3 former Diebold executives accused of accounting fraud

The Securities and Exchange Commission on Wednesday filed a lawsuit formally accusing three former Diebold Inc. executives of using fraudulent accounting practices to misstate the company's earnings by at least $127 million. The complaints, filed in U.S. District Court for the District of Columbia, were the culmination of a years-long SEC investigation into Diebold's accounting practices from at least 2002 to 2007. Diebold, which was the subject of a separate SEC complaint, agreed in May 2009 to pay a $25 million civil penalty to settle the SEC's accusations against the company "without admitting or denying securities fraud charges." Diebold also agreed as part of the settlement not to violate any federal securities laws in the future. Diebold, which designs, manufactures and maintains automatic teller machines and bank security systems, recorded the charge in the first quarter of 2009. But the SEC is still separately pursuing civil charges against former Diebold Chief Financial Officer Gregory Geswein, former Controller and later CFO Kevin Krakora, and former Director of Corporate Accounting Sandra Miller. Geswein and Miller no longer work for Diebold, but Krakora remains an employee in a non-financial reporting role. "Diebold's financial executives borrowed money from many different chapters of the deceptive accounting playbook to fraudulently boost the company's bottom line," said Robert Khuzami, director of the SEC's Division of Enforcement, in a statement.
Attorneys for the three former executives called the accusations both inaccurate and unfair. "We are deeply disappointed that almost five years after Mr. Geswein voluntarily left Diebold of his own initiative, the SEC has made these stale allegations," said Geswein's attorney, Stephen S. Scholes of McDermott Will & Emery law firm in Chicago. "Mr. Geswein strongly disputes the SEC's charges and looks forward to defending himself in the courtroom, where he is confident he will successfully defend the unblemished professional reputation he has built over the years."
Krakora's attorney, John J. Carney of Baker Hostetler LLP in New York, said via e-mail that "Mr. Krakora is an honest and well-respected financial professional with an unblemished record for integrity. We strongly disagree with the SEC's allegations and conclusions." Miller's attorney, Virginia Davidson of Calfee, Halter & Griswold LLP in Cleveland, said via e-mail that "Sandra Miller is an honest, hardworking person. She did nothing wrong. She never should have been dragged into this case, and we are certain the courts will agree." The SEC also filed a separate enforcement action against former Chief Executive Walden O'Dell seeking reimbursement of the money he received during the period in question. The SEC has not accused O'Dell of fraud, but he has agreed as part of a settlement to repay $470,016 in cash bonuses, 30,000 shares of Diebold stock, and stock options for 85,000 shares of Diebold stock. "We are pleased that the settlement with the SEC is final," said Thomas W. Swidarski, Diebold's president and chief executive, in a statement, referring to the charges specifically against the company. "Moving forward, we will continue to direct our energy and focus toward the essential work of improving our competitive position and creating value for all our stakeholders while maintaining effective financial controls within our processes." Shares of Diebold rose 88 cents, or 3.1 percent, to close at $29.08 in Wednesday's trading.