Tuesday, October 31, 2006

NY TIMES: U.S. Investigates Voting Machines’ Venezuela Ties

October 29, 2006
U.S. Investigates Voting Machines’ Venezuela Ties
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 Chávez.
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 Chávez’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. Chávez 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. Chávez 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 Chávez 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 Chávez government have been well known to United States foreign-policy officials since before the 2004 recall election in which Mr. Chávez, 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. Chávez 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 Curaçao (Smartmatic International Group, N.V.). The firm’s ownership was further shielded in two Curaçao 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.

Saturday, October 28, 2006

HERALD: U.S. digs for vote-machine links to Hugo Chávez

Posted on Sat, Oct. 28, 2006
U.S. digs for vote-machine links to Hugo Chávez

In the debate about the reliability of electronic voting technology, the South Florida parent company of one of the nation's leading suppliers of touch-screen voting machines is drawing special scrutiny from the U.S. government.
Federal officials are investigating whether Smartmatic, owner of Oakland, Calif.-based Sequoia Voting Systems, is secretly controlled by Venezuelan President Hugo Chávez, according to two people familiar with the probe.
In July, a Treasury Department spokeswoman disclosed that a Treasury-led panel had contacted Smartmatic, and a company representative said his firm was ''in discussions'' with the panel. At the time, those discussions were informal. The government has now upgraded to a formal investigation, the two sources said.
Sequoia's electronic voting machines operate in 17 states. In Florida, the machines are used in four counties: Palm Beach, Indian River, Pinellas and Hillsborough.
Miami-Dade and Broward use other technology.
Concerns about Smartmatic are keen on the eve of the Nov. 7 election, given fears that someone with unauthorized access to the electronic system could create electoral chaos. Some critics believe that if the Venezuelan government is involved, Smartmatic could be a ''Trojan horse'' designed to advance Chavez's anti-American agenda.
However, officials in all four Florida counties using Sequoia said they were satisfied with the machines and were not concerned about allegations of a Chávez connection because company officials told them the Venezuelan government had no stake in the company.
''We are very satisfied,'' said Kathy Adams, spokeswoman for the Palm Beach County supervisor of elections.
The probe stems from a May 4 letter to the Treasury Department by Rep. Carolyn Maloney, D-N.Y., raising concerns about Smartmatic's purchase of Sequoia last year. Maloney said she was disturbed by a 2004 article in The Miami Herald revealing that the Venezuelan government owned 28 percent of Bizta -- a company operated by two of the same people who own Smartmatic. Bizta bought back those shares after the article appeared, and Smartmatic now characterizes the deal as a loan.
Bizta and Smartmatic had partnered with Venezuelan telephone giant CANTV to win a $91 million contract to supply electronic voting machines for Venezuelan elections, including the controversial 2004 referendum Chávez won.
Smartmatic categorically denies any link to the Chávez regime. ''Smartmatic is a privately held corporation, and no foreign government or entity -- including Venezuela -- has ever held an ownership stake in the company,'' Mitch Stoller, a company spokesman, said in an e-mail to The Miami Herald.
Botched municipal elections involving Sequoia machines in Chicago in March added to the suspicions.
When the Chicago City Council grilled Sequoia executive Jack Blaine in April, he revealed that some Venezuelans had provided technical support during the election and that some of the glitches could be traced to a component developed in Venezuela to print and transmit results to a central tabulation computer.
The Chicago Board of Election Commissioners is withholding further payment to Sequoia until after the Nov. 7 election.
Sequoia machines in Florida do not use the component involved in the Chicago problems, however.
The Smartmatic investigation is being conducted by the Treasury-led Committee on Foreign Investment in the United States, CFIUS -- which determines whether deals involving foreign investors compromise national security.
Neither CFIUS nor Smartmatic confirmed the investigation, but they did not dispute it. The two people familiar with the probe asked that their names not be published because they were not authorized to speak about it.
Brookly McLaughlin, a Treasury spokeswoman, said she could not comment. Stoller, the Smartmatic spokesman, said in an e-mail: ``We have been in contact with CFIUS staff and will provide additional information as appropriate and as requested.''
Determining whether there really is a hidden connection to Chávez or anyone in his government is difficult because of Smartmatic's complex, though legal, corporate structure.
Smartmatic's corporate papers, obtained in Curac¸ao by The Miami Herald, reveal a convoluted trail of companies incorporated abroad and operating through dozens of proxy holders -- a structure seemingly designed to cloak the true owners.
The founders and principal owners of Smartmatic are Antonio Mugica and Alfredo Anzola. They are also the founders and owners of Bizta -- the company the Venezuelan government once partly owned.
Though both men come from wealthy families, a decidedly anti-Chávez sector, their reluctance to provide specific details about ownership has continued to fuel suspicions about the company.
Adding to the suspicions was a recent statement from the Venezuela Information Office about Smartmatic, which Chávez critics viewed as corroboration the company is linked to the government in Caracas.
But Eric Wingerter of the Venezuela Information Office in Washington said the ''fact sheet'' was, rather, aimed at rebutting critics' allegations that the Chávez government controls the company.
Ostensibly, the company's umbrella corporation, Smartmatic International Group, is housed inside a bank building on a scenic boulevard in Willemstad's busy Punda financial district. But all the people contacted either at the building or at the addresses of company proxy holders refused to talk to a reporter in Curac¸ao.
However, business records obtained by The Miami Herald in Willemstad's commercial registry provide no evidence of any Venezuelan government official or agency as director, associate, employee or proxy. What the records do show is the circuitous ownership structure with a paper trail leading from Willemstad to Amsterdam to Caracas to Delaware and then to Boca Raton and Oakland, Calif.
Stoller said the arrangement is standard for multinational companies.
But experts in offshore financial services say the Curac¸ao arrangement is largely designed to conceal and protect the true owners and assets of a company.
Cárlos A. Souffront, a partner and expert on offshore jurisdictions at the Miami-based law firm of Tew Cardenas, said companies often choose offshore havens to avoid paying high taxes and disclosing owners' identities or to protect assets and avoid scrutiny and oversight under post-9/11 U.S. regulations.
Stoller said the company is 97 percent owned by the four Venezuelan founders -- two of them dual citizens: Mugica (Spanish and Venezuelan), Anzola, Roger Piñate and Jorge Massa (French and Venezuelan). The remainder of the company, Stoller said, is owned ``by employees of Smartmatic (past and present) and family and acquaintances of the founders.''
Stoller did not identify any of them, and their names are not listed in records obtained by The Miami Herald.
The four top owners have not said whether they support or oppose Chávez.
Curac¸ao records show that Smartmatic International Group has three statutory directors: Piñate and two companies -- Curac¸ao Corporation Co. and Netherlands Antilles Corporation Co.
Piñate was also identified by Sequoia's Blaine as among the Venezuelans who helped deliver technology ''support'' during the glitch-plagued Chicago elections.
Curac¸ao business records also show that the two statutory director companies have 28 ''proxy holders,'' all employees of Curac¸ao International Trust Co.
CITCO is an old Dutch financial services firm based in the building Smartmatic lists as its Curac¸ao address. CITCO specializes in financial services for wealthy clients who seek confidentiality.
Smartmatic's Amsterdam address is also CITCO.
Anzola and Mugica, the main founders, are childhood friends. Anzola's father, Alfredo Anzola Mendez, wrote a column for the anti-Chávez Caracas newspaper Tal Cual.

Wednesday, October 25, 2006

Texas Herald-Zeitung: Venezuela Controls U.S. Elections

Who controls U.S. elections?
By R. Edward MooreThe Herald-Zeitung
Published October 20, 2006

Harvard University and Princeton University, in a joint study, have found that a hacker, given 30 seconds alone with an electronic voting machine, can plant a virus on that machine.

When the infected machine’s votes are downloaded at the end of the day, the virus infects the main computer and thus determines the election results giving victory to whomever the hacker desires. How? Using a key available over the internet for less than $3 the hacker opens the voting machine up and replaces a chip. The replacement chip has the virus code on it. The code for the virus and how to put it on the chip is available on the internet. It is all simple, low-level computer technology.

But it gets worse.

Why hack when you can control the company that makes and services the machines?

Hugo Chavez in control of electronic voting machines in America? True.

A Venezuelan company called Smartmatic International, parent of Sequoia Voting Systems, now provides electronic voting machines for millions of Americans.

Smartmatic started as a small software company in Caracas, Venezuela during the late 1990s. Despite having no election experience, the small company was awarded a $100 million contract by the Chávez-dominated National Electoral Council to replace Venezuela’s electronic voting machines for the Chavez recall vote. The one Jimmy Carter endorsed.

Smartmatic in America is still owned/controlled by the Venezuelan government through a complicated series of shell corporations.

Exit polls of the Chavez recall election, by New York’s Penn, Schoen & Berland Associates, showed Chávez had been defeated 59 to 41 percent. But when official tallies were announced, the numbers changed to 58-42 in favor of Chávez. Using data from Venezuela's electoral council, mathematicians from MIT and Harvard found suspicious patterns in the machine-by-machine results. Now Smartmatic has set up offices in America and has been selling the same electronic voting machines used in the Venezuelan elections to many states in America.

California, New York and Chicago and 19 other states use Smartmatic machines.In states that use Smartmatic machines, Smartmatic company technicians not only prepare the machines right before the elections, they also tally the final vote. That means Venezuelans will have direct control of the election outcomes in many states in this next election.

“Just as the Dubai ports deal was a priority security issue, any potential foreign influence on our elections system is vital to our national security and deserves at least a look,” said Congresswoman Carolyn B. Maloney.

So what about the national security concerns over a company owned and controlled by an anti-American government having direct control over American election outcomes?

Call your congressman and senator and get things changed now, before it is a long-distance call to Caracas. Call your New Braunfels City councilperson and county commissioner and tell them you don’t want the all-electronic machines — with no paper record — they are going to use here in the next election.

Speak up while you still can.

Thursday, October 19, 2006


Tribune reports that the Smartmatic-Sequoia Voting Systems HAAT component is responsible for recent election glitches. Software for the HAAT was designed in Venezuela, according to City Hall.

Voting glitches feared on Nov. 7
More races, bigger turnout will test new machines

By John McCormick
Tribune staff reporter
October 19, 2006

With the November election just weeks away, Chicago and Cook County officials have yet to fix some of the problems that led to a virtual meltdown of the new electronic voting system used in the spring primary.

Twice as many voters are likely to head for the polls on Nov. 7, where they will face new voting procedures and test the training of election workers who were often baffled by the machinery in March.

The most likely stumbling block for a smooth election remains a small device that is supposed to consolidate totals from two voting systems and transmit the results downtown via cellular technology. In the spring, many judges couldn't get it to work.

And it will still be possible for workers to accidentally fry vote totals if they forget to disconnect the power from ballot scanners before data cartridges are removed at the end of the night."We don't want you to erase any of the memory," warned Gail Weisberg, Cook County's equipment manager coordinator, during a training class last week in Hoffman Estates.

Election officials have boosted training and demanded many fixes to the machinery and software since March, when they were humiliated by confusion and delayed results.

The possible snags are unlikely to throw an election--there are paper backup systems at most every turn--but they could again slow results from some of the nearly 5,000 precincts.

While they suggest major improvements have been made, officials say politicians, voters and the media should never expect the new system to operate as quickly as when paper ballots were used and 90 percent of precincts typically reported results within an hour of polls closing."Will it be better than the primary? Absolutely," said Tom Leach, a spokesman for the Chicago Board of Election Commissioners.

The experience here this year with electronic voting was one of the earliest, and also one of the most troubled. But problems were also seen in Ohio, Maryland and elsewhere.The snafu potential will be even greater in November, when the battle for Congress and other close races hangs in the balance. It is estimated that more than 80 percent of voters nationwide will use electronic voting machines, with a third of all precincts using the technology for the first time.

The changes were required by the federal government after problems in the 2000 presidential election with punch-card ballots and antiquated voting machines in Florida and elsewhere.

To satisfy a new requirement that the visually impaired and others with disabilities be able to vote unassisted, Chicago and Cook County purchased touch screens with audio prompts for each polling place.

Dual system in each precinctBut because those machines were expensive, officials also purchased cheaper optical scan readers for paper ballots, creating a dual system in each precinct.

This dual system, at a cost of more than $50 million, requires hardware and software to blend the vote tallies from both platforms into one result per precinct.

But the system, the first major hardware change here in more than two decades, buckled under the pressure in its debut, when poorly trained election judges failed to properly deal with ballot jams, locked-up computer screens and other issues.

As roughly 25,000 Chicago and suburban Cook election judges are trained, city and county officials are working through the recommendations contained in a 26-page report that deconstructed the primary's problems.

The report, prepared by a Florida-based consulting firm at a cost of more than $90,000, found one of the biggest issues was a device that is designed, among other things, to merge totals from the two voting systems.

The Hybrid, Activator, Accumulator & Transmitter (HAAT) machine was capable of erasing results from data cartridges if it wasn't first turned off before the cartridges were loaded. Large numbers of election judges were also unable to follow a complex series of instructions to get the machine to transmit results.

Mostly operator error"Most of the inability of the HAAT devices to successfully transmit data on election night was due to operator error," the Freeman, Craft, McGregor Group wrote in its report.

Still, as the latest version of the HAAT was approved by the State Board of Elections at an emergency meeting Friday, there was testimony that even those who regularly work with election equipment could not get it to function properly."

I followed the steps and the steps didn't take me to where I needed to be," said Dianne Felts, the state board's director of voting systems and standards.Felts said that in one round of testing, 16 of 19 precincts failed to properly consolidate in the HAAT because there were differing versions of software installed in the machines. "It was easily remedied, but it was another human error," she said.

Felts also encouraged Chicago and Cook County officials to calibrate the touch screen machines once they are set up in the polls because she found some where it was possible to accidentally check one candidate's name when intending to check another.

Election officials say they plan to calibrate the equipment at warehouses before it is shipped and that the machines can be calibrated again at the polls.

The frontline of defense against such equipment problems will be a specially trained group of poll workers. Cook County is calling them "equipment managers," while Chicago will have "polling place administrators."

The specialists will receive about 10 hours of training, triple what typical election judges receive. They will also be paid more: $500 versus $150.

The county is giving the extra training to about 1,600 election judges, one for each polling place. The city, meanwhile, will give the weighty responsibility to roughly 2,100 college students, the only group allowed to apply for the jobs. "We figured they had the time to devote to this," Leach said.

Election judges say they welcome the presence of an on-site technology specialist."I think it will work a little better, if that person is there," said Phyllis Pepper, a South Side resident and election judge since 1996.

Most of the changes since March should go mostly unnoticed by voters, with a couple exceptions.Voters will be asked to shade in an arrow next to a candidate's names instead of marking an "X." In March, too many of the other marks failed to be read by optical scanners.Voters will also receive two ballots, instead of one as in the primary. The second ballot is needed because there are so many judges running for retention.

Preventing scanner jams

Despite the higher volume of ballots, officials promise fewer jams in optical scanners because the ballots will be shipped in cellophane, rather than having perforations for tearing off a tablet, something that created scanner jams in March.Another major improvement is the elimination of doubling up on equipment.

In March, multiple precincts that shared a polling place also shared a HAAT, resulting in a traffic jam at the end of the night.

Cook County Clerk David Orr predicted that "most" of the precinct transmissions would be successful.On election night, California-based Sequoia Voting Systems, the equipment manufacturer, plans to have as many as 75 people here, including the company's president, to help work through any equipment failures or issues that may arise.

The outcome here is important for the company's reputation because the combined Chicago and Cook County contracts are its biggest in the nation.

Copyright © 2006, Chicago Tribune