Saturday, December 02, 2006

Smartmatic denies tax, bribery allegations

Posted on Sat, Dec. 02, 2006

A Boca Raton company owned by Venezuelans denied allegations it evaded U.S. taxes and paid a bribe to secure a contract in Venezuela to supply electronic voting machines.
Smartmatic, an international company with offices in Boca Raton, has contacted the Justice Department to deny allegations that its Venezuelan owners paid a bribe to secure a $91 million contract to supply electronic voting machines in Venezuela, an attorney for the firm said Friday.
''We have informally told the Justice Department that there is no basis for these allegations,'' said Jeffrey Bialos, a Washington, D.C. attorney retained by Smartmatic.
He said Justice officials told the company this fall that it was not the target of a criminal investigation, nor has it received any subpoenas.
The company, incorporated in Delaware, also denied allegations that it failed to pay U.S. income taxes.
Smartmatic's denials mark yet another chapter in the convoluted saga of the Boca Raton firm that last year bought Sequoia Voting Systems of Oakland, Calif., one of the nation's leading suppliers of electronic voting machines. Sequoia machines operate in Washington, D.C. and 16 states, including four counties in Florida: Palm Beach, Indian River, Hillsborough and Pinellas. Smartmatic machines will be used in Sunday's presidential election in Venezuela.
Smartmatic also is being investigated by a Treasury-led panel over whether the government of Venezuelan President Hugo Chávez, increasingly at odds with President Bush, is a secret business partner. Smartmatic has denied any link to the Chávez government.
In another development, Rep. Carolyn Maloney, D-N.Y., who helped spark the Smartmatic probe by the Treasury-led Committee on Foreign Investment in the United States, sent a letter Thursday to Treasury Secretary Henry Paulson Jr. to urge his agency to publicize its findings as soon as the review is completed.
The Wall Street Journal reported Friday that the Justice Department has been probing Smartmatic for possible violations of the Foreign Corrupt Practices Act and possible tax evasion. A Justice Department spokesman on Friday refused to comment.
El Nuevo Herald reported Thursday that agents from the Internal Revenue Service and the Federal Bureau of Investigation are investigating allegations involving tax evasion, an excessive commission to a lobbyist in Caracas and alleged death threats by Smartmatic President Antonio Mugica.
In a statement sent to El Nuevo Herald, a copy of which the company sent Friday to The Miami Herald, Smartmatic said Mugica ``has never threatened any employee.''
The statement said the company has concluded that the allegations came from two former employees who ``appear to be acting in a manner inconsistent with their separation and confidentiality agreements.''
Bialos said Smartmatic sent the ex-employees -- a chief financial officer and comptroller -- ''cease and desist'' letters, reminding them of the confidential nature of their ''voluntary termination'' agreements. He said Smartmatic would take legal action, if necessary, but was not attempting to stop them from talking with authorities.
''The company's policy is one of full and open disclosure,'' Bialos said.
Smartmatic raised suspicions among Chávez's critics after The Miami Herald revealed in May 2004 that two of its main owners, Mugica and Alfredo Anzola, also owned Bizta Corp. -- a small software company in Caracas in which the Venezuelan government had a 28 percent ownership stake.
The disclosure sparked concern among Chávez's political opponents because Bizta, Smartmatic and Venezuelan telephone giant CANTV had won the $91 million contract to supply electronic voting machines before the 2004 referendum that Chávez won. Just before the referendum took place, Bizta announced it would buy back the government shares.
Concern resurfaced after Smartmatic acquired Sequoia last year and Maloney asked the Treasury-led group to investigate. The Miami Herald reported in October that the interagency panel had begun a full-fledged investigation into whether the Chávez government played a behind-the-scenes role in Smartmatic. Smartmatic later confirmed that it had ''voluntarily submitted'' to the review.
Brookly McLaughlin, a Treasury spokeswoman, said Friday there was nothing new to report on the investigation.
The panel determines whether a particular foreign investment ''threatens to impair the national security of the United States.'' The panel has an initial 30 days to review a transaction but can extend the probe 45 more days if at least one member of the committee determines that a particular investment threatens to impair national security. Though no one would say whether the probe is now in the 45-day stage, all indications are that it is. The Miami Herald reported on the original review in July.
According to procedures, the panel can recommend that the president suspend or prohibit the investment in question or offer another recommendation or none at all.
El Nuevo Herald said Thursday that federal investigators were reviewing Smartmatic payments to Morris Loyo, a retired Venezuelan air force captain with ''ample connections'' to the Chávez government, as commissions for helping to obtain the voting machine contract.
Smartmatic confirmed employing Loyo ''as a lobbyist/salesperson and independent contractor to assist in securing election contracts in Venezuela'' but would not say how much he was paid.