The U.S. Securities and Exchange Commission on June 2 filed civil charges against several current and former executives at Diebold Inc. In addition, the agency filed paperwork in federal court finalizing a $25 million settlement the ATM maker reached with SEC staff two years ago to resolve three years of legal issues with the regulator.

The SEC alleges that Gregory Geswein, former chief financial officer; Kevin Krakora, former controller and finance chief; and Sandra Miller, former director of corporate accounting, manipulated the company’s earnings to meet forecasts over a period of several years.

In dispute was the company’s revenue-recognition accounting procedure known as “bill and hold,” in which the company recorded revenue before shipping sold merchandise to buyers.

The agency alleges that Diebold’s financial management received “flash reports,” sometimes daily, comparing the company’s actual earnings to analysts’ earnings forecasts. Diebold’s financial management prepared “opportunity lists” of ways to close the gap between the company’s actual financial results and analyst forecasts. Many of the opportunities on these lists were fraudulent accounting transactions designed to improperly recognize revenue or otherwise inflate Diebold’s financial performance, the SEC alleges in a news release.

The SEC in 2009 also served Wells notices to executives who handled Diebold finances during a period of several years, which led to the company restating its quarterly and annual financials beginning with 2003.

“Diebold’s financial executives borrowed from many different chapters of the deceptive accounting playbook to fraudulently boost the company’s bottom line,” Robert Khuzami, director of the SEC’s division of enforcement, states in the release. “When executives disregard their professional obligations to investors, both they and their companies face significant legal consequences.”

Attorneys representing Geswein and Miller dispute the SEC’s charges and tell PaymentsSource they will fight the allegations in court. Krakora’s attorney, John Carney of Baker Hostetler LLP in Washington, D.C., did not return a PaymentsSource call seeking comment, though he reportedly also denied the allegations against his client.

Only Krakora remains employed at Diebold, but in a nonfinancial reporting roll, according to company spokesperson Mike Jacobsen.

Though he was not charged, former CEO Walden O’Dell agreed to pay back about $470,000 in cash, plus stock and options, the government recaptured his compensation under provisions of the 2002 Sarbanes-Oxley law, according to the Associated Press. His attorney, Joshua R. Hochberg of McKenna Long & Aldridge LLP in Washington, did not return a call seeking confirmation and comment.

In an interview in May 2009, Jacobsen said Diebold agreed to make the payment before the SEC filed formal charges against the company (see story).

With the settlement, Diebold, which neither admits or nor denies civil securities fraud charges, has consented to a judgment requiring the $25 million civil-penalty payment and an injunction against committing or causing certain specified securities law violations, according to the company, which recorded the charge to its 2009 first quarter earnings and expects to pay the penalty to the SEC soon.

The SEC launched an informal inquiry into the way Diebold recognized revenue in May 2006. The informal inquiry became a formal, nonpublic investigation in August of that year.

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