Voting equipment maker Diebold settles accounting fraud charges for $25 million
Thursday, June 3, 2010
Diebold, the maker of electronic voting equipment that has links to alleged voting irregularities in the 2004 presidential election, agreed Wednesday to pay $25 million to settle accounting fraud charges brought by the Securities and Exchange Commission.
Former Diebold chief executive Walden O'Dell, who stirred protest when he promised to deliver Ohio to President George W. Bush in 2004, agreed under the settlement to give the company back $470,000 in cash bonuses, $1 million in stock and 85,000 stock options for compensation related to the fraud.
The SEC alleged in its complaint, filed in federal court in Washington, that Diebold and several top executives created false transactions from 2002 to 2007 to boost sales and profits, misstating earnings by $127 million.
The SEC said executives traded near-daily reports comparing Diebold earnings to the expectations of Wall Street analysts and came up with "opportunity lists" of often-fraudulent accounting transactions to bridge the gap between actual and expected earnings.
Other Diebold executives accused by the SEC have declined to settle, including former chief financial officers Gregory Geswein and Kevin Krakora and former director of corporate accounting Sandra Miller.
Diebold has never been formally accused of wrongdoing in connection with the political controversies. But the company's machines were used in areas of Ohio where some Democrats claimed Bush was wrongly awarded votes. The firm also hired the former chief of staff of then-Rep. Robert W. Ney (R-Ohio) to lobby for passage of a voting equipment overhaul bill that awarded the company a lot of business. Ney later resigned after pleading guilty to unrelated corruption charges.
The SEC's charges do not relate to those controversies.
"Diebold's financial executives borrowed from many different chapters of the deceptive accounting playbook to fraudulently boost the company's bottom line," said SEC enforcement director Robert Khuzami. "When executives disregard their professional obligations to investors, both they and their companies face significant legal consequences."
As is customary with such settlements, Diebold did not admit or deny wrongdoing.
"We are pleased that the settlement with the SEC is final," said Diebold chief executive Thomas W. Swidarski.
An attorney for O'Dell, Joshua R. Hochberg, said: "The SEC has not accused Mr. O'Dell of any wrongdoing. He is returning certain compensation to the company as a result of a requirement under" the law.
An attorney for Geswein, Steven S. Scholes, said his client was confident he would prevail in court. An attorney for Miller, Virginia Davidson, said, "The SEC never should have dragged her into this case, and we are confident the courts will agree."
An attorney for Krakora did not return calls seeking comment.