Home Depot 2007 Annual Report Download - page 27

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Item 3. Legal Proceedings.
In August 2005, the Company received an informal request from the staff of the SEC for information related to the Company's return-to-vendor
policies and procedures. Subsequent to August 2005, the SEC staff requested additional information related to such policies and procedures. The
SEC staff last contacted the Company regarding this matter in January 2007. The Company responded to this request and will continue to fully
cooperate with the SEC staff. The SEC has informed the Company that the informal inquiry is not an indication that any violations of law have
occurred. Although the Company cannot predict the outcome of this matter, it does not expect that this informal inquiry will have a material
adverse effect on its consolidated financial condition or results of operations.
In June 2006, the SEC commenced an informal inquiry into the Company's stock option granting practices, and the Office of the U.S. Attorney
for the Southern District of New York also requested information on this subject. The SEC staff last contacted the Company regarding this
matter in January 2007. The Company responded to each request and will continue to fully cooperate with the SEC and the Office of the U.S.
Attorney. In addition, a subcommittee of the Audit Committee reviewed the Company's historical stock option practices and engaged
independent outside counsel to assist in this matter. On December 6, 2006, the Company announced the results of this investigation. The
Company determined that the unrecorded expense from 1981 through the present is approximately $227 million in the aggregate, including
related tax items. In accordance with the provisions of Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements," the Company corrected these errors by decreasing beginning Retained
Earnings for fiscal 2006 by $227 million, with offsetting entries to Paid-In Capital, Other Accrued Expenses and Deferred Income Taxes, within
its Consolidated Financial Statements. Although the Company cannot predict the outcome of these matters, it does not believe they will have a
material adverse effect on its consolidated financial condition or results of operations.
The following actions have been filed against the Company and, in some cases, against certain of its current and former officers and directors as
described below. Although the Company cannot predict their outcome, it does not expect these actions, individually or together, will have a
material adverse effect on its consolidated financial condition or results of operations.
In the second quarter of fiscal 2006, six purported, but as yet uncertified, class actions were filed against the Company and certain of its current
and former officers and directors in the U.S. District Court for the Northern District of Georgia in Atlanta, alleging certain misrepresentations in
violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder in connection with the Company's
return-to-vendor practices. These actions were filed by certain current and former shareholders of the Company. In the third quarter of fiscal
2006, one of the shareholders dismissed his complaint. The Court preliminarily appointed a lead plaintiff, and the lead plaintiff filed an amended
complaint in each of the remaining five actions. Relief sought in the amended complaint includes unspecified damages and costs and attorney's
fees. On July 18, 2007, the Court granted the defendants' motions to dismiss without leave to amend and entered a judgment in favor of the
defendants. The plaintiffs' appeal from the dismissal is pending in the U.S. Court of Appeals for the Eleventh Circuit.
In the second and third quarters of fiscal 2006, three purported, but uncertified, class actions were filed against the Company, The Home Depot
FutureBuilder Administrative Committee and certain of the Company's current and former directors and employees in federal court in Brooklyn,
New York alleging breach of fiduciary duty in violation of the Employee Retirement Income Security Act of 1974 in connection with the
Company's return-to-vendor and stock option practices. These actions were transferred to the U.S. District Court for the Northern District of
Georgia in Atlanta. In the first quarter of fiscal 2007, the plaintiffs joined together in one case and voluntarily dismissed the other two cases. In
March 2007, the three original plaintiffs and two additional former employees filed a joint
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