Diebold, Inc.; Walden O'Dell; and Gregory Geswein, Kevin Krakora, and Sandra Miller

U.S. Securities and Exchange Commission

Litigation Release No. 21543 / June 2, 2010

Accounting and Auditing Enforcement Release No. 3137 / June 2, 2010

SEC v. Diebold, Inc., Civil Action No. 1:10-CV-00908 (D.D.C.); SEC v. Walden O'Dell, Civil Action No. 1:10-CV-00909 (D.D.C.); and SEC v. Gregory Geswein, Kevin Krakora, and Sandra Miller, Civil Action No. 5:10-CV-01235 (N.D. Ohio)

SEC CHARGES DIEBOLD AND FORMER FINANCIAL EXECUTIVES WITH ACCOUNTING FRAUD

Diebold To Pay $25 Million Civil Penalty

Former Diebold CEO To Reimburse Cash Bonuses, Stock and Options Pursuant to Section 304 of the Sarbanes-Oxley Act

The U.S. Securities and Exchange Commission today filed fraud and other charges against Diebold, Inc. ("Diebold"), Gregory Geswein, the company's former Chief Financial Officer, Kevin Krakora, the company's former Controller and later CFO, and Sandra Miller, the company's former Director of Corporate Accounting. Diebold is an Ohio corporation that manufactures and sells automated teller machines, bank security systems, and electronic voting machines. The company's stock is registered with the Commission and listed on the New York Stock Exchange.

The Commission alleges that Diebold, Geswein, Krakora, and Miller engaged in fraudulent accounting practices to inflate the company's earnings to meet forecasts. As alleged in the complaints, from at least 2002 through 2007, these fraudulent practices included (i) improper use of "bill-and-hold" accounting; (ii) improper recognition of revenue on a lease agreement subject to an undisclosed buy-back agreement; (iii) manipulating reserves and accruals; (iv) improperly delaying and capitalizing expenses; and (v) improperly writing up the value of used inventory.

The Commission alleges that Diebold filed at least 40 annual, quarterly, and other reports with the Commission, and issued dozens of press releases, that contained material misstatements and omissions concerning the company's financial performance. According to the complaints, Diebold's improper accounting practices misstated the company's reported pre-tax earnings by at least $127 million. As alleged in the complaints, to correct the recent misstatements, on September 30, 2008, Diebold restated its financial statements for the years 2003 through 2006, and the first quarter of 2007, in its Form 10-K for 2007.

The Commission charged Diebold with violating Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act"), and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13. Without admitting or denying the Commission's charges, Diebold has agreed to consent to a final judgment ordering the company to pay a $25 million civil penalty and permanently enjoining the company from future violations.

In a contested action, the Commission charged Geswein, Krakora, and Miller with violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 13(b)(5) of the of the Exchange Act, and Exchange Act Rules 10b 5 and 13b2-1, and aiding and abetting Diebold's violations of Sections 13(a), 13(b)(2)(A) and13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-11, and 13a-13. In addition, the Commission charged Geswein and Krakora with violating Exchange Act Rules 13a-14 and 13b2-2 and Section 304 of the Sarbanes-Oxley Act of 2002. The Commission seeks against these defendants permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, civil monetary penalties, and, with respect to Geswein and Krakora, officer-and-director bars and reimbursement of bonuses and other compensation.

In addition, the Commission filed an action against Walden O'Dell, the former Chief Executive Officer of Diebold, seeking reimbursement for bonuses and other incentive-based and equity-based compensation pursuant Section 304 of the Sarbanes-Oxley Act of 2002. The Commission's complaint alleges that Diebold was required to restate its annual financial statements for 2003, as well as other reporting periods, as a result of fraud and other misconduct. The complaint further alleges that O'Dell received from Diebold cash bonuses, shares of Diebold stock, and stock options during the 12-month period following the issuance of Diebold's 2003 financial statements, and that O'Dell failed to reimburse Diebold for that compensation. The complaint does not allege that O'Dell engaged in the fraud. Without admitting or denying the Commission's allegations, O'Dell has agreed to consent to a final judgment ordering him to reimburse $470,016 in cash bonuses, 30,000 shares of Diebold stock, and stock options for 85,000 shares of Diebold stock.

The Commission acknowledges the assistance of the U.S. Attorney's Office for the Northern District of Ohio and the Federal Bureau of Investigation.

See Also: SEC Complaint v. Diebold; SEC Complaint v. O'Dell; SEC Complaint v. Geswein, Krakora, and Miller