Diebold Probe Costs CFO His Job

Kevin Krakora resigns after receiving a Wells notice from the SEC as it studies the company. Leslie Pierce is named as interim finance chief.
Stephen TaubMarch 25, 2009

Diebold Inc. said CFO Kevin J. Krakora, who also is an executive vice president, resigned after receiving a Wells notice from the Securities and Exchange Commission. It said the notice was in connection with a previously disclosed investigation of the company.

In addition, its prior finance chief and other former employees in the company’s finance organization also have received Wells notices, the company added. Diebold did not identify those individuals, however.

“To the company’s knowledge, the Wells notices relate to items addressed in the company’s previously filed restated financial statements,” said the maker of ATMs, voting machines, and security systems.

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Diebold said that it continues to cooperate with the SEC in the commission’s investigation, and the company added it has had preliminary discussions with the SEC about resolving thes matter, including the possibility of entering into a settlement agreement.

Diebold also warned that it is possible the SEC will issue a Wells notice to the company itself. “There can be no assurance that Diebold will be able to successfully resolve this matter with the SEC, or that any such resolution will not have a material adverse impact on the company’s financial condition, liquidity or results of operations,” it said.

Leslie A. Pierce, vice president and corporate controller, will serve as interim CFO. Prior to being named to his previous positions, Pierce had served as vice president of accounting, compliance, and external reporting. She joined Diebold in 1990 as a senior accountant. Before joining Diebold, Pierce spent four years at KPMG.

In February 2008, Krakora had been told that he would not receive his expected 2007 bonus — or get a merit-based salary boost or stock awards under the company performance plan — even as he was working on restating company results and revising its revenue recognition policy. At that time, Diebold said that it had revoked compensation for Krakora and another executive “in light of and in connection with” Diebold’s pending restatements. The move affected the performance shares the executives were predicted to earn from an incentive plan covering the period between 2005 and 2007, as well as their 2007 discretionary cash bonus, and 2008 merit-based salary increase.

This week’s Wells notices indicate that the SEC staff is considering recommending that the SEC bring civil enforcement actions against these individuals alleging that they violated various provisions of the federal securities laws. Under the SEC’s procedures, recipients of the notice have the opportunity to respond to the SEC staff before the staff makes its formal recommendation to the Commission on whether any civil enforcement action should be brought by the SEC.

Krakora will continue to serve the company in a nonfinancial reporting capacity pending resolution of this matter, the company said.