EXCLUSIVE: SECURITIES FRAUD LITIGATION FILED AGAINST DIEBOLD, INC!

[Guest guest]

Is Diebold the next Enron? Is Diebold TOAST? I'd like to think so, but

even in the unlikely event Diebold goes under, no doubt their fraudulent voting

machines will remain in use around the country because " it would be too

expensive to replace them. "

 

Diebold machines - $5000 each. Democracy - priceless.

 

No mention of this in the mainstream media, yet, that I can find. Margie

 

EXCLUSIVE: SECURITIES FRAUD LITIGATION FILED AGAINST DIEBOLD, INC!

 

Eight Current and Former Executives Named as Co-Defendants, Including former

CEO O'Dell and New CEO Swidarski

Class Action Suit Alleges Fraud, Insider Trading, Manipulation of Stock

Prices, Concealment of Known Flaws in Voting Machines and Company Structural

Problems

 

The BRAD BLOG can now report that a Securities Fraud Class Action suit has

been filed against Diebold, Inc. (stock symbol: DBD ) naming eight top

executive officers in the...

(http://www.bradblog.com/archives/00002153.htm) _The BRAD BLOG_

(http://www.bradblog.com/) can now report that a Securities Fraud Class Action

suit has

been filed against Diebold, Inc. (stock symbol: _DBD_

(http://finance./q?s=DBD & d=t) ) naming eight top executive officers in

the company as

co-defendants. The suit has been filed by plaintiff Janice Konkol, alleging

securities fraud against the North Canton, Ohio-based manufacturer of Voting

Systems

and ATM machines on behalf of investors who owned shares of Diebold stock

and lost money due to an alleged fraudulent scheme by the company and its

executives to deceive shareholders during the " class period " of October 22,

2003

through September 21, 2005.

 

The suit was filed today in U.S. Federal District Court in Ohio and alleges

the company " artificially inflated " stock prices through misleading public

information designed to conceal the true nature of Diebold's financial and

legal situation. The defendants are also alleged to have attempted to disguise

well-known and ongoing problems with Diebold's Voting Machine equipment and

software. Additionally, the suit alleges insider trading by defendants

resulting

in proceeds of $2.7 million. Remedies are sought under the Securities

Exchange Act of 1934.

 

The suit, filed by the law firm Scott+Scott, LLC on behalf of Konkol and the

plaintiff class, names former Diebold CEO and Chairman, Walden O'Dell as a

co-defendant along with seven other current and former officers of the

once-venerable company.

 

News of the pending litigation was first reported as imminent in an

_exclusive report by The BRAD BLOG_

(http://www.bradblog.com/archives/00002126.htm)

late last week.

 

(http://www.bradblog.com/archives/00002153.htm) Yesterday, in a surprise

announcement, _O'Dell unexpectedly resigned_

(http://www.bradblog.com/archives/00002149.htm) from the company. A Diebold

press release described O'Dell as

leaving the company for " personal reasons " . He was immediately replaced by the

company's president and chief operating officer, Thomas W. Swidarski, who had

directly overseen Diebold's Election Systems subsidiary division for some

time. Swidarski is also named as a co-defendant in today's class action suit.

 

After news was released of weaker-than-expected third-quarter earnings on

September 21, Diebold stock prices _plummeted 15.5%_

(http://www.bradblog.com/archives/00001852.htm) in unusually heavy trading

that resulted in a one day

sell-off costing investors more than $40 million dollars. The complaint

describes Diebold and the co-defendants as having " failed to disclose adverse

facts known " to the company and that they " participated in a fraudulent scheme

and course of business that operated as a fraud. "

 

The suit, to be released in full by _The BRAD BLOG_

(http://www.bradblog.com/) shortly, alleges Diebold and the eight

co-defendants failed to alert

investors to adverse facts known to the company, choosing instead to

participate

in a " fraudulent scheme and course of business " that operated as a fraud or

deceit on the company's shareholders.

 

The suit describes the liabilities of the company and co-defendants as

follows...

 

Each defendant is liable for (a) making false statements, or (b) failing to

disclose adverse facts known to him about Diebold. Defendants’ fraudulent

scheme and course of business that operated as a fraud or deceit on purchasers

of Diebold publicly traded securities was a success, as it (a) deceived the

investing public regarding Diebold’s prospects and business; (b) artificially

inflated the prices of Diebold’s publicly traded securities; © allowed

insiders to sell over 51,000 shares of Diebold stock, for proceeds of $2.7

million; and (d) caused plaintiff and other members of the Class to purchase

Diebold’

s publicly traded securities at inflated prices.

 

 

 

....THE DEFENDANTS...

 

(http://www.bradblog.com/archives/00002153.htm) Named as co-defendants in

the suit along with former CEO O'Dell and new CEO Swidarski are President of

International Operations, Michael J. Hillock; Senior Vice President of

Customer Solutions, David Bucci; Interim Chief Financial Officer, Principal

Accounting Officer and Controller, Kevin J. Krakora; Vice President and Chief

Information Officer, John M. Crowther; Senior Vice President and CFO, Gregory T.

Geswein; and President and COO, Eric C. Evans. (Titles applied to the named

co-defendants during the class period. Evans, for example resigned from the

company on the same day as the Sep. 21, 2005 announcement.) " Each individual

defendant, " the suit points out, " owed a duty to the Company and its

shareholders

not to trade on inside information. "

 

The claim cites a number of allegedly misleading news releases pertaining to

the fitness and security of election systems as contracted by Diebold in San

Diego County in 2003; their settlement for $2.6 million with the state of

California in 2004, wherein Diebold is alleged to have concealed " the

dimensions and scope of internal problems at the Company " from investors; and

an

" astonishingly low and incredibly inaccurate " statement about " restructuring

charges " in the Sep. 21 announcement.

 

Once again, quoting from the lawsuit:

 

During the Class Period, defendants knew and concealed that:

(a) the Company remained unable to assure the quality and working order of

their voting machine products;

(b) the Company lacked a credible state of internal controls and corporate

compliance;

© the 2004 settlement with the State of California served to conceal from

investors the dimensions and scope of internal problems at the Company,

impacting product quality, strategic planning, forecasting, guidance, internal

controls and corporate compliance; and

(d) the Company’s " prediction " of astonishingly low and incredibly

inaccurate restructuring charges for the entire 2005 fiscal year grossly

understated

the true costs defendants faced to restructure the Company.

 

 

The complaint alleges that the company lied to investors about the true

costs of its restructuring activities, concealing the fact that Diebold was

facing far worse restructuring issues than publicly represented -- indicative

of

far greater problems than the company was willing to reveal.

 

For example, the complaint indicates that the problems Diebold faced in

California in 2004 were merely the tip of an internal structural iceberg which

the company had sought to conceal from investors when they decided to make a

settlement in the case. Investors could not know then that the problems

revealed by the California litigation in 2004 were a sign of more and deeper

internal problems to come. The settlement agreed to by Diebold in that case,

the

suit alleges, was meant to keep a lid on the larger dimensions of the problems,

rather than indicating that the issues at stake had been fully resolved.

Press materials released by the company announcing the settlement -- and

included

in the version of the complaint filed today -- seem to indicate otherwise to

investors.

 

 

....THE INSIDER...

 

Additional facets of the company's internal structural problems were

revealed in a _series of previous BRAD BLOG articles_

(http://www.bradblog.com/Diebold.htm) reporting on an anonymous company insider

we dubbed " DIEB-THROAT " who

alerted us to the _ " Cyber Alert Warning " _

(http://www.us-cert.gov/cas/bulletins/SB04-252.html#diebold) issued by a branch

of the Dept. of Homeland

Security in August of 2004. That warning concerned the vulnerability to hackers

of

Diebold's central vote tabulating software prior to last year's Presidential

Election. The election watchdog organization _BlackBoxVoting.org_

(http://www.blackboxvoting.org/) , who had first discovered the vulnerability,

had also

recently arranged for a computer security expert to successfully hack into

actual Diebold voting machines used in Leon County, Florida without leaving any

trace of the manipulation.

 

It was just several days after _our first report on DIEB-THROAT_

(http://www.bradblog.com/archives/00001838.htm) that stock prices plunged at

the company

in September. Diebold attempted to blame their troubles, at the time, on bad

weather in the gulf which lead our insider source _to aver_

(http://www.bradblog.com/archives/00001852.htm) : " Using Hurricane Katrina is a

poor excuse

for bad products - the last time this kind of deception occurred it was called

Enron. "

 

Internet news site, _The RAW STORY_ (http://www.rawstory.com/) recently ran

their own _interview with DIEB-THROAT_

(http://rawstory.com/news/2005/Diebold_insider__alleges_company_plagued_1206.htm\

l) revealing still more structural

problems within the company and its voting division. The report explained

that the company was " plagued by technical woes, " even as a Diebold

spokesperson

claimed the 144-year old company " has a sterling reputation in the industry. "

 

 

....THE PLAINTIFF...

 

Plaintiff Konkol, a just-retired 29-year public school employee from Central

Wisconsin first invested in Diebold in 1999. She told _The BRAD BLOG_

(http://www.bradblog.com/) that she purchased the stock thinking, " ATM's

that'd be

the way to go. " She originally invested $500 which eventually grew to $1400

before falling. She is also invested in Diebold via mutual funds held by the

Wisconsin Education Union in which she is a member. Konkol, a 56-year old

grandmother of three, recently returned from two weeks of volunteering on the

Gulf Coast with several members of her Lutheran church. " We got a big group

together and we went down to the Gulf to help out in Katrina. "

 

" I believe in churches...I believe we should practice what we're preached to

about, " she told us. " I don't like it when big companies take advantage of

us little people, " she said. " I can't say that I'm anti-big business...I just

want things to be fair. "

 

It appears that Scott+Scott, the attorneys associated with the case, are

just beginning to learn about the full scope of the fraud allegedly perpetrated

by Diebold on investors. Amended complaints with additional details are

expected to be filed in the weeks and months to come. Other law firms are also

expected to file similar suits which will eventually be consolidated by the

Federal District Court hearing the case. Indeed _The BRAD BLOG_

(http://www.bradblog.com/) has been contacted since filing _our original

report_

(http://www.bradblog.com/archives/00002126.htm) on this last week, by other

firms who

are said to be pursuing similar litigation against Diebold.

 

 

....THE REFORMERS...

 

(http://www.bradblog.com/archives/00002153.htm) As one of America's largest

Voting Machine Companies (along with ES & S, they account for the tabulation

of more than 80% of America's votes every election) Diebold has been the

target of Election Reform advocates for their strong partisan support of

Republican causes and candidates, a statement made prior to last year's

Presidential

Election to Republican fundraisers by O'Dell that he was committed to

" delivering the state of Ohio " to George W. Bush, along with their reluctance

to

include verifiable paper ballots with their voting products and to make the

source-code for their software open and available for public inspection.

 

A recent _100+ page GAO report_

(http://www.bradblog.com/archives/00001940.htm) , shamefully _unreported_

(http://www.bradblog.com/archives/00001964.htm)

by the mainstream media, confirmed many of the Election Reform advocates

concerns about the security and vulnerability of Voting Equipment made by

Diebold

and other such companies. In California, a recent mock election test

revealed that some 20% of Diebold touch-screen voting machines failed to

operate as

expected after being previous decertified for similar failures and

vulnerabilities. Despite that, California's Republican Sec. of State Bruce

McPherson

remarkably is considering re-certifying those same machines in the state which

Diebold has described as America's " largest voting market. "

 

Diebold was one of seven major American Voting Machine companies named in

Velvet Revolution's _ " Divestiture for Democracy " _

(http://www.velvetrevolution.us/Campaigns/DV4D/) campaign launched on

Presidents' Day last February. The

campaign demanded accountability and openness by the Voting Machine Companies

in what Velvet Revolution deemed a " patriotic duty " to " ensure free, fair and

transparent elections " by the private companies entrusted with running our

sacred public democracy. _The BRAD BLOG_ (http://www.bradblog.com/) is a

co-founder of _VelvetRevolution.us_ (http://www.velvetrevolution.us/) .

 

Konkol's complaint as filed today demands " a trial by jury. "

 

_The BRAD BLOG_ (http://www.bradblog.com/) will of course, compile an

extensive, accurate and verifiable paper trail in regards to this story as it

continues to unfold...

 

UPDATE Scott+Scott, LLC releases news of the case filing in a _press release

here..._ (http://biz./prnews/051213/netu036.html?.v=32)

 

_http://www.bradblog.com/archives/00002153.htm_

(http://www.bradblog.com/archives/00002153.htm)

 

 

 

 

 

" When the power of love becomes stronger than the love of power, we will have

peace. "

Jimi Hendrix