Toledo glassmaker Libbey Inc. Thursday reassigned its chief financial officer after he was named in a federal complaint alleging securities and accounting fraud at his previous employer from 2002 to 2005.
Gregory T. Geswein will remain with Libbey in a new position of vice president, strategic planning and business development. He has been the company's chief financial officer since 2007. The company named Richard Reynolds, Libbey's chief operating officer since 1995 and its chief financial officer from 1993 to 1995, to replace Mr. Geswein.
Mr. Geswein was reassigned eight days after the U.S. Securities and Exchange Commission filed a federal complaint against him in U.S. District Court in Cleveland alleging securities and accounting fraud from when he served as chief financial officer of Diebold Inc.
The problem resulted in Diebold having to restate its earnings.
Diebold is a manufacturer of automated teller machines, cash registers, and electronic voting machines, and is headquartered in North Canton, Ohio.
Mr. Geswein resigned from the company in August, 2005, and was hired by Libbey as its CFO in 2007.
While the SEC is pursuing the individuals involved in the alleged violations, Diebold reached a settlement last year with the agency. The company agreed to pay a civil penalty of $25 million. That agreement was finalized and filed in federal court on June 2, according to Diebold filings.
The agency said Diebold filed at least 40 annual, quarterly, and other reports with the SEC and issued dozens of press releases that contained "material misstatements and omissions concerning the company's financial performance."
According to the SEC complaints, Diebold's improper accounting practices misstated the company's reported pretax earnings by at least $127 million.
In its complaint against Mr. Geswein, the SEC alleges that he and others at Diebold "engaged in fraudulent accounting practices to inflate the company's earnings."
The complaint contends that Mr. Geswein and two subordinates regularly pulled sales revenue forward and delayed accounting for expenses to allow Diebold to meet the earnings expectations of industry analysts.
It also alleges the company used what it called "cookie jar reserves" to pad earnings in quarters when the publicly held company's performance was not meeting industry expectations.
The federal regulators said the company engaged in what it called fraudulent accounting practices from 2002 to 2007, including improper use of "bill-and-hold" accounting; improper recognition of revenue on a lease agreement subject to an undisclosed buy-back agreement; manipulating reserves and accruals; improperly delaying and capitalizing expenses, and improperly writing up the value of used inventory.
In its complaint against Mr. Geswein and other top Diebold financial officials, the SEC is seeking a court order to bar the defendants from serving as an officer or director of any company. In addition, it is seeking the repayment of "ill-gotten gains" with interest, civil penalties, and reimbursement of bonuses and other compensation.
Mr. Geswein referred questions to his attorney, Steven Scholes of Chicago. Mr. Scholes said his client takes "serious issue with the truthfulness and accuracy of the complaint," and looks forward to refuting the allegations in court.
Mr. Scholes said his client received notice of the SEC's intent to consider charges a year ago, and "has been transparent and cooperative throughout the entire process, and now there is a lawsuit. We're very disappointed that it was filed and are considering all of our options in how we deal with the litigation."
In his new role at Libbey, Mr. Geswein no longer will have oversight of the Toledo firm's financial reporting, Libbey officials said.
John F. Meier, Libbey's longtime chairman and chief executive officer, said in a statement to The Blade that Mr. Geswein's reassignment was "influenced" by the SEC complaint, which, he said, does not relate to Libbey or its financial reports.
"Libbey's senior management reorganization, focusing on global roles particularly in the operating areas of the company, has been under review for some period of time. Greg Geswein's new assignment is influenced by the civil proceeding," Mr. Meier said.
"These allegations do not in any way relate to Libbey, or its financial statements. I look forward to his continued contributions to Libbey in his new role."
The SEC complaint is similar to what the the agency filed against four former executives of the former Dana Corp. In September, the four agreed to pay $400,000 in fines and penalties as part of a settlement stemming from their alleged practices that the SEC alleged inflated Dana's performance by $88 million in profits 2004 and 2005.
The shuffle at Libbey seemed of little concern to investors yesterday. The stock's price closed up 21 cents at $13.60 a share.
Contact Larry P. Vellequette at: