Office Depot to Pay $68.5 Million to Settle False Claims Charge

More than 1,000 cities, counties, school districts and other government entities in California – including Los Angeles and Santa Clara County – will share in a $68.5 million settlement paid by Office Depot for allegedly overcharging them for office supplies.


The settlement agreement — which was filed in Los Angeles Superior Court – resolves a whistleblower lawsuit filed by former Office Depot employee — David Sherwin.

Office Depot was represented by Daniel Katz of Williams & Connolly in Washington, D.C.

Sherwin alleged Office Depot failed to give most of its California government customers the lowest price it was offering any government customer as required under its contracts. Other pricing misconduct also was alleged.

“David Sherwin’s insider knowledge and his determination to do the right thing were the most important factors in bringing Office Depot’s alleged misconduct to light,” said Stephen Hasegawa, a San Francisco whistleblower attorney with Phillips & Cohen LLP, which represented Sherwin. “He worked tirelessly on his own and with his lawyers for several years to try to prove Office Depot had overcharged its government customers. Even after he was diagnosed with terminal cancer, he continued to assist in the prosecution of the lawsuit.”

Sherwin died from cancer last year, only a month after testifying in the lawsuit.

The California entities participated in the US Communities purchasing program, which was set up to allow state and local governments across the country to leverage their combined purchasing power by appointing a single public entity to negotiate a contract with a vendor on behalf of all US Communities members.

Participants in the contract are guaranteed to receive Office Depot’s best available prices for government purchasers, according to Sherwin’s complaint.

But Office Depot allegedly gave Los Angeles, Santa Clara and the other California entities that are part of the settlement a lower discount rate than other government entities were given.

“Rather than solicit competitive bids each time they needed office supplies, cities and schools participated in the purchasing program with Office Depot with the understanding that they were being offered the best price the company was giving any government entity,” said Eric R. Havian, a whistleblower attorney in Phillips & Cohen’s San Francisco office. “Not only did Office Depot allegedly overcharge California entities, according to our lawsuit, it also instructed company account managers to manipulate their government customers into agreeing to purchases that were much more expensive than the contract allowed.”

The qui tam lawsuit was filed under the California False Claims Act in 2009 in Los Angeles Superior Court.

The law rewards whistleblowers 15 percent to 33 percent of the amount recovered when the entity intervenes in the case and 25 percent to 50 percent when the entity doesn’t join.

Those amounts are paid by each entity from its share of the recovery and in this case varied by entity.

Sherwin’s estate will receive the reward.

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