OfficeMax 2007 Annual Report Download - page 94

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18. Legal Proceedings and Contingencies
OfficeMax Incorporated and certain of its subsidiaries are named as defendants in a number of
lawsuits, claims and proceedings arising out of the operation of the paper and forest products
assets prior to the closing of the Sale, for which OfficeMax agreed to retain responsibility. Also, as
part of the Sale, we agreed to retain responsibility for all pending or threatened proceedings and
future proceedings alleging asbestos-related injuries arising out of the operation of the paper and
forest products assets prior to the closing of the Sale. We do not believe any of these retained
proceedings are material to our business.
We have been notified that we are a ‘‘potentially responsible party’’ under the Comprehensive
Environmental Response Compensation and Liability Act (‘‘CERCLA’’) or similar federal and state
laws, or have received a claim from a private party, with respect to certain sites where hazardous
substances or other contaminants are or may be located. All of these sites relate to operations
either no longer owned by the Company or unrelated to its ongoing operations. In most cases, we
are one of many potentially responsible parties, and our alleged contribution to these sites is
relatively minor. For sites where a range of potential liability can be determined, we have
established appropriate reserves. We believe we have minimal or no responsibility with regard to
several other sites. We cannot predict with certainty the total response and remedial costs, our
share of the total costs, the extent to which contributions will be available from other parties or the
amount of time necessary to complete the cleanups. Based on our investigations; our experience
with respect to cleanup of hazardous substances; the fact that expenditures will, in many cases, be
incurred over extended periods of time; and the number of solvent potentially responsible parties,
we do not believe that the known actual and potential response costs will, in the aggregate,
materially affect our financial position, results of operations or cash flows.
Over the past several years and continuing in 2008, we have been named a defendant in a
number of cases where the plaintiffs allege asbestos-related injuries from exposure to asbestos
products or exposure to asbestos while working at job sites. The claims vary widely and often are
not specific about the plaintiffs’ contacts with the Company. None of the claimants seeks damages
from us individually, and we are generally one of numerous defendants. Many of the cases filed
against us have been voluntarily dismissed, although we have settled some cases. The settlements
we have paid have been covered mostly by insurance, and we believe any future settlements or
judgments in these cases would be similarly covered. To date, no asbestos case against us has
gone to trial, and the nature of these cases makes any prediction as to the outcome of pending
litigation inherently subjective. At this time, however, we believe our involvement in asbestos
litigation is not material to either our financial position or our results of operations.
In June 2005, the Company announced that the SEC issued a formal order of investigation
arising from the Company’s previously announced internal investigation into its accounting for
vendor income. The Company launched its internal investigation in December 2004 when the
Company received claims by a vendor to its retail business that certain employees acted
inappropriately in requesting promotional payments and in falsifying supporting documentation. The
internal investigation was conducted under the direction of the Company’s audit committee and
was completed in March 2005. The Company cooperated fully with the SEC. In a letter dated
October 23, 2007, the Company received notification from the SEC that it had completed its
investigation against the Company and was not recommending any enforcement action.
On April 25, 2005, a putative derivative action, Homstrom v. Harad, et al., was filed in the
Circuit Court of Cook County, Illinois. The Homstrom complaint names as defendants the following
current and former officers and directors of OfficeMax Incorporated: George J. Harad, Christopher
C. Milliken, Theodore Crumley, Gary J. Peterson, Brian P. Anderson, Warren F. Bryant, Claire S.
Farley, Rakesh Gangwal, Edward E. Hagenlocker, Gary G. Michael, A. William Reynolds, Francesca
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