesday.

The county and 18 other plaintiffs in California reached the settlement agreement with the Florida-based Office Depot in November in Los Angeles County Superior Court and are waiting for a judge to formally order the payment, assistant county council Danny Chou said.

The county joined the whistleblower case of David Sherwin v. Office Depot, Inc., in 2012 when it discovered Office Depot had not fulfilled a requirement in its contract to sell office supplies at the lowest price available to governments, Chou said.

A former Office Depot sales representative, the late David Sherwin, filed the case in 2009 and made allegations about the company’s sales practices, said Steve Hasegawa, lawyer for Phillips and Cohen, a San Francisco firm that represented the county and other plaintiffs.

Office Depot had signed vendor contracts with a service called U.S. Communities that represented some California cities, counties and school districts and sought to obtain the lowest government pricing for office goods.

U.S. Communities offered the government entities the chance to join a group pricing organization, in this case buying products at a discount from Office Depot without having to put purchasing contracts out to bid, Hasegawa said. But the plaintiffs discovered through Sherwin that they were paying higher prices than those the company charged the City and County of San Francisco in a separate contract, Hasegawa said.

The U.S. Communities signatories were given discounts of 45 percent off regular list price for Office Depot goods, but later learned that San Francisco was getting 70 percent off list, a violation of the agreement to provide the lowest price available, Hasegawa said.

“We alleged in the case that it was fraud that they (Office Depot) chose not to” offer the lowest price, he said. “It was more profitable to sell them at the higher price,” he said. Santa Clara County had its own contract with Office Depot, but like U.S. Communities the county was not given the best price available and so joined the lawsuit, Chou said.

The settlement, Chou said, “will serve as a deterrent to other contractors who might be considering overcharging the county in violation of their contracts.” The plaintiffs sued Office Depot under the California False Claims Act, county officials said. County Counsel Orry Korb said in a statement today the settlement would both recover funds the county lost from overpaying the retail chain and avoid costly future litigation:

“Not only have we sent a message to vendors that they will be held accountable for defrauding the county, we have recovered millions of dollars that can be used to restore critical services that were cut during the recent budget crisis.”

Karen Denning, a spokeswoman for Office Depot in Boca Raton, Fla., did not respond to a request for comment.

In addition to the county, others in the suit against Office Depot include the cities of Azusa, Colton, Corona, Davis, Fontana, Indian Wells, Santa Maria, Shafter and Woodland, the Los Angeles Baldwin Park Unified School District, Elk Grove Unified School District, Merced Union High School District, Monrovia Unified School District, Rowland Unified School District, San Joaquin County Office of Education, Stanislaus County Office of Education and the Stockton Unified School District.

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