Crisis Management: The Diebold Saga

Based upon the voting machine debacle unfolding here in California, Diebold either needs an education in business ethics or in how to do a much more effective job of crisis management — and, at this point, it’s not clear which. But, clearly, when charges of potential criminal misconduct by a major corporation start flying — as they did yesterday — reputations may be seriously at risk.

Diebold has a long history of supplying sophisticated equipment to the financial services industry. Its Automated Teller Machines are in use by banks everywhere. Its Election Systems line of business is forecast (based upon company guidance) to have 2004 revenues in the range of $138 to 170 million out of total company revenues of about $2.2 billion. The company’s most recent investor presentation is available online.

Yesterday, California Secretary of State Kevin Shelley decertified all touch screen voting machines from every vendor. In particular, Diebold was singled out by Shelley for its behavior in marketing its TSx voting systems:

Shelley decertified one type of touchscreen system, the Diebold TSx system, banning its use in the four counties where it is installed: Kern, San Diego, San Joaquin, and Solano. He took the additional step of requesting the Attorney General to investigate criminal and civil actions against Diebold in this matter based on what he called “fraudulent actions by Diebold.”

These actions were detailed in a report issued April 20 by the Secretary of State’s office. The report indicated Diebold’s persistent and aggressive marketing led to installation in a number of counties of touchscreen systems that were neither tested, qualified at the federal level, nor certified at the state level – and that Diebold then lied about it to Secretary of State officials.

“We will not tolerate the deceitful conduct of Diebold, and we must send a clear message to the rest of the industry: Don’t try to pull a fast one on the voters of California,” Shelley said.

A New York Times article this morning quoted Shelley further:

Mr. Shelley said that he was recommending that the state’s attorney general look into possible civil and criminal charges against Diebold because of what he called “fraudulent actions by Diebold.”

In an interview, Mr. Shelley said that “their performance, their behavior, is despicable,” and that “if that’s the kind of deceitful behavior they’re going to engage in, they can’t do business in California.”

That’s some pretty strong language! For its part, Diebold issued a press release saying it was moving forward in spite of its difficulties in California.