City alleges it was overcharged millions on office supplies from Office Depot

December 7, 2012 3:47:21 PM PST
The city of Houston says a store you've likely shopped at bilked the city out of millions of your tax dollars. An audit released late Friday afternoon accuses Office Depot of overcharging city taxpayers for more than 4 years.

In all, the city says it was overcharged more than $6 million and there's suspicion the overcharging was no accident.

This is the latest in a string of complaints against Office Depot. Cities across the country have alleged similar overcharging. Much of it first brought to light by a former Office Depot employee who's notified cities across the county of potential problems -- issues now confirmed by the city of Houston.

Who would think that a few cents here on paper, and a few cents there on pens or cartridges or tape, would somehow add up to millions and millions of dollars? City of Houston Controller Ronald Green does.

"This wasn't nickels and dimes on Office Depot's part?" we asked Green.

"Not at all," he replied. "We think an upwards of $6.5 million, on the high end."

According to the audit, thousands of supplies had no price on city invoices from Office Depot; other items had prices that changed without reason; and some items were delivered to the city without the proper discounts applied.

It was so frequent and so widespread that, Green says, there's no way it was an accident.

"It opened up the door really for a lot of fraud, if you will," Green said.

"That's a strong word," we said.

"And I think it is," Green said. "I think someone knew what was going on here."

"And they made a lot of money of the taxpayers of Houston?" we asked.

"They made a lot of money," he said.

Here is just one of the irregularities the city auditor found: The first time the city bought easel pads, it paid $7.50 under this Office Depot contract. Then the auditor says the price climbed to $31.49, then dropped down to $30.99, and then back again to $7.50, before climbing again to $30.99 toward the end of the contract. All the price change were without explanation, says the auditor, and while the city should've been getting the cheapest price available.

"The vendor should be successful and make money, and we're for that. But the whole thing should be clear, it should be up front and then it should be honored," city of Houston auditor Dave Schroeder said.

Houston is far from the only city alleging overcharging by Office Depot.

According to government audits available online and press reports nationwide, Dallas settled with the company for $1.7 million, Florida for $4.5 million; Phoenix says it was overcharged by $5.3 million, while San Francisco alleges $4.25 million. Add in some other smaller cities and the alleged nationwide overcharges easily top $16 million nationwide.

Now Houston wants cash, too.

"I think that there is some nefarious intent on the side of Office Depot. We've been shown that by the way they've responded to us and not being transparent in providing information," Green said.

In a written reply to the Houston audit, Office Depot denies the charges and challenges the way the audit was conducted. The company says:

    "The City of Houston auditor's assertion that the City was entitled to certain additional discounts is simply wrong. The auditor's report rehashes old claims originally made by a disgruntled former employee, that are based on inaccurate legal interpretations of Office Depot's former contract that the City was not a party to and which contract expired at the end of 2010.

    "These very claims were considered and expressly rejected by the Florida Attorney General's office back in 2010, after it conducted a two-year investigation into the same allegations. Office Depot cooperated with the City of Houston's auditor and appreciated the City's patronage of Office Depot on the contact."


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