SEC Charges Diebold with FCPA Violations in China, Indonesia, and Russia
The Securities and Exchange Commission today charged Diebold, Inc. ("Diebold"), an Ohio corporation that is a global provider of ATMs and bank security systems, with violations of the Foreign Corrupt Practices Act ("FCPA") for lavishing international leisure trips, entertainment, and other improper gifts on foreign officials to obtain and retain lucrative business with government owned banks in China and Indonesia, and for paying other bribes in connection with the sale of ATMs to private banks in Russia. The SEC's complaint, filed in the United States District Court for the District of Columbia, alleges that Diebold paid approximately $3 million in illicit payments in these countries from 2005 through 2010. To settle the SEC's charges, Diebold has agreed to consent to final judgment, which is subject to court approval, ordering a permanent injunction, payment of $22,972,942 in disgorgement and prejudgment interest, and appointment of independent compliance monitor.
As alleged in the SEC's complaint, from 2005 through 2010, through its Chinese subsidiary Diebold Financial Equipment Company (China), Ltd., Diebold provided international leisure trips and entertainment to officials of government owned banks in China. This included trips to Europe, with stays in Paris, Amsterdam, Florence, Rome and other European cities, and trips to the United States, with travel to the Grand Canyon, Napa Valley, Disneyland, Las Vegas, and other popular tourist destinations. The SEC alleges that Diebold spent approximately $1.6 million on leisure trips, entertainment, and other improper gifts for government bank officials in China. During this same time period, the SEC alleges, Diebold spent over $147,000 on leisure trips and entertainment for officials of government banks in Indonesia. As alleged in the complaint, Diebold executives in charge of the company's operations in Asia knew of these improper payments, which were falsely recorded in Diebold's books and records as training or other legitimate business expenses.
The SEC's complaint further alleges that from 2005 through 2008, through its Russian subsidiary Diebold Self-Service Ltd., Diebold paid bribes on the sale of ATMs to private banks in Russia. As alleged in the complaint, these bribes totaled approximately $1.2 million, and were funneled through a Diebold distributor in Russia. According to the complaint, Diebold's Russian subsidiary executed phony service contracts with its distributor to hide and falsely record the payments as legitimate business expenses.
The SEC's complaint charges Diebold with violating Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934. Diebold has agreed to consent to a final judgment that permanently enjoins the company from future violations of these provisions, orders Diebold to pay $22,972,942 in disgorgement and prejudgment interest, and requires the appointment of an independent compliance monitor. In a parallel criminal proceeding, Diebold has agreed to pay a $25.2 million criminal fine as part of a deferred prosecution agreement with the U.S. Department of Justice.
The SEC's investigation was led by Devon A. Brown and Brian O. Quinn with assistance from Jennifer Baskin of the FCPA Unit and Kristen Dieter. The SEC thanks the U.S. Department of Justice's Fraud Section, the United States Attorney's Office for the Northern District of Ohio, and the Federal Bureau of Investigation, for their assistance in this matter.
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