Another No-Confidence Vote for Diebold

Diebold can't seem to catch a break. Federal regulators sued a former sales representative for the automated-teller and voting machine maker in U.S. District Court in Oklahoma, accusing him of insider trading.

The Securities and Exchange Commission says that the Diebold worker, Robert G. Cole, illegally netted $500,000 by investing in derivatives tied to the company's stock using information not available to the general public.

On September 15, 2005, after learning from a sales manager that revenue was down from company's North American regional bank business, Cole began buying hundreds of soon-to-expire Diebold put option contracts, the S.E.C. says in its complaint.

Ultimately, Cole invested $70,110 in Diebold puts, knowing that the bad earnings news would send the company's stock tumbling and allow him to reap a considerable profit essentially risk-free.

As Cole anticipated, Diebold soon lowered its earning forecasts, because of the revenue shortfall. The stock price dropped 16 percent the next day, closing at $37.27 per share. Cole's put option contracts raked in a return of 700 percent.

The insider-trading allegation comes not long after Diebold announced it would be laying off 5 percent of its workforce to cut costs. The company's last financial statement in April 2007 shows that overall revenue only rose by 1 percent while its election equipment subsidiary dropped 69 percent.

Following years of bad publicity around faulty election equipment in the 2004 presidential and 2006 midterm election, Diebold changed its election systems subsidary's name to Premier Election Solutions.

Earlier this month, United Technologies Corp. offered to buy Diebold for $2.63 billion.

by Andrea Chalupa