SEC, DOJ charge Diebold in foreign bribery case

Kevin McCoy | USA TODAY

Ohio-based ATM manufacturer Diebold spent roughly $3 million bribing officials at banks in China, Indonesia and Russia with pleasure trips in a bid to win and keep lucrative business deals, federal authorities charged Tuesday.

Violating the Foreign Corrupt Practices Act, Diebold's agents and subsidiaries between 2005 and 2010 "lavished international leisure trips, entertainment and other improper gifts" on officials in the three nations, alleged a 12-page civil complaint filed by the Securities and Exchange Commission.

For instance, Diebold paid for two officials from a government-controlled bank in China to take a 15-day trip in 2005 to Universal Studios and Disneyland in Los Angeles, Las Vegas, the Grand Canyon, Washington, D.C., New York City, San Francisco and Hawaii, the complaint charged.

In a 2009 e-mail exchange cited in the SEC complaint, a Diebold Indonesia employee sought a supervisor's approval to fund a European trip by two bank officials. The supervisor approved, e-mailing: "Make this trip successful for upcoming bid too!" the complaint charged.

The bank employees in the three countries "were senior officials who had the ability to influence purchasing decisions" on the ATMs and bank security systems manufactured by Diebold, the complaint charged.

Diebold also allegedly plied some foreign bank officials with annual gift payments from less than $100 to more than $600.

Diebold officials overseas allegedly knew the payments were improper and covered them up. The SEC accused the company of recording the expenditures in its books and records as legitimate training expenses.

Diebold, based in North Canton, agreed to pay more than $48 million to settle the SEC allegations and resolve a parallel criminal case in which the U.S. Department of Justice agreed to defer prosecution for three years. The company also agreed to implement strong internal controls, cooperate fully with the Justice Department and retain a compliance monitor for at least 18 months.

Diebold's defense attorney, Jonathan Leiken, did not immediately respond to a message seeking comment.

"A bribe is a bribe, whether it's a stack of cash or an all-expense-paid trip to Europe," said Scott Friestad, an associate director in the SEC's enforcement division. "Public companies must be held accountable when they break the law to influence government officials with improper payments or gifts."

Federal prosecutors said they would seek dismissal of criminal charges if Diebold complies with the terms of the deferred prosecution agreement.

"Corporate earnings cannot be placed above the rule of law, and today's penalties – nearly $50 million in all – send the message again, loud and clear, that such conduct is unacceptable," said U.S. Attorney Steven Dettelbach of the Northern District of Ohio.