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As it prepares to conduct an extensive internal audit of its dealings with Office Depot and potential overpayments, the Lee County School District may be in line for a refund from the office supply giant.
If it gets a refund, the Lee district would become the fourth government agency in Southwest Florida to receive a credit from Office Depot in relation to the company’s government contract pricing.
That’s out of at least seven other government agencies in Collier and Lee counties — and more than 10,000 agencies and nonprofit organizations nationwide — that have spent and in some cases continue to spend millions on the exact same contract with Office Depot.
Lee schools Superintendent James Browder said Friday the district will now launch a “full-scale investigation” of its contract with Office Depot.
He said the district will be looking at everything, and didn’t rule out the possibility that district officials may have acted inappropriately.
Browder said he also learned a lesson from the other agencies’ dealings with Office Depot.
Office Depot refunds issued to date:
Lee County government $160,467
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
“That should tell you that we’re not communicating with each other, because after the first one, we should have known,” Browder said Friday, referring to the other agencies that have received a credit. “I believe I have learned a valuable lesson inside of this.”
However, it wasn’t just that the other agencies didn’t contact the district. The superintendent, Lee School Board members and district officials involved with purchasing and auditing had all been sent e-mails for more than a year and a half with concerns about the contract.
Those came from David Sherwin, a Fort Myers man who is the former Office Depot account manager that sold the contract to the district.
Office Depot’s government contract practices are being investigated by seven states. Four federal agencies are involved in investigations of the company, as well. Sherwin has provided documentation from the Florida Attorney General showing he is listed as a whistle-blower in the state’s investigation. He estimates the Lee district is eligible for a credit of more than $240,000.
Browder did take some action after first learning of allegations against Office Depot. In fact, Browder did so before Sherwin began airing his concerns, by initiating a new arrangement that allows district employees to purchase office and school supplies from four different vendors, Office Depot, OfficeMax, Corporate Express, and Fort Myers-based Wallenbrock Office City.
“When we realized there were allegations of controversy, our first step was to re-bid,” Browder said. “Every time I get something on e-mail I forward it to folks inside and say ‘check this out.’ On multiple occasions, I was told we were OK.”
Sherwin said he was contacted by a member of the district’s Professional Standards and Equity Department earlier this week with questions about district employees’ dealings with Office Depot.
Browder acknowledged Friday that district internal auditor Robert Brown had “been brought in late” in regards to examining the allegations.
Asked Friday if any employees had been disciplined in relation to their handling of the allegations, Browder said “not at this time.”
Using his background as a former Air Force and Florida state agency auditor, Sherwin said he came across problems with the massive piggy-backing contract while an account manager with Office Depot in 2006. Though his allegations into the contract are many, he is most vocal about a pricing switch he said increased prices to the government agencies that signed onto it.
Office Depot asserts that the second pricing option was sold to agencies as a simpler way to check prices. Sherwin says he also was told to sell it as a cost savings, something he says was fraudulent.
Brown told the Daily News last week that in its earlier, random spot checks, the district didn’t compare the prices between the two pricing plans. After being told about Sherwin’s allegations, Brown said he would look into the difference between the two pricing options.
But Browder said he decided to conduct the audit announced Friday after discussing the issues with area public officials, including Lee County Clerk of Courts Internal Audit Department Director Chuck Short. In the new audit, Browder said his employees may be working with others outside the district, but couldn’t confirm who that might be.
Lee School Board Vice Chairman Steven Teuber wasn’t critical of Browder’s decision to wait for a full-blown audit until now. He said new information received from Sarasota and Charlotte counties, which Sherwin has said both buy from Office Depot, changed everything for the district, not Sherwin’s dozens of e-mails sharing details about the allegations he first leveled publicly in April 2008.
“I have been reading what he would send us,” Teuber said, after noting that he had never spoken with Sherwin. “But until you get that different perspective, you don’t see it. And when they told us, it really opened up some opportunities for us to look at some things in some new ways ... that really got us to the point where we can find what Mr. Sherwin was trying to tell us in a nondescript way.”
Though the Lee County School District spends more than any other local agency on office and school supplies, about $2.5 million a year, other agencies also purchase from Office Depot.
Those included are Collier County Public Schools, the city of Naples, Lee County government, Edison State College, the Lee County Port Authority, the city of Fort Myers and the city of Cape Coral.
Lee County had Short conduct an audit on the pricing switch. The audit reported about $58,000 in overcharges and credit was received from Office Depot. After simply contacting Office Depot with concerns about the pricing switch, Cape Coral received $51,603 and Edison State College received $24,234.
A statement provided by Office Depot in response to questions relating to the credits acknowledged that the company issued them when asked for.
“As part of our commitment to customer satisfaction, Office Depot extended credits to each entity for the estimated difference between Option 1 and Option 2 pricing based on their spend(ing),” the statement said.
Office Depot denies its pricing is fraudulent or in violation of any contract. Furthermore, the company is quick to point out that Sherwin was fired for workplace misconduct after sending a profane e-mail to company executives.
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)