A day after its chief executive resigned, a shareholder suit was filed against Diebold Inc. and several executives, alleging they inflated the company's share price by hiding the extent of its problems while selling $2.7 million of stock.
Class-action status is being sought for the suit, filed Tuesday in the U.S. District Court for the Northern District of Ohio. In addition to Diebold, it names Walden O'Dell, the former CEO, and his replacement, Thomas Swidarski, among other Diebold executives.
The complaint says the North Canton, Ohio, automated teller machine maker issued public statements that were "misleading prior to or shortly after their issuance." It says that "each individual defendant had knowledge of Diebold's problems" and that each "was motivated to conceal such problems."
Earnings have been falling steadily at the North Canton, Ohio, company. It lowered its full-year guidance three times this year, and its third-quarter profit dropped 45% from a year earlier, to $26.4 million. Revenue rose 2.7%, to $622.3 million.
Scott + Scott LLC of Colchester, Conn., is representing the sole current plaintiff, shareholder Janice Konkol. A lead plaintiff is still being sought.
David R. Scott, Scott + Scott's managing partner, told American Banker that Diebold "failed to really disclose to the public the extent of the problems that they were having with their voting machines and the data on those voting machines." He also alleged that Diebold executives reported lower restructuring charges than they knew the company would incur.
Mike Jacobsen, a Diebold spokesman, said its policy is not to discuss pending litigation.
Asked whether the allegations in the lawsuit played a part in Mr. O'Dell's resignation, Mr. Jacobsen said he did not know. "O'Dell resigned from the company for personal reasons, and the board agreed that it was in both parties' best interests."
American Banker was unable to reach Mr. O'Dell by phone.
Mr. Scott said he did not believe any of the executives, including Mr. O'Dell, knew the suit was coming. "We generally don't communicate with the defendants before we bring an action against them."
