When executives at Office Depot realized they would fall short of their quarterly earnings estimate in 2007, they allegedly dropped hints to analysts and institutional investors in a series of phone calls. These calls were the subject of an SEC investigation that led to charges now being settled for $1 million. The SEC charged the company with violating fair disclosure regulations as well as accounting violations. CEO Stephen Odland and former CFO Patricia McKay will each individually pay $50,000 as part of the settlement.

The charges were not that Office Depot executives directly told analysts privileged information; rather, the charges were that the message was veiled but clearly hinted. The SEC charged Office Depot with violating Section 13(a) of the Exchange Act and Regulation FD, as well as allegedly prematurely inflating operating profit. These acts “gave an unfair advantage to favored investors at the expense of other investigators and, as today’s action shows, is illegal” said Robert Khuzami, Director of the SEC’s Division of Enforcement. 

Office Depot was represented by Daniel Shea of Hogan Lovells. John Sturc of Gibson, Dunn & Crutcher represented CEO Odland, and Charles Mills of K & L Gates represented McKay, the CFO. The SEC's case was handled by Steven Meiner, Kathleen Strandell, Chad Alan Earnst, Eric Busto, Amie Berlin, Bob Levenson, Teresa Verges, and Yolanda Gonzalez.

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