Jan 13, 2006

SEC Informally Investigates DepotSource: Various

The U.S. Securities and Exchange Commission (SEC) opened an informal investigation into charges that The Home Depot Inc. inflated profits through supplier payments meant to cover the cost of damaged merchandise, reported Reuters, citing a New York Post article.

“The top home improvement retail chain is accused of inappropriately using so-called ‘return-to-vendor charges’ by over-billing suppliers for goods damaged during shipping, the newspaper said,” Reuters reported.

The Associated Press (AP) also said, “In a statement, Atlanta-based Home Depot said it responded to the SEC request several months ago. The SEC declined to comment on the matter.” The current status of the matter is not clear.

“Our internal financial controls related to vendor policies preclude any potential for a material adverse impact on the company,” Jerry Shields, Home Depot’s spokesman, said to Reuters.

According to the Reuters article, “When customers return defective merchandise, Home Depot sends it back to the vendor, which gives the company a credit to cover the cost. Home Depot said those credits don’t boost its net profit.”