From: Reuters
Published February 27, 2008 10:41 AM

Regulator investigating Office Depot

NEW YORK (Reuters) - The Securities and Exchange Commission is investigating communications that Office Depot Inc <ODP.N> had last year with Wall Street analysts, the No. 2 office supplies retailer said.

Office Depot is being investigated for allegedly making a series of phone calls to analysts last June, warning them that weak economic conditions were hurting its sales, a company spokesman said on Wednesday.

The investigation, announced in a regulatory filing on Tuesday, was opened in July.

The SEC is also reviewing other matters, including inventory receipt, timing of vendor payments, timing of recognition of vendor program funds, and certain inter-company

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loans.

Office Depot said in the filing it would cooperate with the SEC's probe, adding that it may face significant financial penalties if it's determined that the company violated federal securities laws.

In October, the company delayed its third-quarter results due to an independent review of its vendor program funds, and its shares fell as much as 17 percent.

The SEC probe will compound the daunting challenges the company already faces in a difficult economic environment, Sanford Bernstein analyst Colin McGranahan wrote in a research note.

"Both the management turnover and the SEC investigation are unwelcome distractions from attention that is surely needed to address the poor fundamental performance," wrote McGranahan, who has an "outperform" rating on Office Depot's stock.

On Tuesday Office Depot said Chief Financial Officer Patricia McKay will leave the company March 1. Charles Brown, president of its international segment, will become acting CFO.

Office Depot's shares fell about 3 percent to $12.95 in morning trading on the New York Stock Exchange.

(Reporting by Justin Grant, additional reporting by Yinka Adegoke; Editing by Derek Caney)

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