SMARTMATIC RESPONDS TO HERALD

Foreign governments not involved in U.S. voting

Re the Jan. 8 editorial Sale could ease doubt about elections: A Miami Herald story in October reported that Smartmatic Corp. voluntarily submitted information to the U.S. Committee on Foreign Investment in the United States. The editorial uses the word ``resisted.''
Smartmatic has provided the media documents detailing the company's ownership structure -- 97 percent of Smartmatic is owned by its four founders -- Antonio Mugica Rivero, a citizen of Spain and Venezuela, Roger Pinate and Alfredo Anzola, both Venezuelan citizens, and Jorge Massa, a citizen of France and Venezuela. The remaining stock is held by Smartmatic's senior executives and the founders' family members.
The Oct. 28 story U.S. digs for vote-machine links to Hugo Chávez says that 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 in Smartmatic.
Most important, the idea that foreigners could somehow influence the U.S. voting process is untrue and ignores the numerous safeguards and stringent regulations in place to ensure fair and accurate elections. Sequoia Voting Systems' election equipment and software have been tested and qualified by federal Independent Testing Authorities and certified by individual states.
ANTONIO MUGICA, CEO and president, Smartmatic Corp., Boca Raton
JACK A. BLAINE, president, Sequoia Voting Systems, Boca Raton

Herald Editors: PROBE OF VOTE-EQUIPMENT COMPANY IN NATIONAL INTEREST

Posted on Mon, Jan. 08, 2007
Sale could ease doubt about elections
OUR OPINION: PROBE OF VOTE-EQUIPMENT COMPANY IN NATIONAL INTEREST
The pending sale of Smartmatic Corp.'s subsidiary, Sequoia Voting Systems Co., should ease doubts voters may have about possible foreign influence in U.S. elections. A U.S. Treasury panel that was investigating Smartmatic regarding national-security concerns said that it will ''closely monitor'' the sale of Sequoia. This should help assure Americans that no hostile government can meddle in U.S Elections.
Smartmatic purchased Sequoia, a leading voting-equipment vendor, in 2005. The company has been under a cloud since the Committee on Foreign Investment in the United States, or CFIUS, began a national-security investigation last fall. The concern was that the Venezuela, headed by President Hugo Chávez, who is known for anti-U.S. antics, might have undue influence in Smartmatic. Given the growing distrust of electronic-voting systems and the fear of vote manipulation, careful review of Smartmatic was justified.
Bribery probe
Smartmatic initially resisted the CFIUS investigation. Later, The Wall Street Journal reported that the Justice Department had undertaken a different investigation of Smartmatic. This investigation was related to possible bribes and tax evasion in Smartmatic's sale of voting equipment to Venezuela's government for use in its 2004 presidential recall election.
Antonio Mujica, Smartmatic's CEO and founder, is a Spanish-Venezuelan dual citizen. He and other company officials repeatedly have denied any connection to the Venezuelan government and all allegations of bribery or tax evasion.
Unnamed investors
Smartmatic's ownership structure is so convoluted that it is virtually impossible to verify all its owners. Parent company Smartmatic International is owned by a Netherlands company, which is owned by Curacao trusts, which in turn, are controlled by unnamed investors.
The Venezuelan government once had a stake in a company closely linked to Smartmatic. Venezuela invested in Bizta, which is owned by two of Smartmatic's main owners, including Mr. Mujica. Bizta provides software for Smartmatic's voting system and joined Smartmatic in selling that system to the Chávez government for the 2004 recall election. Venezuela sold its stake in Bizta after The Miami Herald reported on the investment, which prompted complaints that the Chávez government shouldn't have any interest in machines that would determine his stay in office.
U.S. Rep Carolyn Maloney, D-N.Y., who initiated the CFIUS probe, says that Smartmatic ''could not overcome the cloud of doubt'' about its ownership of Sequoia. CFIUS was right to take decisive action to protect national security and the integrity of U.S. elections.

Herald: Sale ends machine flap

Posted on Fri, Dec. 22, 2006
VOTING MACHINES

Sale ends machine flap
Smartmatic -- the South Florida-based voting-machine company that was under investigation for possible links to the Venezuelan government -- will sell the U.S. subsidiary that provides electronic machines in Florida and other states.
By CASEY WOODS
cwoods@MiamiHerald.com
A federal investigation into possible secret Venezuelan government involvement in a South Florida-based electronic voting machine company has been closed after Smartmatic announced on Thursday that it will sell the subsidiary that sparked the probe.
A Treasury-led panel began the inquiry earlier this year because of concerns that Smartmatic, which owns Sequoia Voting Systems Co., could pose a threat to U.S. national security by giving the left-wing government of Venezuelan President Hugo Chávez a way to influence elections.
Sequoia, one of the nation's leading suppliers of touch-screen voting machines, provides machines to the nation's capital and dozens of counties in 16 states, including Florida counties such as Hillsborough, Palm Beach, Indian River, and Pinellas.
Smartmatic representatives, who say the company voluntarily submitted to the probe, said the sale of Sequoia and the end of the investigation will allow both companies to grow without a cloud of suspicion hanging over their operations.
''We think Sequoia is a great company with the best product out there, and it is going to become the number one voting vendor in the U.S.,'' said Smartmatic CEO Antonio Mugica. ``It would be [a mistake] for it not to realize its full potential because of this distraction about ownership.''
ALLEGATION
Even with the sale of Sequoia, Smartmatic's dealings with the federal government may not be over.
Earlier this month, the company contacted the Justice Department to deny allegations, first reported in El Nuevo Herald, that its owners paid a bribe to obtain the contract to supply voting machines to the Venezuelan government. Company representatives also disputed allegations that it failed to pay U.S. income taxes.
The company, with offices in Boca Raton and incorporated in Delaware, has not been notified that it is the target of a criminal investigation, said Jeff Bialos, a Washington, D.C. attorney for Smartmatic.
''The company hasn't been subpoenaed and all the underlying activity was associated with legal advice at the time,'' he said. ``The company believes there is no basis in the allegations.''
The Justice Department has refused to comment on the matter.
Mugica and other Smartmatic representatives have categorically denied that the company has any connections to Chávez, a harsh critic of the Bush administration.
`CLOSELY MONITOR'
Smartmatic is withdrawing from the investigation by the Treasury department's Committee on Foreign Investments in the United States.
A CFIUS committee spokeswoman confirmed the probe would be closed.
''Though the CFIUS process had not yet concluded, Smartmatic has decided to sell its ownership of Sequoia, as the companies have said,'' spokeswoman Brookly McLaughlin said in a written statement. ``CFIUS has therefore agreed to allow the company to withdraw from the CFIUS process. CFIUS will closely monitor the sale process.''
Smartmatic, which purchased Sequoia in 2005, is majority-controlled by Mugica, a dual Spanish-Venezuelan citizen.
The company drew attention from Chávez critics after The Miami Herald revealed in 2004 that the Venezuelan government owned 28 percent of Bizta, a software development company founded and operated by Mugica and another Venezuelan, Alfredo Anzola. Bizta repurchased those shares after the article was published.
Smartmatic representatives call the arrangement a loan, and say the company had to ''pledge'' the shares to the government as part of the deal but that the loan was later paid off.
In 2004, Smartmatic partnered with Bizta and Venezuelan telecommunications giant CANTV to land a $91 million contract to provide electronic voting machines for Venezuelan elections.
Smartmatic has a convoluted corporate structure, involving dozens of proxy owners, that makes it difficult to independently determine whether there is any Venezuelan government connection.
It has a paper trail leading from Curacao to Amsterdam to Delaware and Boca Raton as well as Oakland, Calif.
REACTION
A U.S. congresswoman, who wrote a letter to CFIUS raising concerns about the Smartmatic-Sequoia deal before CFIUS launched the review, said that doubts still remain despite the company's decision to sell the subsidiary and end the investigation.
''In my opinion, Smartmatic's reported action shows that the company could not or was unwilling to get beyond the doubts surrounding this deal and that the CFIUS review was important,'' said Rep. Carolyn Maloney, D-N.Y.
9/11 EFFECT
Smartmatic representatives say the company fell victim to changing attitudes toward foreign investment in sensitive industries, as evidenced by the flap over the sale of major U.S. port operations to a Dubai company. After that deal ignited a political firestorm, Dubai Ports World agreed to sell the operations to an American company.
''The environment for foreign investors has changed markedly in the post-9/11, post-Dubai Ports world,'' Bialos said. ``There is much more focus on foreign investment in critical infrastructure.''

WSJ: Smartmatic to Sell Sequoia

Smartmatic to Shed U.S. Unit,End Probe Into Venezuelan Links
By BOB DAVIS
December 22, 2006; Page A6
WASHINGTON -- Voting-machine company Smartmatic Corp. said it would sell its U.S. subsidiary to end a review by the Committee on Foreign Investment in the U.S. into whether Smartmatic is partially owned by the Venezuelan government.
Smartmatic, owned by Venezuelan entrepreneurs who split their time between Caracas and Boca Raton, Fla., portrayed itself as the latest victim of a U.S. protectionist response to foreign investment in sensitive industries.
Earlier this year, a company owned by the government of Dubai, a Gulf emirate that is part of the United Arab Emirates, drew opposition in Congress and some media outlets with plans to buy a company that runs commercial operations at several U.S. ports. The company later sold the port-operations business."
Given the current climate of the United States marketplace, with so much public debate over foreign ownership of firms in an area that is viewed as critical U.S. infrastructure -- election technology -- we feel it is in both companies' best interests to move forward as separate entities with separate ownership," Smartmatic said. The company said it plans to sell Sequoia Voting Systems Inc., headquartered in Oakland, Calif., which it purchased in early 2005 for $16 million.
The Committee on Foreign Investment, known as the CFIUS, reviews foreign acquisitions to see if they pose national-security concerns. Normally, such reviews are conducted before deals close. The Smartmatic acquisition drew attention earlier this year because of concerns that the government run by Venezuelan President Hugo Chávez, an opponent of U.S. policy, owns a stake in the company.
Since its purchase by Smartmatic, Sequoia's sales have risen sharply to a projected $200 million in 2006, said Smartmatic's chief executive, Anthony Mugica. He said the firm has a "healthy" profit but didn't provide a specific figure. Nevertheless, the CFIUS investigation, as well as a separate Justice Department probe into whether Smartmatic had paid bribes in Venezuela, had become a "distraction" for senior management, Mr. Mugica said.
With the 2008 election on the horizon, Mr. Mugica said, "it would be an extremely big mistake to not capitalize on the opportunity [of selling voting-machine equipment] by having a handicap, even if it was only a fantasy or a myth about Sequoia."Sequoia voting machines were used in 16 states and the District of Colombia in 2006. Smartmatic, which has revenue of about $100 million, focuses on Venezuela and other markets outside the U.S. After selling Sequoia, Mr. Mugica said, he hoped Smartmatic would work with Sequoia on projects in the U.S., though Smartmatic wouldn't take an equity stake.
The proposed sale may dim the spotlight on the Justice Department probe and make it easier to resolve.
Among the issues the department is looking at are whether Smartmatic paid bribes to Venezuelan officials to win an election contract in 2004 and failed to pay taxes owed in the U.S. Smartmatic said it is cooperating with that probe and that the Justice Department hasn't issued any subpoenas to Smartmatic employees.
Jeffrey Bialos, a lawyer for Smartmatic, said the Justice Department investigation didn't play into its sales decision. Rather, he said, the attitude in the U.S. to foreign acquisitions had hardened since the Sept. 11, 2001, terror attacks.A spokeswoman for the Treasury, which takes the lead on matters regarding the CFIUS, said the committee agreed to end the Smartmatic review but added that "CFIUS will closely monitor the sale process."
Smartmatic came to prominence in 2004 when its machines were used in an election to recall President Chávez, which Mr. Chávez won handily -- and which the Venezuelan opposition said was riddled with fraud. Smartmatic put together a consortium to conduct the recall elections, including a company called Bizta Corp., in which Smartmatic owners had a large stake. For a time, the Venezuelan government had a 28% stake in Bizta in exchange for a loan.
Bizta paid off the loan in 2004, and Smartmatic bought the company the following year. But accusations of Chávez government control of Smartmatic never ended, especially since Smartmatic scrapped a simple corporate structure, in which it was based in the U.S. with a Venezuelan subsidiary, for a far more complex arrangement. The company said it made the change for tax reasons, but critics, including Rep. Carolyn Maloney (D., N.Y.) and TV journalist Lou Dobbs, pounded the company for alleged links to the Chávez regime.
Write to Bob Davis at bob.davis@wsj.com1