Nov 5, 2009 7:58 pm US/Pacific
On The Money: Pricey Paper Trail
SACRAMENTO (CBS13) ―
When the State of California signed a $75 million contract with Office Depot to buy office supplies at a discount, it was supposed to be a good deal for taxpayers. But Assemblyman Ira Ruskin says it didn't turn out that way.
"And what I found really surprised me," the Bay Area Assemblyman told CBS 13. "It kind of shocked me."
When Ruskin scrutinized the contract, he immediately noticed something was wrong.
"We know there was at least $2.5 million in overcharging," Ruskin said. Then he added, "It may have been a lot more."
California's Department of General Services (DGS) was the overseer of the program.
"We conducted a six month audit," said Eric Lamoureux, Manager of Media Relations for the Department of General Services. "We realized there were a significant amount of overcharges by Office Depot. And they in turn settled with us for two and a half million dollars."
But California should be getting even more money back, according to former Office Depot manager David Sherwin of Florida, who left Office Depot in April of this year and blew the whistle on the company.
"Office Depot has paid them back two and a half million dollars," Sherwin stated. Then he added, "There's probably another two to two and a half million (dollars) they should be paid back in straight overcharges."
The DGS audit also found state agencies bought items that had nothing to do with office supplies.
DGS Manager Eric Lamoureux told CBS 13, "There were items that had been purchased by other state agencies that were not supposed to be purchased as part of that contract. Such things as televisions, refrigerators."
State agencies also bought bandages, candy and various food items that were banned from the contract, adding up to at least $124,000 worth of stuff, according to the DGS audit.
But at the Capitol, there's growing concern that DGS should have caught this sooner.
"At best, this was a shoddily made, shoddily overseen contract," Assemblyman Ruskin told CBS 13. "At worst, it was intentional."
Office Depot denies any wrongdoing and says whistleblower David Sherwin was terminated for workplace misconduct. The company insists the two and a half million dollars it paid to California was not a refund for overcharges, but rather done, "in the spirit of cooperation and customer satisfaction."
Office Depot says it is cooperating with investigations by California and five others states, including Florida, Texas, Ohio, Colorado and Missouri, over allegations of overcharging.
In a statement to CBS 13, the company says, "Office Depot continues to work with small business partners to offer superior products and services to government agencies across the State of California."
But even though California's contract with Office Depot has expired, CBS 13 has learned some state agencies continued to buy office supplies there and may not have gotten the discounts they thought they were getting.
The Department of General Services says California saved 30% in discounts over the life of the contract. Yet critics are calling for a new, independent audit and CBS 13 has learned they will get one. CBS 13 will have more on that, coming up Friday at six p.m.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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