The Securities and Exchange Commission has begun a formal investigation into employee misuse of trade promotions at OfficeMax, for as much as $4.3 million.
OfficeMax began an internal investigation in December 2004 when a vendor complained that specific employees had inappropriately requested promotional payments, and falsified supporting documents for those payments in 2003 and 2004. OfficeMax found that certain employees had fabricated documents for about $3.3 million in claims billed to the unnamed vendor. OfficeMax also found some rebates and payments from vendors were reported as income before the payments occurred—in the end, a miscalculation of $4.3 million.
OfficeMax fired six employees and told the SEC that it had overstated its net operating income for the first nine months of fiscal 2005 by $4.3 million. The retailer also reviewed all outstanding vendor claims and receivables; and converted “a substantial portion” of vendor credits to standard agreements that “emphasize purchase volume credits over promotion and event driven credits, thereby ensuring the use of objective criteria to determine when a credit has been earned,” per OfficeMax documents filed with the SEC.
The company also is improving accounting and merchandising personnel training on vendor income policies, and making a senior executive responsible for regularly reviewing vendor credits.
Itasca, IL-based OfficeMax said it will cooperate fully with the SEC investigation.
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