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January 12, 2006... and now, Home DepotAhold... The New York Post reports that the SEC has opened an investigation of charges that Home Depot inflated vendor chargebacks for shipping damages. The investigation is based on charges by an employee, Michael Davis, who is suing Home Depot, claiming he was fired for complaining about it. The Post describes HD's practice as follows: For instance, Philips Lighting Company . provided the Home Depot store in Aspen Hill, Md., with a $1,000 monthly credit to cover the cost of damaged light bulbs, according to Davis. As long as the amount didn't exceed $1,000, Philips would accept the charge, no questions asked. Davis said he was told by his superiors to charge Philips slightly less than the $1,000 ceiling each month, even if the actual damages totaled less than that amount. As the Post notes: "The SEC investigation and legal action at Home Depot mirror similar complaints against other retailers, notably Saks Inc. and Federated Department Stores, which are accused of overcharging suppliers in a variety of ways." Suppliers have largely been unwilling to speak out for fear of losing Home Depot's business. But one vendor - who sells to Home Depot stores throughout the country and who spoke on the condition of anonymity for fear of reprisals - said she suspected the practice was done on a national level, though not at all stores at all times. Most of us can sympathize with the HD vendor. Both in terms of understanding the fear of reprisals and in the assumption that these or similar practices go on in most stores - not just in the HD chain, but in most major retailers. It's interesting to consider that the whistleblower opens up new possibilities for these practices coming to light. Without prejudging Mr. Davis's case - his complaints may be totally valid or mere sour grapes on the part of a disgruntled ex-employee - he has shown the way for disgruntled retail employees to get some vengeance. Now that such practices have achieved a fair degree of attention, how long will it be before other unhappy retail employees (and, having been in retail myself, I consider the term a massive redundancy - just about all retail employees are unhappy, generally with good reason) bring similar cases to light? A while back - I think it was just after Office Max and just before Saks - I predicted that there would be more such cases come to light. I'm wrong often enough that when I'm right I like to make sure people know about it. But this time, I don't think I can claim much prescience - it's so obvious there would be, and still will be, more cases that I feel it's unnecessary to say so. Before, though, I was basing it on vendors revealing retailer abuses as a response to Sarbanes-Oxley. If whistleblowers get into the game, the floodgates may really open. Home Depot says the claims are untrue: In a brief statement, the nation's largest do-it-yourself retailer disputed a New York Post article that reported it had forced employees to inflate return charges from vendors. The company also acknowledged that the Securities and Exchange Commission opened an informal inquiry into its return policies. |
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