Ohio-based Diebold Inc. agreed Tuesday to pay a criminal fine of $25.2 million to the DOJ and $23 million in disgorgement and prejudgment interest to the SEC to resolve allegations it violated the Foreign Corrupt Practices Act by covering up bribes to bank officials in China, Indonesia and Russia.
Diebold makes ATM machines. The DOJ charged it in a two-count information with conspiring to violate the FCPA’s anti-bribery and books and records provisions and a substantive books and records offense. There were no charges under the anti-bribery provisions, which apply only to corrupt payments to foreign officials.
Some of Diebold’s overseas customers are state-owned banks but the criminal charges under the books and records provisions related also to bribes to privately owned banks.
From 2005 to 2010, Diebold used cash, gifts, and travel and entertainment worth about $3 million to win and keep contracts for the sale of its ATM machines. It tried to hide the bribes by using third parties to deliver the payments and gifts, and calling the pleasure travel by bank employees ‘training.’
Under a three-year deferred prosecution agreement, Diebold will retain a compliance monitor for at least 18 months. The DOJ said Diebold self reported the offenses and was credited for ‘an extensive internal investigation and cooperation.’
Through its Chinese subsidiary Diebold Financial Equipment Company (China), Ltd., Diebold spent about $1.6 million for pleasure trips and entertainment for officials of government owned China banks. Travel destinations included Paris, Amsterdam, Florence, Rome and other European cities. Trips to the United States included the Grand Canyon, Napa Valley, Disneyland, Las Vegas, and other tourist spots, the SEC said.
In Russia, the SEC said, Diebold’s bribes totaled about $1.2 million. They were paid through a phony contract with a Diebold distributor and recorded as business expenses. The bribes in Russia went to privately owned banks.
The DOJ filed the criminal information and settlement documents Tuesday in the U.S. District Court for the Northern District of Ohio. The SEC’s civil case was filed in the District of Columbia.
The DOJ’s October 22, 2013 release is here.
The SEC’s Litigation Release No. 22849 and Accounting and Auditing Enforcement Release No. 3509 (both dated October 22, 2013) in Securities and Exchange Commission v. Diebold, Inc., Civil Action No. 1:13-cv-01609 (D.D.C.) is here. The SEC’s civil complaint against Diebold is here.
Richard L. Cassin is the Publisher and Editor of the FCPA Blog. He can be contacted here.