Additional coverage of this story
NAPLES — Collier County schools Superintendent Dennis Thompson has ordered a review of allegations the district has been overcharged by Office Depot.
The announcement came after the Daily News began asking questions concerning the district waiting for more than a year and a half to review the allegations.
Office Depot credits issued to date:
Lee County government $58,105
City of Cape Coral $51,603
Edison State College $24,234
Sarasota County School District $41,124
Charlotte County government $75,146
City of Naples $12,042
Lee County School District $297,063
City of Pembroke Pines $22,000
The allegations were first leveled in April 2008 by David Sherwin, the Fort Myers man and former Office Depot salesman who sold the district on the company’s national contract for office and school supplies.
“Given all of the allegations swirling around, including claims of potential criminal wrongdoing, as well as the reports pertaining to Lee County, the superintendent, as a matter of due diligence, wanted the district to do a follow-up review,” district spokesman Joe Landon said in an e-mail.
Collier schools spend nearly $900,000 a year on the Office Depot contract, one of three contracts under which the district purchases office and school supplies, said Nancy Sirko, the Collier district’s purchasing director.
If the Collier district were to conduct a full investigation, Sherwin says the district would uncover at least $295,000 in overcharges.
Since Sherwin has come forward with his allegations, seven state four federal agencies have become involved with investigating Office Depot’s government purchasing contracts.
Sherwin has provided documentation indicating he is a whistle-blower in the Florida Attorney General’s investigation.
Furthermore, among at least eight agencies in Southwest Florida that have purchased from the contract, three have received a credit from Office Depot, which denies it overcharged the agencies.
Sherwin asserts the company’s national contract, which the company says is used by more than 10,000 government agencies and nonprofits across the country, is rife with fraudulent schemes. Though his allegations are many, he says the worst is a second pricing option introduced to the contract Jan. 2, 2006.
The second pricing option was sold as coming at a lower cost even though it was more expensive, Sherwin asserts.
Though Office Depot denies the contract was sold in a deceptive manner or that its pricing is in violation of any contract, it has said that most agencies ended up spending more through the second pricing option.
Any agency wanting to be switched back could do so at any time, Office Depot says, and the company has issued credits to agencies that may have been confused.
Nonetheless, when Sherwin said he told purchasing director Sirko and other Collier schools officials they were being duped, he said he was ignored.
Sirko said the district is considering rebidding its contract and did conduct an audit of purchases, although she said the audit didn’t look at the difference between the two pricing options.
That’s because the pricing switch was authorized, she said.
“We did not do an audit to compare pricing between option one and option two, because the switch was made at our request,” Sirko said.
However, Office Depot has been issuing credits to agencies, whether officials at those agencies knew they were on the second pricing option or if they thought the second pricing option was cheaper.
“Each entity advised Office Depot that they were either unaware that Mr. Sherwin had placed them on option two or that they did not know that there could be a difference in the price paid depending on their spending,” a statement from Office Depot said. “As part of our commitment to customer satisfaction, Office Depot extended credits to each entity for the estimated difference between option one and option two pricing.”
Either way, Sherwin says that even a comparison between the two pricing options wouldn’t uncover everything he alleges.
“A straight comparison between option one and option two, without an investigative audit, will only identify about one-third of the overcharges,” Sherwin said. “For Collier County schools to do any kind of due diligence, their audit needs to mirror what is being done by the Lee County School District.”
Lee schools Superintendent James Browder announced last week his district would launch a full investigation into the contract, which the district spent $2.5 million on per year during the period the second pricing option was in place.
Lee schools aside, several local agencies have continued to purchase from Office Depot, despite the allegations, credits and an audit done for Lee County that reported the county was overcharged by $58,105.
Even though that Sept. 2008 audit, which was conducted by the Lee County Clerk of Court’s Office, recommended the county stop purchasing from the contract, the county continued to purchase. The county was receiving its refund through monthly reductions to its Office Depot bill.
On Tuesday, the county accepted bids for a new office supplies contract. Among the bidders was Office Depot, which came in with a total bid just above the lowest bidder, Staples.
Lee County Purchasing Director Janet Sheehan said it could take weeks before the winner of the bid is announced, as prices submitted by the vendors are reviewed.
The cities of Naples, Fort Myers and Cape Coral purchased from the contract in question, as did Edison State College and the Lee County Port Authority.
DAVID SHERWIN/OFFICE DEPOT
The Daily News documents government inquiries into Office Depot's government contract practices as we become aware of them or when they conclude. Many of these inquiries were full-blown investigative audits, while others consisted of government officials calling Office Depot and asking for a refund. For a full listing of all the inquiries, including descriptions of their findings and related documents, click here.
- Number of concluded inquiries: 25
- Number of concluded state-level inquiries: Seven, including two conducted in North Carolina and Florida, and one each in Georgia, Nebraska, California and Missouri.
- Number of second pricing option refunds issued: Nine, not including any refunds issued due to statewide settlements in Missouri or Florida or refunds not disclosed by the government agencies receiving them
- Total amount of second pricing option refunds or credits: $683,679, not including those issued from the $320,000 and $4.5 million accounts set up by the Missouri and Florida attorneys general, respectively
- Total amount of all refunds, credits or other settlement costs: $11,409,295, including the second pricing option refunds, settlements with the states Georgia, California, Florida and Missouri, and a refund paid to the City of Berekely, Calif.
- View the complete list of all concluded investigations, including their findings and related documents here.
When documentation verifying David Sherwin's claims of certain ongoing investigations can be found, they will be added to the list. Currently, Sherwin said the state of Washington's Office of Special Investigations and the Dallas County, Texas fraud auditor are also examining Office Depot's government contracts.
- February 2009: Office Depot releases in its annual report that three federal agencies, the Departments of Defense and Education and the General Services Administration, are working with the Department of Justice in investigating the company’s government contract pricing practices. Sherwin refused comment on the investigation. (Read filing, page 16)
- April 2009: Office Depot releases in its quarterly report that it is also being investigated by the Texas Attorney General's Office in relation to pricing practices, primarily with government customers. (Read filing, page 21)
- April 2009: Detroit Public Schools Inspector General John E. Bell says in the Detroit News that he is looking into the district's purchases through Office Depot's national piggybacking contract with Los Angeles County.
- July 2009: Office Depot announces in its quarterly report that it is also being investigated by the Colorado, California, and Ohio Attorneys General in relation to pricing practices, primarily with government customers. (Read filing, page 30)
- November 2009: Collier County School District Superintendent Dennis Thompson orders a review of allegations the district has been overcharged by Office Depot. The district purchases through the company's national piggybacking contract with Los Angeles County. (Read story)
THE DOCUMENT TRAIL
- Background on David Sherwin: Discharge paper from the Air Force, certificates detailing training received while an inspector general with the Florida Department of Health and Human Services, an article detailing the biggest case Sherwin handled while with HRS, and Sherwin's arrest reports. (Read documents)
- Documents provided by David Sherwin: Beginning with a June 2006 performance review in which Sherwin said he is encouraged to sell L.A. County option two pricing to increase IMU (profit), continuing with a series of e-mails leading up to the one which Sherwin said got him fired (contains explicit language), a cease and desist letter Sherwin said he received from Office Depot (which he ignored), and ending with the minutes of a meeting between L.A. County and Office Depot officials, in which issues with the contract are discussed. Office Depot officials have not confirmed the authenticity of the documents. (Read documents)
- L.A. County Master Agreement 42595: A copy of the original agreement shared by about 10,000 government agencies. (Read contract)
- Second pricing option: A list of the largest agencies using the second pricing option sent to Los Angeles County in October 2008.(Read documents)
- The new pricing option: In February 2009, Office Depot announced it will be doing away with the L.A. County agreement’s two pricing plans, and transition all customers to a new, simpler pricing plan on March 30, 2009. In a release, the company says the new plan will offer "enhanced transparency and accountability." (Read release)
- David Sherwin's communication with state and federal agencies: Beginning with his communication with the offices of the Florida Attorney General and Inspector General, continuing with an e-mail from the Securities and Exchange Commission, and concluding with letters from the states of Pennsylvania, Texas and Alabama. (Read documents)