U.S. Securities and Exchange Commission Announces 'Informal Inquiry' into Accounting Practices of ATM, E-Voting Giant!
Inquiry Comes on Heels of Recent Securities Fraud Class Action Litigation, Sharp Drop in Stock Value, Growing List of Security Vulnerabilities Discovered in Company's Electronic Voting Machines...
By Brad Friedman on 5/9/2006, 3:13pm PT  

Just out from Reuters...

NEW YORK, May 9 (Reuters) - Diebold Inc. (DBD.N), one of the world's largest makers of automated teller and electronic voting machines, on Tuesday said staff at the U.S. Securities and Exchange Commission have begun an informal inquiry into how the company recognizes revenue.

North Canton, Ohio-based Diebold said it learned recently about the SEC inquiry and is cooperating. The company disclosed the inquiry in its quarterly report filed with the agency.

The investigation of Diebold by the SEC, which we had heard previously about through background sources over the past several months, comes on the heels of a class action Securities Fraud litigation suit, originally reported exclusively by The BRAD BLOG just before it was filed last December.

That suit came on the heels of a growing number of reports on the reliability and vulnerability of Diebold's electronic voting machines and concerns about their larger ATM division.

Last September, just days after we reported on an anonymous Diebold insider, nicknamed "DIEB-THROAT", who pointed us to a Dept. of Homeland Security "Cyber Security Alert" about vulnerabilities in Diebold's election software, the company's stock-prices plummeted more than 15%.

While the stock price has remained lower than the nearly all-time highs it had been at just prior to the sudden drop, the price per share has been slowing inching back up over the last several months since the resignation of former CEO Walden O'Dell who was apparently pushed out just prior to the filing of the Securities Fraud suit which complained of insider trading, stock price manipulation and other malfeasance by eight current and former top Diebold executives.

O'Dell had earned criticism after sending a fundraising letter to Republicans, prior to the 2004 President Election promising to deliver the state of Ohio to George W. Bush, for whom O'Dell was a top supporter.

O'Dell was quickly replaced by the President of the Diebold Elections division, Thomas Swidarski, who is also named in the class action litigation.

Problems continue to plague the North Canton, Ohio-based company's Electronic Voting Machine division. Last Friday, The BRAD BLOG filed a detailed report on the newest security vulnerability to be discovered in Diebold touch-screen voting machines. This particular vulnerability, just the latest in a string of more than a dozen serious flaws to be discovered since last December, has been described as a "major national security risk" and last week forced the state of Pennsylvania to "sequester" all of their new Diebold touch-screen systems until an attempted "fix" can be applied to mitigate the problem...

Pennsylvania's primary election is scheduled for next Tuesday and the state had been planning on using the new Diebold touch-screen systems for the first time this year in a number of counties.

This most recent problem is said to affect all Diebold AccuVote touch-screen systems in every state. It is said, by a number of officials who have been made aware of the problem, to be such a security concern that only partial details are being released publicly for the time being.

The security flaw --- which, incredebily was reportedly built-in to the system by Diebold as a "feature" in order to make system upgrades easier --- was first discovered when computer security professionals were allowed, by Emery County, Utah County Clerk Bruce Funk, to examine the county's new Diebold AccuVote TSx machines last March.

In the wake of the examination, state officials have since attempted to push Funk, a 23-year elected official, out of his job for daring to allow an independent investigation and analysis of the new voting systems. BlackBoxVoting.org (BBV), the election watchdog organization who arranged the security analysis in Emery County with two different computer security teams, is financially backing Funk's legal battle against the state of Utah for reinstatement in his former position. BBV has promised to release more details on the newly discovered problem tomorrow on their website.

UPDATE: A complete listing of the now ten listed Securities suits being brought against Diebold, from their recent Quarterly Report as filed with the SEC.

And, P.S., more bad legal news for Diebold to come out of Arizona tomorrow, The BRAD BLOG has learned. Details mañana...