Office Depot Inc., its chief executive and a former executive agreed to collectively pay more than $1 million to settle regulator’s charges of improper disclosures, the Securities and Exchange Commission said Thursday.
The SEC had accused the company, its CEO Stephen Odland and former chief financial officer Patricia McKay of conveying to analysts and big investors that the company would not meet analysts’ earning estimates for the second quarter of 2007.
Shares of the second-largest U.S. retailer of office supplies closed down 0.85 percent, at $4.65, Thursday.
According to the SEC, company executives discussed how to encourage analysts to revisit their second-quarter forecasts. The office supplier then signaled to analysts it would not meet expectations and analysts lowered their estimates.
The SEC said these communications violated “Reg FD,” a disclosure rule put in place in 2000 to prevent corporate executives from selectively disclosing information to analysts and investors.
According to the SEC, the executives were not present during the calls, but were aware of analysts lowering their estimates and encouraged the calls to be completed.
Although public companies routinely talk to their analysts, companies cannot selectively give them nonpublic material information.
The case “reaffirms that (companies) can’t share material nonpublic information by signaling with analysts without telling all shareholders,” said Chad Alan Earnst, assistant regional director with the SEC’s Miami office.
The SEC said the company did not directly state that it would not meet analysts’ expectations. However, it conveyed the message with references to other companies’ statements on the impact of the slowing economy on their earnings.
Analysts were also reminded of Office Depot’s prior cautionary public statements, the SEC said.
Office Depot agreed to pay $1 million to settle the disclosure violations and unrelated accounting violations.
The company was charged with overstating its net earnings in its financial statements for the third quarter of 2006 through the second quarter of 2007. The company restated results in November 2007. In settling, Office Depot did not admit to or deny any wrongdoing.
Odland and McKay agreed to each pay $50,000 to settle the disclosure charges without admitting or denying any wrongdoing, according to the agency. Odland and McKay were not charged in connection with the company’s accounting violation.
Office Depot, which disclosed the settlement in a regulatory filing, said in an e-mail that it had no further comment at this time. A lawyer for Odland had no comment. A lawyer for McKay had no comment either.
