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Diebold Inc. yesterday agreed to pay a $25 million fine in hopes of resolving three years of legal issues with the U.S. Securities and Exchange Commission and the U.S. Attorney's Office for the Northern District of Ohio. The ATM manufacturer agreed to make the payment before the SEC filed formal charges against the company, Mike Jacobsen, a spokesperson for Diebold, tells ATM&Debit News, a CardLine sister publication. Paying the fine means the SEC will not file formal charges against Diebold if the SEC accepts its staff's recommendations to accept the payment, Jacobsen says. "This is a good thing. The company settled before it received a Wells notice," says Gil Luria, an analyst with Wedbush Morgan Securities in Los Angeles. A Wells notice informs recipients they are targets of civil legal action. "If Diebold had not settled, the investigation would have dragged out for years. Now the company can go back to managing its business of making and selling ATMs," he says. 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 2006. 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 U.S. Attorney's Office for the Northern District of Ohio has agreed not to press charges against Diebold stemming from the SEC investigation, the SEC filing says. The possible resolution of the dispute has nothing to do with the SEC serving Wells notices on current and former Diebold employees. The SEC served the Wells notices, indicating possible civil action, against the executives, including Kevin Krakora, Diebold chief financial officer, last month. Diebold forced Krakora to step down from his position, but he remains with the company in an undefined role, Jacobsen says. Gregory T. Geswein, Krakora's predecessor, has left the company, Jacobsen says. The SEC sent 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.
