UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF OHIO

__________________________________________

ROGER GRAHAM, Individually and On Behalf ofAll Others Similarly Situated,

Plaintiff,

vs.

DIEBOLD INC., WALDEN W. O=DELL, ERIC C.EVANS and GREGORY T. GESWEIN,

Defendants.__________________________________________

))))))))))))

CIVIL ACTION NO.

CLASS ACTION COMPLAINT

JURY TRIAL DEMANDED

Plaintiff, Roger Graham, (APlaintiff@) alleges the following based upon the investigation

of Plaintiff=s counsel, which included, among other things, a review of the defendants= public

documents, conference calls and announcements made by defendants, United States Securities

and Exchange Commission (ASEC@) filings, wire and press releases published by and regarding

Diebold Inc. (ADiebold’@ or the ACompany@) securities analysts= reports and advisories about the

Company, and information readily obtainable on the Internet.

NATURE OF THE ACTION AND OVERVIEW

1. This is a federal class action on behalf of persons who purchased the securities of

Diebold between October 22, 2003 and September 21, 2005, inclusive (the AClass Period@)

seeking to pursue remedies under the Securities Exchange Act of 1934 (the AExchange Act@).

2. Diebold engages in the development, manufacture, sale, and service of

self-service transaction systems, electronic and physical security systems, software, and various

products used to equip bank facilities and electronic voting terminals principally in the United

States.

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3. The complaint alleges that defendants’ Class Period representations regarding

Diebold were materially false and misleading when made for the following reasons: (1) that as a

result of improper accounting for commission expenses, the Company=s financial statements for

2004 and the first two quarters of 2005 were misstated; (2) that the Company lacked adequate

internal controls; (3) that the Company was losing market share in North America to

competitors; (4) that the Company=s election machines were plagued with execution problems;

and (5) that as a consequence of the above, the Company=s statements with respect to its

financial guidance lacked in all reasonable basis.

4. On September 21, 2005, before the market opened, the Company announced it

was lowering its third quarter and full-year earnings per share guidance for 2005. On this news,

shares of Diebold fell $6.90 per share, or 15.55 percent, to close at $37.47 per share.

JURISDICTION AND VENUE

5. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of

the Exchange Act, (15 U.S.C. ‘’ 78j(b) and 78t(a)), and Rule 10b-5 promulgated thereunder (17

C.F.R. ‘240.10b-5).

6. This Court has jurisdiction over the subject matter of this action pursuant to ‘27

of the Exchange Act (15 U.S.C. ‘78aa) and 28 U.S.C. ‘ 1331.

7. Venue is proper in this Judicial District pursuant to ‘27 of the Exchange Act, 15

U.S.C. ‘ 78aa and 28 U.S.C. ‘ 1391(b). Many of the acts and transactions alleged herein,

including the preparation and dissemination of materially false and misleading information,

occurred in substantial part in this Judicial District.

8. In connection with the acts, conduct and other wrongs alleged in this complaint,

defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,

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including but not limited to, the United States mails, interstate telephone communications and

the facilities of the national securities exchange.

PARTIES

9. Plaintiff, Roger Graham, as set forth in the accompanying certification,

incorporated by reference herein, purchased Diebold securities at artificially inflated prices

during the Class Period and has been damaged thereby.

10. Defendant Diebold is an Ohio corporation with its principal executive offices

located at 5995 Mayfair Road, PO Box 3077, North Canton, Ohio 44720.

11. Defendant Walden W. O=Dell (AO=Dell@) was, at all relevant times, the Company=s

Chief Executive Officer and Chairman.

12. Defendant Eric C. Evans (AEvans@) was the Company=s President and Chief

Operating Officer.

13. Defendant Gregory T. Geswein (AGeswein@) was the Company=s Senior Vice

President and Chief Financial Officer.

14. Defendants O=Dell, Evans, and Geswein are collectively referred to hereinafter as

the AIndividual Defendants.@ The Individual Defendants, because of their positions with the

Company, possessed the power and authority to control the contents of Diebold’s quarterly

reports, press releases and presentations to securities analysts, money and portfolio managers

and institutional investors, i.e., the market. Each defendant was provided with copies of the

Company’s reports and press releases alleged herein to be misleading prior to or shortly after

their issuance and had the ability and opportunity to prevent their issuance or cause them to be

corrected. Because of their positions and access to material non-public information available to

them but not to the public, each of these defendants knew that the adverse facts specified herein

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had not been disclosed to and were being concealed from the public and that the positive

representations which were being made were then materially false and misleading. The

Individual Defendants are liable for the false statements pleaded herein, as those statements were

each “group-published” information, the result of the collective actions of the Individual

Defendants.

SUBSTANTIVE ALLEGATIONS

Background

15. Diebold engages in the development, manufacture, sale, and service of

self-service transaction systems, electronic and physical security systems, software, and various

products used to equip bank facilities and electronic voting terminals principally in the United

States. The Company=s products primarily include self-service banking products and automated

teller machines, RemoteTeller System, vaults, safe deposit boxes and safes, drive-up banking

equipment, and electronic voting systems. Its customers include banks and financial institutions,

as well as colleges and universities, public libraries, government agencies, utilities, and various

retail outlets. The Company sells its systems and equipment directly through its sales force to

customers in the United States and through manufacturer=s representatives and distributors

worldwide.

Materially False And MisleadingStatements Issued During The Class Period

16. On October 22, 2003, Diebold issued a press release entitled ADiebold Announces

Record Third Quarter Results.@ Therein, the Company, in relevant part, stated:

Diebold, Incorporated (NYSE: DBD) today reported record thirdquarter 2003 net income of $48,289,000, an increase of 9.5 percentover third quarter 2002 net income of $44,080,000. Third quarter2003 revenue was $570,239,000, a 7.6 percent increase over thethird quarter 2002 revenue of $529,799,000. Diluted earnings per

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share in the third quarter 2003 were $.66, which was near the highend of the company=s previous guidance of $.62 to $.67 per share.

***

Financial Results

AI am extremely pleased that we once again delivered solid results.I am particularly encouraged by the strong growth in financialself-service orders globally,@ said Walden W. O=Dell, Dieboldchairman, president and chief executive officer. AOrders were verystrong as global acceptance of the new Opteva ATM line isgrowing, as is demand for our security solutions where revenuegrew more than 15 percent from the third quarter 2002.

AAlso, I am encouraged by our overall growth in Asia-Pacific. Inthe region, we completed the acquisition of two small securitycompanies at the end of the quarter that will further strengthen ourmarket presence there. We also had excellent performance fromour business in the Americas during the quarter.@

O=Dell continued, ALooking forward, these results, combined withgrowing demand globally for Opteva and our security solutions,positions us very well for future accelerated revenue growth.@

Fixed Exchange Rate Third Quarter Orders

Despite a challenging global economic environment, total ordersfor product and service increased in the double-digit range.Financial self-service orders in the Americas, Asia-Pacific, andEMEA all increased in the double-digit range. Security ordersremain strong, increasing in the high single-digit range. Totalorders in North America grew in the double-digit range, excludingelection systems.Orders in election systems grew substantially from the thirdquarter 2002. The election systems business is driven by a smallnumber of large orders in any given quarter, making quarter toquarter comparisons difficult. For example, election systemsorders for the third quarter 2003 include a very large order fromthe state of Maryland. ***

Revenue

Total revenue for the quarter was $570.2 million, up $40.4 million,or 7.6 percent and 4.9 percent on a fixed exchange rate basis.

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Total financial self-service revenue increased 8.3 percent and 4.2percent on a fixed exchange rate basis. Security solutions revenuegrew 15.4 percent as a result of continued revenue growth in thefinancial industry, government and retail markets. Total financialself-service & security revenue increased by 10.1 percent andincreased by 6.9 percent on a fixed exchange rate basis. Electionsystems revenue is comprised of a small number of very largecontracts. The third quarter of 2003 included revenue from thestate of Maryland contract, as compared to revenue from the stateof Georgia contract in the third quarter of 2002.

17. On January 28, 2004, Diebold issued a press release ADiebold announces record

fourth quarter and year-end results.@ Therein, the Company, in relevant part, stated:

Diebold, Incorporated (NYSE: DBD) today reported record fourthquarter 2003 revenue of $648,410,000, an increase of 23.3 percentover the fourth quarter 2002. Net income in the fourth quarter2003 was $59,243,000, an increase of 170.0 percent over thefourth quarter 2002. Diluted earnings per share for the fourthquarter 2003 were $.81 per share versus $.30 per share in thefourth quarter of 2002, and was within the company=s previousguidance of $.78 to $.83 per share.

The prior-year fourth quarter results included an after-tax chargeof $26,494,000 related to the settlement of a dispute with the IRSregarding the deductibility of interest on debt related to corporateowned life insurance (COLI), which reduced fully diluted earningsper share by $.37. Net income and diluted earnings per share forthe fourth quarter 2003 would have increased by 22.3 percent and20.8 percent, respectively, versus the fourth quarter of 2002, if theimpact of the COLI settlement charge was excluded from the 2002results.

For the year ended December 31, 2003 Diebold reported revenueof $2,109,673,000, an increase of 8.7 percent over 2002. Netincome in 2003 was $174,776,000, an increase of 76.3 percentfrom 2002. Fully diluted earnings per share were $2.40, anincrease of 75.2 percent from $1.37 reported in 2002.Included in the 2002 results was a first quarter after-tax charge of$33,147,000 from a Cumulative Effect of a Change in Accountingrelated to the impairment of Goodwill (SFAS 142, Goodwill andOther Intangible Assets), which reduced 2002 fully dilutedearnings per share by $.46. Net income and fully diluted earningsper share in 2003 would have increased by 10.0 percent and 9.1percent, respectively, versus 2002, if the impact of the impairment

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charge and the previously discussed COLI settlement wasexcluded from the 2002 results.

***

Financial Results

AI am extremely pleased that we were able to deliver exemplaryresults for the quarter and year, exceeding $2 billion in revenue forthe first time in our company=s history. I am particularly pleasedby the continued strong performance in the financial self-servicebusiness as market conditions in North America continue toimprove, and we continue to gain market share globally,@ saidWalden W. O=Dell, Diebold chairman and chief executive officer.AGlobal acceptance of the new Opteva ATM line continues to bestrong as we saw a significant increase in Opteva as a percentageof overall ATM business.

AOur security business has also realized strong growth from theprior year with revenue up more than 13 percent for the quarterand nearly 18 percent for the year. We continue to make strides inthe retail and government markets and gain share in the financialsecurity market. In the election systems business, while purchasingdecisions in 2003 were slower than anticipated, we are pleasedwith our strong market position and remain the clear leader in thisspace.@

O=Dell continued, AGiven current global business trends and theeconomic recovery underway in the United States, I am optimisticabout our prospects in 2004.@

18. On April 20, 2004, Diebold issued a press release ADiebold Announces First

Quarter Results.@ Therein, the Company, in relevant part, stated:

Diebold, Incorporated (NYSE: DBD) today reported first quarter2004 net income of $29,169,000 on revenue of $498,255,000, withdiluted earnings of $.40 per share, compared to $.36 in the firstquarter of 2003. Diluted earnings per share were within thecompany’s previous guidance of $.38 to $.42. Revenue grew 21.5percent versus the first quarter of 2003, while net income increased12.6 percent and diluted earnings per share grew 11.1 percent. Thisperformance was driven by strong growth in the financialself-service business, which more than off set the dilutive effect ofthe election systems business, which was $.04 per share in the first

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quarter of 2004 compared to $.01 accretive in the first quarter of2003.

***

Financial Results

“We’re very pleased to have generated strong revenue growth inour financial self-service and security businesses, which performedexceptionally well during the first quarter” said Walden W.O’Dell, Diebold chairman and chief executive officer. “Marketacceptance of Opteva is continuing to gain momentum globally, asthe new product line continues to constitute a growing percentageof our overall financial self-service business. Our securitysolutions continue to gain momentum with double-digit revenuegrowth from the same period last year.

“Purchasing delays, as a result of ongoing political debate, arecontinuing to adversely impact the election systems business thisyear. As a result, we have significantly reduced election systemsrevenue and profit expectations for the current year. However, weremain confident in the long- term prospects of the electionsystems business. We’ve overcome these recent setbacks with ourstrong overall performance and have slightly increased full- yeartotal revenue guidance for 2004.”

O’Dell continued, “As a result of the overall performance of the

business and the continued acceptance of our core product and

service solutions in the marketplace, I am very optimistic about

our prospects for the balance of this year - and beyond.”

19. On July 21, 2004, Diebold issued a press release ADiebold Announces Record

Second Quarter Earnings Per Share of $0.60 on Strong Revenue Growth of 14.8 Percent.@

Therein, the Company, in relevant part, stated:

Diebold, Incorporated (NYSE: DBD) today reported record secondquarter 2004 net income of $43,667,000 and diluted earnings pershare of $.60, compared to diluted earnings per share of $.57 in thesecond quarter of 2003. Prior year EPS included a gain of

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approximately $.03 per share, which was a result of an earlybuyout of leased ATM equipment by a major customer. Dilutedearnings per share grew 5.6 percent and were within thecompany’s previous guidance of $.58 to $.62 per share. Excludingthe gain in the second quarter of 2003, diluted earnings per sharewould have increased by 11.9 percent.

Diebold also achieved record second quarter revenue of$552,043,000, 14.8 percent higher than the second quarter of 2003.This significant increase in revenue was led by strong growth infinancial self-service products which was fueled by strong demandfor the company’s new Opteva product solution, particularly in theUnited States.

***

Financial Results“I continue to be very encouraged by our strong order growth, asproduct orders in the second quarter were the highest in thecompany’s history,” said Walden W. O’Dell, Diebold chairmanand chief executive officer. “Our Opteva solution continues to bewell-received globally, particularly in North America, and we areencouraged by the margins on that product line. Our securitysolutions continue to be successful, and we’re working toprofitably grow that part of our business through strategicacquisitions and continued market penetration.”

O’Dell continued, “Given the growth of Opteva and the success ofour overall core product and service businesses, we continue to bevery confident about the prospects for the company movingforward.”

20. On October 24, 2004, Diebold issued a press release entitled ADiebold Reports

Third Quarter Earnings Per Share.@ Therein, the Company, in relevant part, stated:

Diebold, Incorporated (NYSE: DBD) today reported third quarter2004 net income of $48,319,000 and diluted earnings per share of$.67, compared to diluted earnings per share of $.66 in the thirdquarter of 2003. Included in the third quarter 2004 earnings pershare were previously disclosed product recertification, legal andother costs related to the pending civil action in the state ofCalifornia, which adversely impacted quarterly earnings byapproximately $.05 per share. Diebold also achieved record thirdquarter revenue of $613,393,000, 7.6 percent higher than the thirdquarter 2003 revenue of $570,239,000.

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Diluted earnings per share grew 1.5 percent, driven by strongperformance in the financial self-service and security businesses.Earnings were adversely affected by the election systems business,which was dilutive by $.04 per share in the third quarter of 2004but was $.06 accretive in the third quarter of 2003. Excluding theelection systems business, the third quarter 2004 diluted earningsper share would have increased by 18.3 percent.

***

Financial Results

“We are very encouraged by our continued strong order growthduring the quarter,” said Walden W. O’Dell, Diebold chairman andchief executive officer. “We also achieved strong earnings pershare growth in our financial self- service and security businesses,growing more than 18 percent.

“As previously reported, election systems issues in California hada negative impact on earnings and margins during the thirdquarter,” O’Dell continued. “However, we expect that themodernizing of voting systems in the United States will continuein 2005 and beyond, and we should have better visibility of thedirection of the U.S. election systems market after the Novemberelection.

“While we are very pleased with the significant improvements inU.S. product and service margins excluding election systems, westill have opportunities for improvement internationally,particularly in western Europe where Opteva has not fullycompleted customer certifications. We continue to face risingcommodity costs globally, and while Opteva has allowed us toovercome those challenges in the United States, we have not yetachieved significant Opteva volume levels in some keyinternational regions. However, we are making significant progressin obtaining certifications globally and expect Opteva to increasemarket penetration in these key international regions in 2005.”

Fixed Exchange Rate Third Quarter Orders

Total orders for product and service increased in the double-digitrange excluding election systems. Financial self-service ordersincreased in the single-digit range, led by strong double-digitgrowth in Asia-Pacific and modest growth in the Americas,compared to a particularly strong 2003 third quarter. Thesefinancial self-service order gains were slightly offset by a low

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single-digit decline in EMEA, where the market remainscompetitive and Opteva is not fully certified by all customers.Security orders remain strong, increasing in the double-digit range.Orders in election systems declined due to the expected slowing oforders in 2004 in advance of the U.S. presidential election and alarge order with the state of Maryland in 2003.

***

Revenue

Total revenue for the quarter was $613.4 million, up $43.2 million,or 7.6 percent and 6.4 percent on a fixed exchange rate basis*.Total financial self-service revenue increased 8.6 percent and 7.0percent on a fixed exchange rate basis*. Security solutions revenuegrew 17.0 percent and 16.9 percent on a fixed exchange ratebasis*. Total financial self-service and security revenue increasedby 10.8 percent and 9.5 percent on a fixed exchange rate basis.

21. On January 10, 2005, Barron=s published an article entitled AA Vote for Diebold:

It avoided any election snafus; now, it should enjoy a new upcycle for ATMs.@ The article, in

relevant part, read:

In fact, Diebold=s electronic voting machine businessaccounted for just 5% of its $2.31 billion in trailing 12-monthrevenues, versus 71% for ATMs and related services. But thatdidn=t prevent investors from waiting for Nov. 2 to pass beforecasting their votes for Diebold. Its shares have soared 20% sinceElection Day, which came off with few hitches. But there could beplenty of more room to run, says Hibernia Southcoast Capital=sCharles Brady, who rates the shares a Buy with a target of 66, upfrom about 54 last week, a buck or so from its 52-week high.

As it turns out, Diebold=s computerized polling technologyperformed admirably, and voting-machine revenue is expected togrow 10%-12%, perhaps reaching $100 million in 2005 andpossibly surpassing $150 million by 2006, O=Dell says. AWe arethrilled with the way our equipment performed during the pastelections,@ he adds. AIt has been more challenging than we wouldhave imagined, [but] there is a lot of money to be made.@

But the real story driving Diebold=s recent success centerson ATMs and security products and services. Fans of the stockview the North Canton, Ohio, company as a technology-hardware

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concern enjoying an honest-to-goodness replacement cycle. Itbegan about a year ago, but could continue for another three yearsor so, says brokerage analyst Kartik Mehta of FTN MidwestSecurities. ATMs and services together produce operating marginsas high as 15%, which is the company=s highest- margin business,he says. Revenues for Diebold=s core Afinancial self-service@division are expected to have jumped about 13% to $1.7 billion bythe end of last year, Hibernia=s Brady estimates.

Other hardware purveyors are suffering from compressedmargins, resulting from commoditization and a lack ofdemand-driven spending. That=s why some tech-stock aficionadosview Diebold as reasonably priced, trading at only 17.7 times 2005earnings. NCR, which is Diebold=s closest American competitor,but toils in different areas as well, trades at about 28.8 times 2005earnings. Brady projects Diebold=s 2004 annual earnings at $2.56 ashare, 6.6% above 2003=s. His $3.12 estimate for 2005 is at thehigh end of the consensus range found by Thomson Financial; themedian >05 estimate was $3.08.

Driving the ATM replacement cycle is a combination offactors: Age, new technology, new regulatory requirements andbank branch growth. It has been nearly 10 years since Dieboldintroduced dramatic technological innovations to its ATM line,and the machines [sic] lifetimes average about seven years. Thus,when Diebold launched its new Opteva machines in March of2003, banks were ready to buy. AWe had orders instantly,@ O=Dellrecalls.

In addition to existing machines were getting long in thetooth, the new ATMs with advanced software and operatingsystems help lower total costs for financial institutions that ownthem. What=s more, credit-card companies, new banking policiesand governmental requirements also are driving change. Visa andMasterCard are requiring ATMs meet their more stringentcomputer security encryption standards by yearend >05.

Plus, the banking industry is moving toward theelimination of paper, allowing ATMs to take pictures of depositedchecks without physically having them retrieved and cleared.Proposed changes to the Americans with Disabilities Act wouldrequire ATMs to incorporate voice-guidance features. The newATMs boast Windows-based operating systems; IBM will nolonger support its archaic OS/2 operating system used in someexisting ATMs, Brady says.

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And that=s just in North America, where Dieboldcommands 67% of the $1.1 billion market. NCR is second with a28% share, and German-based Wincor Nixdorf is third with about3%. In Europe, the Middle East and Africa B a $1.8 billion marketB NCR is No. 1 with a 47% share. Wincor Nixdorf is second with30%, and Diebold is third with 18%.

NCR is believed to have grabbed its edge in Europebecause it already had an established sales and service network inplace due to its legacy cash register business. But Diebold CEOO=Dell says that his company is making gains in Europe, where hesees his company capturing more growth. Wincor, for example,tends to control the German market, but the introduction of Optevagives Diebold a chance to win over European Union customers. AIthas been exceedingly well- received all over the world. We shouldgain share in Europe in 2005 and 2006,@ O=Dell says.

Yet with all of this attention paid to newfangled ATMs andelectronic voting machines, one should not overlook Diebold=slegacy security business, which accounts for about a quarter of itstotal revenues. Diebold made a name for itself, when its metalsafes survived the Great Chicago Fire of 1871. Since then, thecompany has been synonymous with banking security. FTNMidwest=s Mehtapredicts that Diebold=s $600 million in yearly revenues fromsecurity could grow as much as 12% in 2005.

22. On January 26, 2005, the Company issued a press release entitled ADiebold

Reports Fourth Quarter Financial Results.@ Therein the Company, in relevant part, stated:

Diebold, Incorporated today reported record fourth quarter 2004net revenue of $717.2 million, up 10.6 percent from the fourthquarter of 2003. Diluted earnings per share were $.87, an increaseof 7.4 percent and within the previous guidance of $.87 to $.92.Net cash provided by operating activities was $160.7 million, up127.9 percent from the prior year, while free cash flow improved$142.3 million or 139.6 percent. For the full year 2004, thecompany reported net revenue of $2,380.9 million, up 12.9 percentfrom 2003, diluted earnings per share of $2.54, an increase of 5.8percent from 2003. Full- year net cash provided by operatingactivities was $232.6 million, up 14.3 percent from the prior year,while free cash flow was $171.4 million, up 31.2 percent from2003.

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Diluted earnings per share in the fourth quarter grew 7.4 percentdriven by strong performance in the financial self service andsecurity businesses. Earnings were adversely affected by theelection systems business which was dilutive by $.03 per share inthe fourth quarter of 2004, including charges of approximately$.02 per share associated with previously disclosed electionsystems product recertification, legal and other costs related toconcluding the civil action in the state of California. Electionsystems business was $.03 per share accretive in the fourth quarterof 2003.

Fourth Quarter Highlights

- Total product orders, excluding election systems, grew inthe double-digit range.

- Security solutions revenue grew 23.8 percent, and 23.3percent on a fixed exchange-rate basis.

- Asia Pacific total revenue increased 29.8 percent, and28.2 on a fixed exchange-rate basis, while total revenue in theAmericas, excluding election systems, grew 15.4 percent, and 14.5percent on a fixed exchange-rate basis.

- Diluted earnings per share would have increased by 15.4percent, excluding the election systems business.

- Free cash flow improved $82.9 million; while accountsreceivable days sales outstanding improved 20 days, moving from83 days at September 30, 2004 to 63 days at December 31, 2004.

Full Year Highlights- Total product orders grew well into the double-digit

range.

- Total financial self-service revenue grew 13.1 percent and10.1 percent on a fixed exchange-rate basis.

- Security solutions revenue grew 16.8 percent and 16.5percent on a fixed exchange-rate basis.

- Diluted earnings per share increased by 5.8 percent, andgrew 12.8 percent excluding the impact of the election systemsbusiness.

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- Free cash flow improved $40.7 million, or 31.2 percent,moving from $130.7 million in 2003 to $171.4 million in 2004.

- The company repurchased 1,534,181 shares of Dieboldstock.

Diebold managed to maintain operating margin in the financialself-service business by controlling operating expenses andimproving manufacturing efficiencies to offset price erosion in themarket, especially in Western Europe. Security solution marginsdeclined slightly primarily because of increased fuel and steelcosts. Election systems generated operating losses in 2004 as aresult of lower revenue as well as product recertification, legal andother costs related to concluding the civil action in the state ofCalifornia.

23. On April 20, 2005, the Company issued a press release entitled ADiebold Reports

First Quarter Financial Results.@ Therein the Company, in relevant part, stated:

Diebold, Incorporated today reported record first quarter 2005revenue of $540.2 million, up 8.4 percent from the first quarter of2004. The company reported first quarter net income of $26.7million, compared to net income of $29.2 million in the firstquarter 2004. Diluted earnings per share were $.37, a decline of7.5 percent and within the previous guidance of $.35 to $.40. Netcash provided by operating activities was $78.4 million, up 389percent from the prior year, while free cash flow improved by$59.6 million, moving from a free cash use of $1.2 million in thefirst quarter 2004 to free cash flow of $58.4 million.

Included in the first quarter 2005 reported results wererestructuring charges of $7.3 million, or approximately $.07 pershare, related primarily to the realignment of the company=soperations in Western Europe, consistent with previous guidance.The first quarter 2005 effective tax rate was 32.8 percent,compared with previous guidance of 31.5 percent. The higher firstquarter effective tax rate reduced reported earnings per share byapproximately $.01. Excluding the impact of both the restructuringcharges and the higher effective tax rate, diluted earnings per sharein the first quarter would have been $.45, or 12.5 percent higherthan the first quarter of 2004.

First Quarter Highlights

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- Total product orders, excluding election systems, grew inthe double-digit range led by double-digit growth in the Europe,Middle East and Africa (EMEA) region and the Americas.

- Total Opteva orders were approximately $109 million, anincrease of more than 80 percent from the first quarter 2004 as thisnew platform continues to gain wider market acceptance globally.

- Security solutions revenue grew 19.9 percent and 19.6percent on a fixed exchange-rate basis.

- Asia Pacific total revenue increased 14.2 percent, and12.5 on a fixed exchange-rate basis, while total revenue in theAmericas, excluding election systems, grew 13.8 percent, and 12.4percent on a fixed exchange-rate basis.

- Net cash provided by operating activities improved by$62.4 million, or 389 percent; while accounts receivable days salesoutstanding improved 13 days, moving from 96 days at March 31,2004 to 83 days at March 31, 2005.

Financial Results

AWe are encouraged by our continued strong order growthin financial selfservice, particularly in EMEA, which experienceda double-digit increase as we continue to make progress withOpteva customer certifications,@ said Walden W. O=Dell, Dieboldchairman and chief executive officer. AWe achieved strongearnings per share growth, excluding restructuring charges and thehigher-than-expected effective tax rate, growing 12.5 percent froma strong first quarter in 2004. We were also pleased that we wereable to slightly improve operating profit margins compared to theprior year period, excluding the effect of restructuring charges. Inaddition, we were very pleased with the strong cash flowperformance in the first quarter of 2005, and as a result are raisingour full-year free cash flow guidance to $210 to $250 million,representing a $10 to $20 million improvement over previousguidance.

AFinancial self-service revenue growth was somewhat lessthan expected due to disappointing revenue performance in EMEAas we focused on completing much of the restructuring of ouroperations there. However, with the strong first quarter ordersachieved, a solid backlog in place and a fully functioningrestructured manufacturing facility, we expect to achievedouble-digit second quarter revenue growth in EMEA and meet

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our previously stated guidance for total financial selfservicerevenue growth for the year. Our security business continues toperform very well led by strong organic growth as well as thesuccessful integration and strong performance by our recentacquisitions.@

O=Dell continued, AAs we look to the remainder of 2005,we are encouraged by order growth for Opteva, which remainsstrong globally. We are, however, faced with rising fuel costs,which are expected to impact full- year earnings by $.02 per share.As a result of the impact of fuel prices, a $.02 impact from ahigher-thananticipated tax rate and a $.01 impact of higherrestructuring charges, our current expectations for full- yearearnings per share are $2.80 to $2.93, including $.09 to $.12 ofrestructuring charges. This represents a 15 to 19 percent increasein earnings per share over 2004, excluding the impact ofrestructuring charges.@

24. The statements contained in && 16-23 were materially false and misleading when

made because defendants failed to disclose or indicate the following: (1) that as a result of

improper accounting for commission expenses, the Company=s financial statements for 2004

and the first two quarters of 2005 were misstated; (2) that the Company lacked adequate internal

controls; (3) that the Company was losing market share in North America to competitors; (4) that

the Company=s election machines were plagued with execution problems; and (5) that as a

consequence of the above, the Company=s statements with respect to its financial guidance

lacked in all reasonable basis.

The Truth Begins To Emerge

25. On June 30, 2005, the Company issued a press release entitled ADiebold Reduces

2005 Second Quarter and Year-End Earnings Outlook.@ Therein, the Company, in relevant part,

stated:

Diebold, Incorporated today announced it has lowered its secondquarter and full year earnings per share guidance for 2005, as its

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North America growth outlook has been revised downward and isnow in line with current expectations of customer demand.

Additionally, the company has identified a reconciliation issue inits North America sales commission accrual account, as ofDecember 31, 2004, with the impact on specific prior years yet tobe determined. As a result of this reconciliation, the company hasdetermined the commission account was under accrued byapproximately $13 million at the end of 2004. This is a preliminaryestimate and the final amount could vary. A thorough review iscurrently underway and is expected to be completed shortly. Thisamount is excluded from earnings estimates provided throughoutthe remainder of this outlook.

Revised Second Quarter and Full-Year Expectations

The company now expects second quarter earnings to be $.47 to$.50. Included in this earnings estimate are restructuring charges of$.04 per share and European Opteva manufacturing start- up costsand related issues of approximately $.03 per share. Excludingthese one-time items, second quarter earnings per share areexpected to be $.54 to $.57.

Full-year 2005 operating earnings are now expected to be $2.60 to$2.70. This range excludes manufacturing start-up costs andrelated issues of approximately $.04 per share, and restructuringcharges of $.15 to $.30. The company has defined and is reviewingvarious options for restructuring and will provide a more definitivereview of its anticipated restructuring costs in its second quarterearnings announcement. This revised earnings guidance comparesto 2004 full-year earnings per share of $2.54.

Factors contributing to the lowered earnings expectations are:

- Growth in the company=s North America business islower than its previous expectations as upgrade/replacementactivity in the regional bank segment has developed at a slowerthan expected rate.

- A proportionately higher mix of revenue from thecompany=s international operations and election systemsbusinesses, which carry lower margins.

- A negative foreign currency exchange impact due to thestrengthening of the dollar, particularly against the Euro which

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moved from approximately $1.30 to $1.20 during the secondquarter.

- Continuing cost challenges in the transition to a single,global product platform

Cost-Reduction Initiatives

To further strengthen its competitiveness, the company is initiatingseveral actions now and for the remainder of 2005:

- The elimination of approximately 300 full-time positionsin North America and Western Europe. This action includes jobsaffected by the recently announced closing of the Danville, Va.,manufacturing facility.

- Further global manufacturing realignment and facilityconsolidation.

- Acceleration of the consolidation of research anddevelopment operations and service functions.

- Further product cost reductions through procurement,manufacturing and design improvements.

AWe are disappointed with our financial performance during thequarter and with our revised outlook for the year,@ said Walden W.O=Dell, Diebold chairman and chief executive officer. AOur globalmarkets remain healthy as we once again experienced stronggrowth in orders and backlog during the quarter. However, ourNorth America revenue outlook is lower than previously expected,resulting in a lower profit outlook. In addition, we continue to facechallenges on the cost side as we transition to a global productplatform. We are moving quickly and decisively to improve ourperformance by accelerating our cost-reduction initiatives.@

O=Dell added, AThere is tremendous value in Diebold, from thestrength of our brand to our world-class technology and productsolutions. We are confident that by taking these aggressive costactions now, we will be able to leverage our leadership position inthe marketplace and ensure long-term, profitable growth.@

26. On this news, shares of Diebold fell $5.44 per share, or 10.76 percent, on June 30,

2005, to close at $45.11 per share.

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27. On July 27, 2005, the Company issued a press release entitled ADiebold Reports

Second Quarter Financial Results.@ Therein, the Company, in relevant part, stated:

Diebold, Incorporated today reported second quarter 2005 revenuefrom continuing operations of $629.2 million, up 15.3 percentfrom the second quarter of 2004. The company reported secondquarter net income of $33.3 million, compared to net income of$43.6 million in the second quarter of 2004. Diluted earnings pershare were $.47, a decline of 21.7 percent from $.60 per share inthe second quarter of 2004 and within the most recent guidance of$.47 to $.50 per share.

Included in the second quarter 2005 reported results arerestructuring charges of approximately $.03 per share andEuropean Opteva manufacturing startup costs and related issues of$.04 per share. Excluding the impact of the restructuring chargesand the European startup costs and related issues, diluted earningsper share in the second quarter would have been $.54 per share,consistent with previous guidance.

As previously announced o n July 5, 2005, the company sold itscampus card systems division. As a result, the financial resultsfrom this business have been classified as a discontinuedoperation.

Second Quarter Highlights

- Total product orders, excluding election systems and theBrazilian lottery business, grew in the high single-digit range ledby double- digit growth in the Europe, Middle East and Africa(EMEA) region.

- The company secured a large order for lottery machinesin Brazil for approximately $52 million.

- Total Opteva orders were approximately $131 million, anincrease of more than 58 percent from the second quarter 2004.

- Security solutions revenue grew 25.0 percent and 24.1percent on a fixed exchange-rate basis.

- Asia Pacific total revenue increased 49.9 percent, and45.4 percent on a fixed exchange-rate basis.

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- EMEA financial self-service revenue increased 14.2percent, and 10.8 percent on a fixed exchange-rate basis.

- Receivable days sales outstanding improved 18 days,moving from 92 days at June 30, 2004 to 74 days at June 30, 2005.

***

Financial Results

AWe are clearly disappointed with our profitability during thequarter,@ said Walden W. O=Dell, Diebold chairman and chiefexecutive officer. AAs we previously indicated, most of the marketsin which we compete remain healthy and we once againexperienced strong growth in orders and backlog during thequarter. However, slower than anticipated upgrade andreplacement activity in the North America regional bank segment,cost challenges in our transition to a single global productplatform, a higher mix of lower-margin revenue and negativeforeign currency exchange impact due to the strengthening of thedollar in the quarter are negatively impacting our profit margins.@

O=Dell added, AWe are focused on improving the profitability ofour business. In addition to previously disclosed cost-reductionactions, we are initiating some strategic changes within ourorganization. These changes are aimed at increasing theeffectiveness of the functions across Diebold to better support ourglobal efforts. The most sweeping of these changes is theestablishment of a single Global Marketing organization, formedthrough consolidating several channel-based marketing functions.These changes will streamline our operations and drive improvedefficiency and knowledge management throughout the company.Also, we have restructured our Global Software & Servicesorganization by integrating all its functions into other existingorganizations to better leverage resources and combine similarknowledge bases within the company.AAs a result of these and other actions, we anticipate costreductions of approximately $20 million on an annual basis. I amconfident that these structural changes to our organization, as wellas our other cost-saving initiatives, will significantly improve ourprofitability and competitiveness in the marketplace.@

28. On August 8, 2005, Diebold issued a press release entitled ADiebold CFO

Resigns; Krakora Named Interim CFO.@ Therein, the Company, in relevant part, stated:

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Diebold, Incorporated (NYSE: DBD) today announced thatGregory T. Geswein, senior vice president and chief financialofficer has resigned, effective August 12, 2005. After serving asCFO for more than five years, Geswein is leaving the company tobecome CFO of The Reynolds and Reynolds Company (NYSE:REY), based near Dayton, Ohio. Kevin J. Krakora, vice presidentand corporate controller, has been named interim CFO until asuccessor is identified. Diebold will be conducting an internal andexternal search for a successor.

“Greg’s leadership has been instrumental to the company’s successover the past five years. This is a voluntary decision on Greg’spart, and we wish him well in his future endeavors. He will bemissed,” said Walden W. O’Dell, chairman and chief executiveofficer. “During his tenure, Greg built a very capable financialteam, which will ensure a smooth transition as we search for asuccessor.”

Prior to joining Diebold as CFO in April 2000, Geswein spent ayear with Agilysys (formerly Pioneer-Standard Electronics) inCleveland, Ohio as CFO and 13 years with Mead Corporation inDayton, Ohio. Originally from Ironton, Ohio, Geswein earned abachelor’s degree in Business Administration and an MBA, fromthe University of Cincinnati.

“While I am very proud to have been a part of Diebold’stransformation over the past five years, I am looking forward toreturning to my roots in Southwest Ohio,” said Geswein. “Thisaffords me a unique opportunity to be closer to my family in thatarea.”

29. On September 21, 2005, the Company issued a press release entitled ADiebold

Reduces 2005 Third Quarter and Year-End Earning Outlook B North America revenue outlook

below previous expectations.@ Therein, the Company, in relevant part, stated:

Diebold, Incorporated today announced it is lowering it s thirdquarter and full-year earnings per share guidance for 2005.

The company now anticipates third quarter EPS in the range of$.32 to $.37, which includes restructuring charges ofapproximately $.07 per share related to the continued realignmentof its operations, manufacturing start-up and other one-time costsof approximately $.04 per share, and the one-time gain ofapproximately $.18 per share on the sale of the campus card

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systems business. Excluding these items, EPS is expected to be inthe range of $.25 to $.30.

Full- year EPS is now expected to be $1.90 to $2.00. This rangeexcludes restructuring charges of approximately $.30 per share,manufacturing start- up costs and other one-time costs ofapproximately $.08 per share, and the one-time gain ofapproximately $.18 per share on the sale of the campus cardsystems business. This revised earnings guidance compares to2004 full- year earnings per share of $2.53.

Factors contributing to the lowered earnings expectations are:

- Overall North America financial self-service revenueoutlook is lower than previously expected, resulting in lower profitexpectations.

- Certain revenue anticipated from the company=s NorthAmerica business for the third quarter is being pushed out to futureperiods, partially impacted by the effect of Hurricane Katrina.

- Operational inefficiencies, rising fuel costs and pricingpressures are continuing to negatively impact gross margins.

- Higher effective tax rate of approximately 34 percent forthe year.

AI am extremely disappointed with our lack of progress incorrecting our operational inefficiencies, and I am personallycommitted to taking immediate action to improve our effectivenessin these areas,@ said Walden W. O=Dell, Diebold chairman andchief executive officer. AWe are eva luating further restructuringand other actions to improve our performance and competitivenessbeyond the current restructuring guidance. We will have more toreport on all these efforts during the coming months.@

Total financial self-service revenue is expected to be more than$50 million lower during the current quarter compared to previousexpectations, with most of the shortfall occurring in NorthAmerica as the company experienced continued market weaknessin the more profitable regional bank segment. This segmentrepresents the majority of Diebold=s North America automatedteller machine-related sales, with half of the company=s globalfinancial self-service revenue derived from North America. Thelowered revenue expectations are also a result of customer delaysand operational inefficiencies that were compounded by Hurricane

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Katrina, which affected scheduled ATM deliveries, securityinstallations, service maintenance contracts and other near-termbusiness throughout the Gulf region.

Additionally, the impact of Hurricane Katrina is negativelyaffecting scheduled election systems deliveries in the Gulf region,resulting in approximately $10 million in lower elections systemsrevenue during the quarter. While management is still quantifyingthe overall impact of Hurricane Katrina, the company anticipatesovercoming some of the shortfall caused by the hurricane in futureperiods as the affected regions begin to rebuild.

Also, fuel prices have increased dramatically, resulting insignificantly higher costs in freight and service fleet operations.The company is taking steps to overcome this continuing issue,including instituting a fuel surcharge on certain services.

AWe continue to be adversely affected by significantly unfavorablegeographic revenue mix as the North America market for ATMshas weakened, particularly among regional banks,@ added O=Dell.AIn addition, we are experiencing global supply chain andmanufacturing inefficiencies and rising commodity costs, whichwere exacerbated by Hurricane Katrina. In response, we areinstituting price increases in appropriate areas. Despite the recentweakness in the North America ATM market, we remain confidentthat the markets we serve remain healthy, and the actions we aretaking will better position us for 2006 and beyond.@

30. On this news, shares of Diebold fell $6.90 per share, or 15.55 percent, to close at

$37.47 per share.

PLAINTIFF’S CLASS ACTION ALLEGATIONS

31. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased the

securities of Diebold between October 22, 2003, and September 21, 2005, common stock

offering, and who were damaged thereby. Excluded from the Class are defendants, the officers

and directors of the Company, at all relevant times, members of their immediate families and

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their legal representatives, heirs, successors or assigns and any entity in which defendants have

or had a controlling interest.

32. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, Diebold=s securities were actively traded on the

NYSE. While the exact number of Class members is unknown to Plaintiff at this time and can

only be ascertained through appropriate discovery, Plaintiff believes that there are hundreds or

thousands of members in the proposed Class. Record owners and other members of the Class

may be identified from records maintained by Diebold or its transfer agent and may be notified

of the pendency of this action by mail, using the form of notice similar to that customarily used

in securities class actions.

33. Plaintiff=s claims are typical of the claims of the members of the Class, as all

members of the Class are similarly affected by defendants= wrongful conduct in violation of

federal law that is complained of herein.

34. Plaintiff will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.

35. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

(a)a whether the federal securities laws were violated by defendants’ acts as

alleged herein;

(a)b whether statements made by defendants to the investing public during the

Class Period misrepresented material facts about the business, operations and management of

Diebold; and

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(a)c to what extent the members of the Class have sustained damages and the

proper measure of damages.

36. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as

the damages suffered by individual Class members may be relatively small, the expense and

burden of individual litigation make it impossible for members of the Class to individually

redress the wrongs done to them. There will be no difficulty in the management of this action as

a class action.

SCIENTER ALLEGATIONS

37. As alleged herein, defendants acted with scienter in that defendants knew that the

public documents and statements issued or disseminated in the name of the Company were

materially false and misleading; knew that such statements or documents would be issued or

disseminated to the investing public; and knowingly and substantially participated or acquiesced

in the issuance or dissemination of such statements or documents as primary violations of the

federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their

receipt of information reflecting the true facts regarding Diebold, their control over, and/or

receipt and/or modification of Diebold=s allegedly materially misleading misstatements and/or

their associations with the Company which made them privy to confidential proprietary

information concerning Diebold, participated in the fraudulent scheme alleged herein.

UNDISCLOSED ADVERSE FACTS

38. The market for Diebold=s securities was open, well-developed and efficient at all

relevant times. As a result of these materially false and misleading statements and failures to

disclose, Diebold=s securities traded at artificially inflated prices during the Class Period.

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Plaintiff and other members of the Class purchased or otherwise acquired Diebold securities

relying upon the integrity of the market price of Diebold=s securities and market information

relating to Diebold, and have been damaged thereby.

39. During the Class Period, defendants materially misled the investing public,

thereby inflating the price of Diebold=s securities, by publicly issuing false and misleading

statements and omitting to disclose material facts necessary to make defendants= statements, as

set forth herein, not false and misleading. Said statements and omissions were materially false

and misleading in that they failed to disclose material adverse information and misrepresented

the truth about the Company, its business and operations, as alleged herein.

40. At all relevant times, the material misrepresentations and omissions particularized

in this Complaint directly or proximately caused or were a substantial contributing cause of the

damages sustained by plaintiff and other members of the Class. As described herein, during the

Class Period, defendants made or caused to be made a series of materially false or misleading

statements about Diebold=s business, prospects and operations. These material misstatements

and omissions had the cause and effect of creating in the market an unrealistically positive

assessment of Diebold and its business, prospects and operations, thus causing the Company=s

securities to be overvalued and artificially inflated at all relevant times. Defendants= materially

false and misleading statements during the Class Period resulted in plaintiff and other members

of the Class purchasing the Company=s securities at artificially inflated prices, thus causing the

damages complained of herein.

LOSS CAUSATION

41. Defendants= wrongful conduct, as alleged herein, directly and proximately caused

the economic loss suffered by Plaintiff and the Class.

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42. During the Class Period, Plaintiff and the Class purchased securities of Diebold at

artificially inflated prices and were damaged thereby. The price of Diebold=s common stock

declined when the misrepresentations made to the market, and/or the information alleged herein

to had been concealed from the market, and/or the effects thereof, were revealed, causing

investors= losses.

Applicability Of Presumption Of Reliance: Fraud-On-The-Market Doctrine

43. At all relevant times, the market for Diebold securities was an efficient market for

the following reasons, among others:

(a)a Diebold stock met the requirements for listing, and was listed and actively

traded on the NYSE, a highly efficient and automated market;

(a)b As a regulated issuer, Diebold filed periodic public reports with the SEC and

the NYSE;

(a)c Diebold regularly communicated with public investors via established

market communication mechanisms, including through regular disseminations of press releases

on the national circuits of major news wire services and through other wide-ranging public

disclosures, such as communications with the financial press and other similar reporting

services; and

(a)d Diebold was followed by several securities analysts employed by major

brokerage firms who wrote reports which were distributed to the sales force and certain

customers of their respective brokerage firms. Each of these reports was publicly available and

entered the public marketplace.

44. As a result of the foregoing, the market for Diebold securities promptly digested

current information regarding Diebold from all publicly-available sources and reflected such

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information in Diebold=s stock price. Under these circumstances, all purchasers of Diebold

securities during the Class Period suffered similar injury through their purchase of Diebold

securities at artificially inflated prices and a presumption of reliance applies.

NO SAFE HARBOR

45. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this complaint.

Many of the specific statements pleaded herein were not identified as Aforward-looking

statements@ when made. To the extent there were any forward-looking statements, there were no

meaningful cautionary statements identifying important factors that could cause actual results to

differ materially from those in the purportedly forward-looking statements. Alternatively, to the

extent that the statutory safe harbor does apply to any forward-looking statements pleaded

herein, defendants are liable for those false forward-looking statements because at the time each

of those forward-looking statements was made, the particular speaker knew that the particular

forward-looking statement was false, and/or the forward-looking statement was authorized

and/or approved by an executive officer of Diebold who knew that those statements were false

when made.

FIRST CLAIMViolation Of Section 10(b) Of

The Exchange Act Against And Rule 10b-5Promulgated Thereunder Against All Defendants

46. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

47. During the Class Period, defendants carried out a plan, scheme and course of

conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing

public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff

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and other members of the Class to purchase Diebold securities at artificially inflated prices. In

furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them,

took the actions set forth herein.

48. Defendants (a) employed devices, schemes, and artifices to defraud; (b) made

untrue statements of material fact and/or omitted to state material facts necessary to make the

statements not misleading; and (c) engaged in acts, practices, and a course of business which

operated as a fraud and deceit upon the purchasers of the Company=s securities in an effort to

maintain artificially high market prices for Diebold securities in violation of Section 10(b) of the

Exchange Act and Rule 10b-5. All defendants are sued either as primary participants in the

wrongful and illegal conduct charged herein or as controlling persons as alleged below.

49. Defendants, individually and in concert, directly and indirectly, by the use, means

or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a

continuous course of conduct to conceal adverse material information about the business,

operations and future prospects of Diebold as specified herein.

50. These defendants employed devices, schemes, and artifices to defraud, while in

possession of material adverse non-public information and engaged in acts, practices, and a

course of conduct as alleged herein in an effort to assure investors of Diebold value and

performance and continued substantial growth, which included the making of, or the

participation in the making of, untrue statements of material facts and omitting to state material

facts necessary in order to make the statements made about Diebold and its business operations

and future prospects in light of the circumstances under which they were made, not misleading,

as set forth more particularly herein, and engaged in transactions, practices and a course of

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business which operated as a fraud and deceit upon the purchasers of Diebold securities during

the Class Period.

51. Each of the Individual Defendants= primary liability, and controlling person

liability, arises from the following facts: (i) the Individual Defendants were high-level executives

and/or directors at the Company during the Class Period and members of the Company=s

management team or had control thereof; (ii) each of these defendants, by virtue of his or her

responsibilities and activities as a senior officer and/or director of the Company was privy to and

participated in the creation, development and reporting of the Company=s internal budgets, plans,

projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and

familiarity with the other defendants and was advised of and had access to other members of the

Company=s management team, internal reports and other data and information about the

Company=s finances, operations, and sales at all relevant times; and (iv) each of these defendants

was aware of the Company=s dissemination of information to the investing public which they

knew or recklessly disregarded was materially false and misleading.

52. The defendants had actual knowledge of the misrepresentations and omissions of

material facts set forth herein, or acted with reckless disregard for the truth in that they failed to

ascertain and to disclose such facts, even though such facts were available to them. Such

defendants= material misrepresentations and/or omissions were done knowingly or recklessly and

for the purpose and effect of concealing Diebold=s operating condition and future business

prospects from the investing public and supporting the artificially inflated price of its securities.

As demonstrated by defendants= overstatements and misstatements of the Company=s business,

operations and earnings throughout the Class Period, defendants, if they did not have actual

knowledge of the misrepresentations and omissions alleged, were reckless in failing to obtain

-32-

such knowledge by deliberately refraining from taking those steps necessary to discover whether

those statements were false or misleading.

53. As a result of the dissemination of the materially false and misleading

information and failure to disclose material facts, as set forth above, the market price of Diebold

securities was artificially inflated during the Class Period. In ignorance of the fact that market

prices of Diebold=s publicly-traded securities were artificially inflated, and relying directly or

indirectly on the false and misleading statements made by defendants, or upon the integrity of

the market in which the securities trade, and/or on the absence of material adverse information

that was known to or recklessly disregarded by defendants but not disclosed in public statements

by defendants during the Class Period, Plaintiff and the other members of the Class acquired

Diebold securities during the Class Period at artificially high prices and were damaged thereby.

54. At the time of said misrepresentations and omissions, Plaintiff and other members

of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff and the

other members of the Class and the marketplace known the truth regarding the problems that

Diebold was experiencing, which were not disclosed by defendants, Plaintiff and other members

of the Class would not have purchased or otherwise acquired their Diebold securities, or, if they

had acquired such securities during the Class Period, they would not have done so at the

artificially inflated prices which they paid.

55. By virtue of the foregoing, defendants have violated Section 10(b) of the

Exchange Act, and Rule 10b-5 promulgated thereunder.

56. As a direct and proximate result of defendants= wrongful conduct, Plaintiff and

the other members of the Class suffered damages in connection with their respective purchases

and sales of the Company=s securities during the Class Period.

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SECOND CLAIMViolation Of Section 20(a) Of

The Exchange Act Against the Individual Defendants

57. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

58. The Individual Defendants acted as controlling persons of Diebold within the

meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level

positions, and their ownership and contractual rights, participation in and/or awareness of the

Company=s operations and/or intimate knowledge of the false financial statements filed by the

Company with the SEC and disseminated to the investing public, the Individual Defendants had

the power to influence and control and did influence and control, directly or indirectly, the

decision-making of the Company, including the content and dissemination of the various

statements which Plaintiff contends are false and misleading. The Individual Defendants were

provided with or had unlimited access to copies of the Company=s reports, press releases, public

filings and other statements alleged by Plaintiff to be misleading prior to and/or shortly after

these statements were issued and had the ability to prevent the issuance of the statements or

cause the statements to be corrected.

59. In particular, each of these defendants had direct and supervisory involvement in

the day-to-day operations of the Company and, therefore, is presumed to have had the power to

control or influence the particular transactions giving rise to the securities violations as alleged

herein, and exercised the same.

60. As set forth above, Diebold and the Individual Defendants each violated Section

10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their

positions as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of

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the Exchange Act. As a direct and proximate result of defendants= wrongful conduct, Plaintiff

and other members of the Class suffered damages in connection with their purchases of the

Company=s securities during the Class Period.

WHEREFORE, Plaintiff prays for relief and judgment, as follows:

(a)a Determining that this action is a proper class action, designating Plaintiff as

Lead Plaintiff and certifying Plaintiff as a class representative under Rule 23 of the Federal

Rules of Civil Procedure and Plaintiff=s counsel as Lead Counsel;

(a)b Awarding compensatory damages in favor of Plaintiff and the other Class

members against all defendants, jointly and severally, for all damages sustained as a result of

defendants= wrongdoing, in an amount to be proven at trial, including interest thereon;

(a)c Awarding Plaintiff and the Class their reasonable costs and expenses

incurred in this action, including counsel fees and expert fees; and

(a)d Such other and further relief as the Court may deem just and proper.

JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.

Dated: ________________________

GOLDMAN SCARLATO & KARON, P.C.

By:_________________________Daniel R. Karon55 Public SquareSuite 1500Cleveland, OH 44113tel (216) 622-1851fax (216) 622-1852

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SCHIFFRIN & BARROWAY, LLP Marc A. Topaz, EsquireRichard A. Maniskas, EsquireTamara Skvirsky, Esquire 280 King of Prussia Road,Radnor, PA 19087(610) 667-7706

Attorneys for Plaintiff