According to a press release dated April 6, 2011, the complaint filed in the action charges that, during the Class Period, Office Depot and certain of its officers and directors overstated the Company's profits and the value of the Company's assets in violation of Generally Accepted Accounting Principles ("GAAP").
As alleged in the complaint, Office Depot shocked the market on March 31, 2011 when it disclosed that the IRS had rejected significant carry-back tax "benefits" the Company had claimed in the 2Q, 3Q, 4Q and FY 2010, requiring that the Company restate its previously reported financial results for those reporting periods.
Rather than the net earnings of $33 million Office Depot had previously reported for fiscal 2010, the Company would report a net loss of $46 million and increase the net loss attributable to common shareholders from $2 million to $82 million. Additionally, the $63 million current tax receivable associated with the purported tax carry-back benefit would be removed from the Company's balance sheet, which was expected to significantly reduce anticipated 2011 operating cash flow.
As alleged in the complaint, Office Depot's Chief Financial Officer admitted that Office Depot had been in discussions with its tax advisors about the viability of carrying back certain net operating tax losses to prior tax years under economic stimulus-based tax legislation enacted in 2009 throughout the Class Period. None of this had been disclosed to investors though.
On the news that Office Depot's 2Q, 3Q and 4Q 2010 earnings reports were false and misleading, its assets were overstated, and its 2011 financial results would be adversely impacted, Office Depot's stock price plummeted, closing at $4.21 on April 1, 2011.
On July 5, 2011, the Court issued an order appointing Central Laborers’ Pension Fund lead plaintiff and approving Robbins Geller Rudman & Dowd LLP as lead counsel.
On September 6, 2011, the Lead Plaintiff filed an Amended Complaint including allegations of violations of Sections 10(b) and 20(a) of the Exchange Act of 1934.
On May 23, 2012, the Court issued an order granting defendants' motion to dismiss. Plaintiffs were permitted 20 days from the date of this order to file a second amended complaint. On July 31, 2012, the Court issued an order closing this case due to plaintiffs' failure to file the second amended complaint.