Office Depot to Pay $80 Million to Settle California False Claims Act Case
Author: Ashley Shaw, XpertHR Legal Editor
November 21, 2014
Office Depot has reached an $80 million dollar settlement with the State of California arising from a whistleblower claim under the state's False Claims Act, with $8.7 million going to the City of Los Angeles alone. Employers can learn a valuable lesson from the Office Depot litigation: employees may be watching and willing to report any potentially illegal activities in the workplace.
The charges against Office Depot stem from claims that the organization overcharged government agencies on office supplies. In states with investigations already settled or currently being investigated, the allegations came to light through the efforts of various whistleblowers.
In California, David Sherwin, an Office Depot accountant, came forward with information regarding questionable dealings on government contracts. The employer's government contract included "most favored public entity" prices on all goods. However, the employer later offered lower prices to other government agencies. It also switched to higher-priced goods and failed to give rebates, along with charging frequent price increases.
The whistleblower claimed that he was fired from Office Depot in 2008 based on his report to superiors about the overcharges. He was also criticized in a YouTube video by an executive who called him a "disgruntled employee." He sued his employer in 2009 under the California False Claims Act for wrongdoings in governmental charges from 2001 to 2011. This state law allows a whistleblower to bring a suit on behalf of the government and then collect a portion of any recovery.
The estate of David Sherwin has yet to settle or drop the case, and may be pursuing additional claims against the employer. In addition, several other states have either reached settlements with the organization or are in the process of investigating claims.
Previously, Office Depot reached a $4.5 million settlement with the State of Florida. The employer is cooperating with investigations in Arizona, Missouri, New York and Texas.
Office Depot maintains that the settlements are in no way an admission of guilt, but instead are a method to bypass the cost of extended litigation and focus on its business.