A Diebold shareholder can go ahead with her lawsuit on behalf of the company against its current and former directors and officers. The lawsuit stems from an investigation of Diebold’s accounting practices by the Securities and Exchange Commission.
A Diebold shareholder can go ahead with her lawsuit on behalf of the company against its current and former directors and officers.
Stark County Common Pleas Judge Frank Forchione issued the ruling Monday, a week after hearing arguments from each side in the case.
The lawsuit stems from an investigation of Diebold’s accounting practices by the Securities and Exchange Commission. In 2008, the Green-based maker of ATMs and bank security systems, restated more than four years of financial reports, and ultimately paid a $25 million penalty, without admitting wrongdoing, to settle civil securities fraud charges brought by the SEC.
Selma Levine, who was identified at the hearing as holding a small number of shares, filed her lawsuit in October, alleging breach of fiduciary duty, waste of corporate assets and unjust enrichment.
In her lawsuit, Levine contends the company lost tens of millions of dollars in connection with the investigation and wasted hundreds of millions of dollars when it bought back stock at an artificially inflated price.
She is seeking monetary damages in favor of Diebold, reform of the company’s corporate governance and attorney fees and expenses.
Lawyers for the defendants had asked Forchione to throw out the case — before the sides have even exchanged information — arguing that Levine’s lawsuit was premature because she didn’t demand that the board of directors pursue the claims first.
The defendants also said the statute of limitations on Levine’s claim had expired.
An attorney with Robbins Umeda LLP, the San Diego-based law firm representing Levine, argued that making such a demand on the board was futile.
Forchione agreed, writing that it was “highly unlikely that the directors would have been willing to bring suit against themselves.”
The judge also overruled the motion to dismiss on the statute of limitations.
When asked about the ruling, Diebold spokesman Mike Jacobsen said the company doesn’t comment on pending litigation.
Attorney Kevin A. Seely, a partner with Robbins Umeda, released a statement by e-mail.
“Our client is a concerned shareholder that questioned the practices of some of the officers and directors at Diebold that she felt were not in the company's best interest,” Seely said. “We will continue to pursue accountability at Diebold on behalf of the company and its shareholders.”
Levine’s claim is different from a class-action shareholder lawsuit pending against Diebold, its outside auditor, its former director of corporate accounting and two former chief financial officers before a federal judge in Youngstown. That complaint alleges that shareholders were defrauded by Diebold’s release of false financial information that misstated its pre-tax earnings by at least $127 million.