Critics chip away at Sequoia's roots: Fears arise because e-voting machine maker's owners are Venezuelan

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http://www.insidebayarea.com/dailyreview/localnews/ci_3952315


Article Last Updated: 6/18/2006 02:51 AM

By Ian Hoffman, STAFF WRITERInside Bay Area
For three years, the nation's two largest suppliers of voting machinery have driven feverishly for sales and shown the symptoms of overextension — missed deliveries, faulty equipment and breach-of-contract lawsuits.
Until recently, the supplier running a close third, Sequoia Voting Systems, kept a lower profile than competitors Diebold and Election Systems & Software while quietly snapping up sales of voting systems on both coasts, all of Nevada and Louisiana, and Chicago and Cook County, Ill.
With a $13.3 million contract signed Friday by Alameda County, Oakland-based Sequoia arguably became the dominant voting-system maker in California, having signed up more counties than any other company.
But a controversy regarding Sequoia's foreign ownership could upset its quiet, sell-what-you-can service strategy.
Politicians in the Windy City and CNN newsman Lou Dobbs suggested recently that the federal government was derelict in not having investigated Sequoia and its acquisition last year by Smartmatic, a Boca Raton, Fla., firm largely owned by Venezuelan businessmen.
After Chicago and Cook County were plagued with delays this spring in tallying votes for a primary, city alderman Edward Burke suggested Sequoia's voting machines were part of a conspiracy by Venezuelan President Hugo Chavez to manipulate U.S. elections.
"We may have stumbled across what could be (an) international conspiracy to subvert the electoral process in the United States of America," Burke told reporters.
"Tell me a single, solitary reason there is to trace ownership through three shell corporations to the Curacao Islands and its roots to Venezuela, where they have already been involved with the dictator of Venezuela, who Defense Secretary (Donald) Rumsfeld says is an enemy of the United States."
Soon after, editorial writers at Investors Business Daily warned that "we might just get ambushed ... if the Venezuelan government ends up controlling our elections."
In late May, the U.S. Treasury Department requested Sequoia and Smartmatic documents on the transaction, as a potential preliminary to review by the Committee on Foreign Investment in the United States, a process typically reserved for defense firms.
A few days later, CNN's Dobbs opened fire on electronic voting and Sequoia in particular as "an outright threat to our democracy."
Next to a television logo reading "Democracy for Sale," Dobbs said, "We know what we're dealing with, and it is a dysfunctional government that is trying to render our elections precisely the same."
The indignation has taken Sequoia executives by surprise, partly because the company has been foreign-owned for 24 years. The firm's roots go back to 1890.
In the early 1980s, Sequoia was sold to the Irish printing conglomerate Jefferson Smurfit, which sold it to De La Rue, a British banking technology and currency printing house.
Sequoia lost money in 2004, and De La Rue sold it to Smartmatic Co. of Boca Raton for $16 million in cash. Smartmatic in turn is owned by holding companies based in the Netherlands and in Curacao. The lead investors are four founders, led by Antonio Mugica and his father, who have Spanish and Venezuelan citizenship.
Smartmatic was a virtual unknown until 2004, when as part of a consortium it won a $91 million contract to supply voting machines for the recall referendum against Venezuelan President Hugo Chavez. Another firm in the consortium, Bizta, had some of the same investors and had obtained a loan from the Venezuelan government secured by a 28 percent equity stake.
News of the Venezuelan government's stake in Bizta sparked protest, and according to Smartmatic officials, Bizta paid off the loan before the election.
Smartmatic purchased Sequoia a year later, and executives of both companies say neither has ties to the Venezuelan government.
Sequoia executives say the purchase by Smartmatic, another voting company, has been a good fit and brought fresh development money that Sequoia rarely saw under De La Rue.
"It is a wonderful and healthy partnership, and I couldn't be happier," said Howard Cramer, Sequoia's vice president of sales.
The firm employs 150; slightly more than half are in Oakland.
Elections officials in the Chicago area say most of their problems in the March primary sprang from shifting to a new voting system of three electronic components, after decades of voting on punchcards.
Harvard "Larry" Lomax, registrar of voters in Clark County, Nev., has been using Sequoia equipment since 1998. When Sequoia first introduced backup records or paper trails for its touch-screens, Lomax was the first head of elections in a large urban county to try them.
He said the foreign ownership issue is "ridiculous."
"I just think that's political posturing on those people's part," Lomax said. "The product hasn't changed, the reliability hasn't changed. We run the elections. It isn't like someone in Venezuela can decide to do something and just do it."
Given the uproar following China's bid for Unocal and Dubai Ports' aborted management of several Northeast U.S. ports, Sequoia's Cramer listened for a broader outcry.
What he's heard is "zero," he said.
"There is no market interest in this topic," he said. "It's a non sequitur. It's as though it doesn't exist."
Critics of electronic voting say a more relevant matter than ownership is an industry penchant for secrecy and the lack of scrutiny for voting machines.
"You care less about them if the system is patently transparent and you can tell whether it's honest," said Doug Jones, a computer science professor and voting systems examiner in Iowa. "If we had sufficient transparency in our elections systems, the devil himself could build our voting systems and we could still hold honest elections."
Contact Ian Hoffman at ihoffman@angnewspapers.com.