[Clips] U.S. Investigates Voting Machines' Venezuela Ties

R.A. Hettinga rah at shipwright.com
Sun Oct 29 09:02:22 PST 2006


Now the NYT begins barking...

Cheers,
RAH
In electronic voting, you can have anonymity, or not be able to sell your
vote, but not both.
--- begin forwarded text


  Delivered-To: rah at shipwright.com
  Delivered-To: clips at philodox.com
  Date: Sun, 29 Oct 2006 13:00:34 -0400
  To: Philodox Clips List <clips at philodox.com>
  From: "R.A. Hettinga" <rah at shipwright.com>
  Subject: [Clips] U.S. Investigates Voting Machines' Venezuela Ties
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<http://www.nytimes.com/2006/10/29/washington/29ballot.html?ei=5065&en=e0c8ab46eb7f870b&ex=1162789200&adxnnl=0&partner=MYWAY&adxnnlx=1162123697-fGdgFeTtCKTTCxcnenqAsQ&pagewanted=print>

  The New York Times


  October 29, 2006

  U.S. Investigates Voting Machines' Venezuela Ties

  By TIM GOLDEN

  The federal government is investigating the takeover last year of a leading
  American manufacturer of electronic voting systems by a small software
  company that has been linked to the leftist Venezuelan government of
  President Hugo Chavez.

  The inquiry is focusing on the Venezuelan owners of the software company,
  the Smartmatic Corporation, and is trying to determine whether the
  government in Caracas has any control or influence over the firm's
  operations, government officials and others familiar with the investigation
  said.

  The inquiry on the eve of the midterm elections is being conducted by the
  Committee on Foreign Investment in the United States, or Cfius, the same
  panel of 12 government agencies that reviewed the abortive attempt by a
  company in Dubai to take over operations at six American ports earlier this
  year.

  The committee's formal inquiry into Smartmatic and its subsidiary, Sequoia
  Voting Systems of Oakland, Calif., was first reported Saturday in The Miami
  Herald.

  Officials of both Smartmatic and the Venezuelan government strongly denied
  yesterday that President Chavez's administration, which has been bitterly
  at odds with Washington, has any role in Smartmatic.

  "The government of Venezuela doesn't have anything to do with the company
  aside from contracting it for our electoral process," the Venezuelan
  ambassador in Washington, Bernardo Alvarez, said last night.

  Smartmatic was a little-known firm with no experience in voting technology
  before it was chosen by the Venezuelan authorities to replace the country's
  elections machinery ahead of a contentious referendum that confirmed Mr.
  Chavez as president in August 2004.

  Seven months before that voting contract was awarded, a Venezuelan
  government financing agency invested more than $200,000 into a smaller
  technology company, owned by some of the same people as Smartmatic, that
  joined with Smartmatic as a minor partner in the bid.

  In return, the government agency was given a 28 percent stake in the
  smaller company and a seat on its board, which was occupied by a senior
  government official who had previously advised Mr. Chavez on elections
  technology. But Venezuelan officials later insisted that the money was
  merely a small-business loan and that it was repaid before the referendum.

  With a windfall of some $120 million from its first three contracts with
  Venezuela, Smartmatic then bought the much larger and more established
  Sequoia Voting Systems, which now has voting equipment installed in 17
  states and the District of Columbia.

  Since its takeover by Smartmatic in March 2005, Sequoia has worked
  aggressively to market its voting machines in Latin America and other
  developing countries. "The goal is to create the world's leader in
  electronic voting solutions," said Mitch Stoller, a company spokesman.

  But the role of the young Venezuelan engineers who founded Smartmatic has
  become less visible in public documents as the company has been
  restructured into an elaborate web of offshore companies and foreign trusts.

  "The government should know who owns our voting machines; that is a
  national security concern," said Representative Carolyn B. Maloney,
  Democrat of New York, who asked the Bush administration in May to review
  the Sequoia takeover.

  "There seems to have been an obvious effort to obscure the ownership of the
  company," Ms. Maloney said of Smartmatic in a telephone interview
  yesterday. "The Cfius process, if it is moving forward, can determine that."

  The concern over Smartmatic's purchase of Sequoia comes amid rising unease
  about the security of touch-screen voting machines and other electronic
  elections systems.

  Government officials familiar with the Smartmatic inquiry said they doubted
  that even if the Chavez government was some kind of secret partner in the
  company, it would try to influence elections in the United States. But some
  of them speculated that the purchase of Sequoia could help Smartmatic sell
  its products in Latin America and other developing countries, where
  safeguards against fraud are weaker.

  A spokeswoman for the Treasury Department, which oversees the foreign
  investment committee, said she could not comment on whether the panel was
  conducting a formal investigation.

  "Cfius has been in contact with the company," said the spokeswoman, Brookly
  McLaughlin, citing discussions that were first disclosed in July. "It is
  important that the process is conducted in a professional and nonpolitical
  manner."

  The committee has wide authority to review foreign investments in the
  United States that might have national security implications. In practice,
  though, it has focused mainly on foreign acquisitions of defense companies
  and other investments in traditional security realms.

  Since the political furor over the Dubai ports deal, members of Congress
  from both parties have sought to widen the purview of such reviews to
  incorporate other emerging national security concerns.

  In late July, the House and the Senate overwhelmingly approved legislation
  to expand the committee's scope, give a greater role to the office of the
  director of national intelligence and strengthen Congressional oversight of
  the review process.

  But the Bush administration opposed major changes, and Congressional
  leaders did not act to reconcile the two bills before Congress adjourned.

  Foreigners seeking to buy American companies in areas like defense
  manufacturing typically seek the committee's review themselves before going
  ahead with a purchase. Legal experts said it would be highly unusual for
  the panel to investigate a transaction like the Sequoia takeover, and even
  more unusual for the panel to try to nullify the transaction so long after
  it was completed.

  It is unclear, moreover, what the government would need to uncover about
  the Sequoia sale to take such an action.

  The investment committee's review typically involves an initial 30-day
  examination of any transactions that might pose a threat to national
  security, including a collective assessment from the intelligence
  community. Should concerns remain, one of the agencies involved can request
  an additional and more rigorous 45-day investigation.

  In the case of the ports deal, the transaction was approved by the
  investment committee. But the Dubai company later abandoned the deal,
  agreeing to sell out to an American company after a barrage of criticism by
  legislators from both parties who said the administration had not
  adequately reviewed the deal or informed Congress about its implications.

  The concerns about possible ties between the owners of Smartmatic and the
  Chavez government have been well known to United States foreign-policy
  officials since before the 2004 recall election in which Mr. Chavez, a
  strong ally of President Fidel Castro of Cuba, won by an official margin of
  nearly 20 percent.

  Opposition leaders asserted that the balloting had been rigged. But a
  statistical analysis of the distribution of the vote by American experts in
  electronic voting security showed that the result did not fit the pattern
  of irregularities that the opposition had claimed.

  At the same time, the official audit of the vote by the Venezuelan election
  authorities was badly flawed, one of the American experts said. "They did
  it all wrong," one of the authors of the study, Avi Rubin, a professor of
  computer science at Johns Hopkins University, said in an interview.

  Opposition members of Venezuela's electoral council had also protested that
  they were excluded from the bidding process in which Smartmatic and a
  smaller company, the Bizta Corporation, were selected to replace a $120
  million system that had been built by Election Systems and Software of
  Omaha.

  Smartmatic was then a fledgling technology start-up. Its registered address
  was the Boca Raton, Fla., home of the father of one of the two young
  Venezuelan engineers who were its principal officers, Antonio Mugica and
  Alfredo Anzola, and it had a one-room office with a single secretary.

  The company claimed to have only two going ventures, small contracts for
  secure communications software that a Smartmatic spokesman said had a total
  value of about $2 million.

  At that point, Bizta amounted to even less. Company documents, first
  reported in 2004 by The Herald, showed the firm to be virtually dormant
  until it received the $200,000 investment from a fund controlled by the
  Venezuelan Finance Ministry, which took a 28 percent stake in return.

  Weeks before Bizta and Smartmatic won the referendum contract, the
  government also placed a senior official of the Science Ministry, Omar
  Montilla, on Bizta's board, alongside Mr. Mugica and Mr. Anzola. Mr.
  Montilla, The Herald reported, had acted as an adviser to Mr. Chavez on
  elections technology.

  More recent corporate documents show that before and after Smartmatic's
  purchase of Sequoia from a British-owned firm, the company was reorganized
  in an array of holding companies based in Delaware (Smartmatic
  International), the Netherlands (Smartmatic International Holding, B.V.),
  and Curagao (Smartmatic International Group, N.V.). The firm's ownership
  was further shielded in two Curagao trusts.

  Mr. Stoller, the Smartmatic spokesman, said that the reorganization was
  done simply to help expand the company's international operations, and that
  it had not tried to hide its ownership, which he said was more than 75
  percent in the hands of Mr. Mugica and his family.

  "No foreign government or entity, including Venezuela, has ever held any
  stake in Smartmatic," Mr. Stoller said. "Smartmatic has always been a
  privately held company, and despite that, we've been fully transparent
  about the ownership of the corporation."

  Mr. Stoller emphasized that Bizta was a separate company and said the
  shares the Venezuelan government received in it were "the guarantee for a
  loan."

  Mr. Stoller also described concerns about the security of Sequoia's
  electronic systems as unfounded, given their certification by federal and
  state election agencies.

  But after a municipal primary election in Chicago in March, Sequoia voting
  machines were blamed for a series of delays and irregularities.
  Smartmatic's new president, Jack A. Blaine, acknowledged in a public
  hearing that Smartmatic workers had been flown up from Venezuela to help
  with the vote.

  Some problems with the election were later blamed on a software component,
  which transmits the voting results to a central computer, that was
  developed in Venezuela.

  Simon Romero contributed reporting from Caracas, Venezuela.

  --
  -----------------
  R. A. Hettinga <mailto: rah at ibuc.com>
  The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
  44 Farquhar Street, Boston, MA 02131 USA
  "... however it may deserve respect for its usefulness and antiquity,
  [predicting the end of the world] has not been found agreeable to
  experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
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-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'





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