The Home Depot Scandal

Nothing is more of a nuisance than deductions. When the two most important jobs in a credit office are collections and credit approval, dealing with those pesky deductions can drive a credit manager crazy. It’s usually a little more than the small insignificant amounts that the cash application clerk merely adjusts off rather than start the entire credit memo process that are the most maddening. There is always a customer or two who not only scrutinize every bill for mistakes, but they make their own calculations as to what the bill should be in their minds. But sometimes, deductions are just wrong and should be challenged, particularly when they start to add up to big money.

We had entered into a sale agreement with The Home Depot, the largest building material retailer in the country. Given their clout and their sales potential, the sales group had already agreed to a series of sales discounts, payment discounts, new store discounts and other price concessions. However, we did not agree to their “Return To Vendor” (RTV) policy. If product was delivered damaged, it was exchanged, upon notification and billed at a no charge. The RTV policy as it was defined in The Home Depot’s own purchase order agreement stipulated that should a vendor’s product be found defective by the end user, it could be returned to the store and The Home Depot would create a deduction. Since our company was selling glass for frames or French Doors, it was assumed if it was good enough to sell and it had not been returned or claimed as damaged at the time of delivery, no RTV back-charge was applicable. It is important to note, that The Home Depot, agreed in writing to our exclusion of the RTV policy.

Not long after the vendor agreement was signed and orders were being delivered and payments were made, the deductions began. Twenty dollars here, fifty dollars there, sometimes less, sometimes more. Given that The Home Depot was on track to spend over a million dollars and the volume of invoices was, well, voluminous. The account manager at the time was up to his eye balls on other collection matters and so, he dismissed the deductions as insignificant and authorized their being credited without review. However, the deductions not only continued, they seemed to be growing at an alarming rate.

I started reviewing the payments and the remittance. The deductions were labeled as RTV damage claims and they never referenced an invoice, sales order, date of delivery or anything that would help trace the problem back to an original order. In fact, the only reference was to a The Home Depot store number. So, I started to track on a spread sheet the stores making the RTV claims. I was startled by what I discovered. Some of the stores were claiming as damaged amounts that far and away exceeded their actual purchases. A stores that had purchased only a few hundred dollars in picture frame glass were back charging us thousands of dollars! In less than a year’s time, the stores combined total RTV back charges amounted to over $100,000.

Since RTV deductions were invalid according to the vendor agreement, we could reject the deduction and make a demand from The Home Depot to reverse the claim and pay the deducted amount. This we could do after submitting their forms and following their procedure and waiting and waiting and waiting for the payment. This we did, but for me the issue was the fraudulent nature of the claims. At the store level, some clerk, was making entries on their system that over stated the damages. In fact the damages were non-existent. They were false, plain and simply. Yet some clerk could make the entry and short us whatever dollar figure they chose. It was not unlike taking money right out of our cash registers.

My complaints to the Atlanta office about the practice seem to fall on deaf ears. So, I began to reject orders placed by the most grievously offending stores. This got the attention of the store managers. When I explained to them that taking falsely stated deductions was similar to my issuing invoices for product they never bought, it went right over the head. They were only doing what they were told. I could only conclude that stealing from the vendors was an institutional The Home Depot policy. I notified the Atlanta office that I was prepared to contact 60 Minutes, or Dateline, or any other news organization that might be interested in knowing that The Home Depot was committing fraud on a wide spread basis. Soon I was meeting with some of their purchasing and payable personnel and soon after that I received a check for nearly all of the $100,000.

Need help in identifying legitimate deductions from the not so legitimate? Need a program to resolve deductions and prevent them from taking up more of your precious time? Contact us at http://powerscredit.com/ and let Strategic Credit Management Solutions assist you. We’ve taken on the big guys. Your comments are welcome. E-mail us at patrickpowers@sbcglobal.net