Stockholders v Office Max Inc
Office Max Investors Seek $129M in Lost Stock Value
A class action has been filed in the Northern District Court of Illinois against Office Max Inc, (NYSE:OMX) a multinational contract and retail distributor of office supplies, paper, technology products and office furniture, and certain of its officers and directors by stockholders who purchased the company's common stock between November 9, 2004 and January 11, 2005. The action claims that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.
Specifically, the complaint alleges that:
• During a period of at least two years, millions of dollars worth of the Company's sales were fraudulently booked as legitimate sales,
• The Company was using (and manipulating its use of) vendor allowances in order to manipulated the Company's earnings and timing of revenue recognition
• The Company's Q4 2004 results and those beyond were being eroded by the Company's internal investigation costs and the halting of the Company's abusive vendor allowance scheme
• The Company lacked the necessary internal controls to insure all revenue reported complied with generally acceptable accounting principles (GAAP)
• The Company had entered into a long term paper supply contract with Boise Cascade, LLC – the Company's timber successor company - which, unbeknownst to investors, was not at market rates.
As a result, Office Max's stock price traded at inflated levels. Investigations and news articles revealed that, among other things, Company employees had created false documents to support about $3.3 million in claims billed to a vendor in 2003 and 2004. Afterwards, the Company's stock fell 5%.
