On June 2, 2010, the SEC charged Diebold with engaging in a fraudulent accounting scheme to inflate the company’s earnings. “Without admitting or denying the SEC’s charges, Diebold consented to a final judgment ordering payment of the $25 million penalty and permanently enjoining the company from future violations of the antifraud, reporting, books and records, and internal control provisions of the federal securities laws.”
The Complaint against Diebold alleged violations of the Securities Exchange Act of 1934 that: “From at least 2002 to 2007, Diebold engaged in fraudulent accounting practices in order to inflate earnings to meet forecasts. These practices included (i) improper use of “bill and hold” accounting; (ii) recognition of revenue on a lease agreement subject to a side buy-back agreement; (iii) manipulating reserves and accruals; (iv) improperly delaying and capitalizing expenses; and (v) writing up the value of used inventory.”
The Complaint further states that: “As a result of these practices, Diebold filed at least 40 annual, quarterly, and current reports with the Commission, and issued dozens of press releases, that contained material misstatements and omissions concerning the company’s financial performance. Diebold’s improper, and in many instances fraudulent, accounting practices misstated the company’s reported pre-tax earnings by at least $127 million.”
SEC v. Diebold, Incorporated, Case No. 10-cv-0908 (D.D.C. June 2, 2010) (Friedman, J.)
