Firm Probing Vendor Claims

OfficeMax Inc., the No. 3 U.S. office-products retailer, said Monday that it was investigating claims by a vendor that some company employees demanded promotional payments and falsified documents. The stock fell 4.2% on the news.

The unidentified supplier said workers inappropriately asked for payments and altered supporting documents for about $3.3 million in bills in 2003 and 2004, OfficeMax said.

Plans to convert some promissory notes and equity security units to repurchase as much as $815 million in stock have been halted until the probe of the vendor’s claims is completed, according to a statement.

Investors want assurances that Itasca, Ill.-based OfficeMax has policies to catch internal fraud, an analyst said.

“The market’s concerned that they have appropriate checks in place to catch any malfeasance,” said Ivan Feinseth, an analyst at Matrix USA in New York.

Bill Bonner, an OfficeMax spokesman, declined to identify the vendor or comment beyond the company’s statement.

Bonner said he wasn’t aware of any investigations of this type conducted at OfficeMax before.

Companies like OfficeMax receive money from vendors to feature their products in ads and circulars, Feinseth said.

“Anytime you see an ad in the newspaper for a retailer for a certain brand of product, some of the cost of that ad is being paid for by the vendor,” he said.

Shares of OfficeMax fell $1.37 to $31.13 on the New York Stock Exchange. Earlier the stock traded as low as $29.51. The stock has dropped 5.3% this year.

Boise Cascade, which last year bought OfficeMax for $1.06 billion, in October completed the sale of paper and timberland assets for $3.7 billion. Last month the company changed its name to OfficeMax.

OfficeMax had third-quarter net income of $61.1 million on sales of $3.65 billion. It is scheduled to release fourth-quarter earnings next month.