TULSA, Okla. – A federal judge last week found a former sales representative of Diebold guilty of illegally earning $500,000 by selling the company’s stock short after he learned the ATM maker would not meet its sales projections and sentenced him to prison.
Robert Cole pled guilty to a felony charge of securities fraud, and was sentenced to a prison term of one year and one day, forfeiture of $509,080, and a $180,000 fine.
In a civil suit, the Securities and Exchange Commission alleged on Sept. 15, 2005, shortly after learning from his sales manager that revenues and orders in Diebold's North American regional bank business were significantly below target, Cole began purchasing hundreds of soon-to-expire Diebold put options contracts, at a total cost of $70,110, anticipating that Diebold would lower its earnings forecast and the price of Diebold stock would fall.
One day after Cole completed purchasing these Diebold put option contracts the company announced that it was lowering its earnings forecasts, primarily because of a revenue shortfall in the company's North American regional bank business. After this public announcement, Diebold's stock price dropped sharply, closing at $37.27 per share, which was a 16% drop from the previous day's closing price of $44.13. Cole immediately sold the Diebold put option contracts for $579,190, realizing illicit profits of $509,080 (a 700% return).
