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Diebold Unplugged...Page 1 Rick Gagliano | 12/19/05
After months of complaints, inquiries and controversy over the security of voting technology and the quality of US elections, one maker of electronic voting machines finds itself under the most intense scrutiny to date.
This past week was a watershed one for the company who's name, in some circles, has become synonymous with election fraud, manipulation and hackable electronic voting machines, Diebold.
In the course of just five days, Diebold's CEO, Walden O'Dell, who in 2003 notoriously stated that he was "committed to helping Ohio deliver its electoral votes to the president next year," resigned, a critical test in Leon County, Florida produced results which demonstrated that Diebold's systems could be hacked and easily compromised, the company got an upgrade from one Wall Street analyst, and by Friday, five firms had filed class action lawsuits against the company.
All of this has put Diebold back in the spotlight - a spotlight the company eagerly sought to avoid - and returns debate to the presidential election of 2004, Diebold's role, and whether polling results in Ohio and elsewhere were purposely skewed in favor of George W. Bush.
This article will attempt to construct a time-line of the week's events and provide some background into the controversy which now seems to be closing in on the company.
For those unfamiliar with the Diebold, the company is a major manufacturer of a variety of products, mostly self-service banking products, ATM machines and drive-up banking equipment. The company, originally a safe-maker, was founded in 1859 by Charles Diebold and is headquartered in Canton, Ohio. Diebold still manufactures a variety of vaults and security systems and employs over 14,000 people worldwide.
In 2001, Diebold bought out Global Election Systems for just over $30 million in stock, plus an additional $5 million in cash financing for the company's continuing operations. The acquisition allowed Diebold to step directly into the lucrative U. S. elections market, bypassing the lengthy certification process required of voting machinery manufacturers as Global Election Systems' AccuVote optical scan and AccuVote-TS (touch screen) units were already in use in more than 850 jurisdictions around the country.
It was a smart move by Diebold, but not their first foray into elections. Their Brazilian subsidiary, Procomp, was already well-entrenched, supplying the country with a nationwide voting system. Procomp provided the Brazilian government with more than 180,000 voting terminals, accessories, software, installation, training, logistics and support in 2000.
Though Diebold's footprint on the U.S. elections landscape is large, according to SEC documents, sales of voting systems and related products and services accounts for less than 5% of their annual global revenues, expected to be in excess of $2.5 billion in 2005.
While their election systems division may be just another data point in their global structure, the events of this past week were set in motion long ago, and this small segment of their business now threatens the entire company, their global brand and indeed, their continued existence as a going concern.
CHRONOLOGY
On Monday, in a press release dated December 12, 4:19 p.m. ET, Diebold announces the resignation of CEO Walden O'Dell. Timed to hit the newswires after the close of trading on the New York Stock Exchange, the release offers little in the way of explanation, saying that O'Dell is stepping down, effective immediately, for "personal reasons."
The press release also notes the promotion of Thomas W. Swidarski from President and Chief Operating Office to replace O'Dell as CEO and names John N. Lauer, a board member since 1992, as non- executive chairman of the board. Swidarski, while serving as CEO will also maintain his other positions.
Lauer provides a terse statement concerning O'Dell, "The board of directors and Wally mutually agreed that his decision to resign at this time for personal reasons was in the best interest of all parties," and goes leaves the matter at that.
Within the hour, Reuters and the Associated Press release similar stories. Just before 6:00 p.m., Forbes' Greg Levine posts a story about O'Dell's resignation on their web site. In after-hours trading, shares of Diebold, which had closed up 11 cents at $37.73, are being traded as much as 75 cents lower.
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