Herrera reaches $4.25 million settlement agreement in Office Depot overcharge case

Compensation in cash, purchase credits avoids litigation over failure to apply discounts that City Controller’s audit discovered in 2009

Proposed Settlement agreement with Office Depot.

SAN FRANCISCO (Dec. 14, 2010)—City Attorney Dennis Herrera today announced a settlement agreement with Office Depot, Inc. that will avoid litigation while securing $4.25 million in payment and purchase credits for the City for alleged overcharges and related costs. Herrera initiated the City’s claim in a demand letter to the Boca Raton, Fla.-based office products supplier a year ago, after an audit by City Controller Ben Rosenfield found that the company failed to provide San Francisco with an estimated $5.75 million in contractually mandated discounts for items covered in its five-year, $18 million contract. Office Depot disputed the claim, initially maintaining that overcharges totaling less than $50,000 were the result of accounting errors. Herrera’s proposed settlement is tentative, pending approval by the Board of Supervisors.

Office Depot has faced a number of similar contract disputes recently for neglecting to adhere to discounted pricing plans for government agencies. In June of this year, the company agreed to a $4.5 million settlement with the State of Florida in a statewide contract dispute involving office supply purchases of between $40 million and $100 million annually. Office Depot similarly reimbursed $2.5 million to the State of California in August 2008 for overcharges that occurred among some $57 million in purchases over a two-year period, according to the California Office of General Affairs.

“This is a favorable settlement that avoids the costs and risks of litigation, and compares extremely well to similar settlement totals in much larger statewide contract disputes,” Herrera said. “Our ability to drive a hard bargain on behalf of San Francisco taxpayers owes much to the excellent work of City Controller Ben Rosenfield and his staff, and I’m very grateful to them for the comprehensive audit they performed last year. I also appreciate the efforts of Office Depot to work with us, cooperatively and diligently, to resolve this dispute.”

Under terms of the agreement Herrera’s office negotiated with Office Depot, the company will make a $3,750,000 payment to the City, which will include $100,000 for attorney’s fees and $250,000 for costs incurred by the Controller’s Office to conduct the audit. The company will additionally extend a purchasing credit to the City in the amount of $500,000. Also addressed in the settlement is a $48,915.40 unpaid balance for office supplies, which the City will pay to Office Depot.

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