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December 23, 2014 Contractor Fraud

Office Depot Pays $80 Million to Settle Historic California False Claims Act Case

In a major victory for California taxpayers, office supply giant Office Depot has agreed to pay $80 million to settle claims it unlawfully defrauded several government agencies out of money under contracts for the provision of supplies. The settlement comes on the heels of a settlement with the state of New York alleging similar fraud and price gouging. The lawsuit was commenced by a former accountant working within Office Depot. The lawsuit was unsealed earlier this year, and was immediately joined by several government agencies largely reiterating the relator’s claims. The amount of the relator’s reward is not immediately known; however, the California False Claims Act allows for recoveries of up to 33 percent of the proceeds.

Details of the allegations against Office Depot

Similar to settlements reached with other states, the California case against Office Depot involves several allegations of inflated prices. Under contracts with the state or federal government, private contractors are required to offer the government the best possible price for the goods. If a contractor charges prices above and beyond that charged to the general public, or fails to offer discounts available to other members of the public, False Claims Act liability could trigger.

Here, Office Depot is alleged to have charged California excessive prices for school supplies, stationery, office equipment, and other office products. It is also alleged to have offered the California government an “alternative pricing model” that did not reflect the pricing offered to regular customers or other entities doing business with the company. In addition, Office Depot is alleged to have padded its invoices between itself and manufacturers and distributors in an attempt to pass these inflated fees onto the government for reimbursement. Last, the complaint alleges that Office Depot increased its fees more than two times per year – which is prohibited under the terms of the contract.

Allegations of retaliation

Also in violation of the California False Claims Act, the relator also claims to have been terminated from Office Depot in response to his filing of a whistleblower complaint. Following a report to his superiors about the overcharges, his position was terminated. Oddly, the relator also claims to have been mocked on social media by various Office Depot executives. The result of the wrongful retaliation aspect of the litigation has not been immediately disclosed.

Other allegations of fraud

As noted above, Office Depot recently settled claims of fraud in Florida and New York, and is facing ongoing investigations in Arizona and Texas.

Much like the federal False Claims Act, government entities suing under California’s version may seek treble (triple) damages, as well as a $10,000 penalty per false claim. While not admitting liability, Office Depot maintains its assertion that settling the matter was the best solution for the company in order to avoid additional litigation costs.

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