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Voting Machine Firm Denies Chavez Ties
Smartmatic Asked for Federal Review

By Zachary A. Goldfarb
Special to The Washington Post
Tuesday, October 31, 2006

The nation's third-largest supplier of electronic voting machines said yesterday that it asked the federal government to review its purchase by a company controlled by Venezuelans to allay concerns that it is influenced by Venezuelan President Hugo Chavez.

The company, Smartmatic Corp., and its subsidiary, Sequoia Voting Systems Inc., are being investigated by the Committee on Foreign Investments in the United States.

The CFIUS, which probes international business deals with defense or national security implications, received national attention this year when it cleared the purchase of a major provider of U.S. port security by a Dubai-based company, a transaction that fell apart after uproar on Capitol Hill.

Smartmatic representatives yesterday said that the Venezuelan government does not own and has never owned any part of the company. "No foreign government from any country has ever held a stake in Smartmatic," said the company's chief executive, Antonio Mugica.

The CFIUS investigation was first reported by the Miami Herald over the weekend, but Smartmatic confirmed in a news conference yesterday that it was cooperating with -- and had asked for -- the investigation.

In May, after concerns about the company's ownership structure began to circulate, Smartmatic dismissed the idea of a CFIUS investigation, saying Sequoia's products "do not fall within the parameters of the matters governed by CFIUS."

Jeff Bialos, a Washington lawyer representing Smartmatic and Sequoia, said that Smartmatic decided to request the inquiry to clear up "unfounded accusations" that have "persistently dogged" officials of both companies. "The company is in a policy of full disclosure with these issues," he said.

The development comes before the midterm elections, which will be a major test of the reliability and security of new electronic voting machines. A breakdown in the use of Sequoia voting machines in the March primary in Chicago gave rise to questions about Smartmatic's corporate structure, which is based in the Netherlands Antilles in the Caribbean but owned by Venezuelan nationals.

Generating more concern is the hostile relationship between the United States and Chavez, who called President Bush "the devil" last month. In 2004, opposition groups questioned the results of an unsuccessful 2004 recall election -- run on Smartmatic technology -- that tried to oust Chavez. International observers cleared the election.

"Given the state of the relationship between President Bush and President Hugo Chavez right now, the idea that a Venezuelan firm might be responsible for programming our voting machines is a legitimate concern," said Robert Pastor, executive director of the Commission on Federal Election Reform at American University.

Smartmatic International Group is owned primarily by foundations controlled by three Venezuelans -- Mugica, Roger Pinate and Alfredo Anzola. It was a small company until it beat out Nebraska-based Election Systems & Software in 2004 for a contract to provide voting technology in Venezuela. With millions in profits from that contract, Smartmatic bought Sequoia last year from a British company for about $16 million. Sequoia supplies electronic voting machines to at least a dozen states and the District.

Bizta, a start-up technology company in Venezuela with some of the same owners as Smartmatic, received a $150,000 grant from a financing arm of Venezuela's government before the 2004 recall. In exchange, Bizta pledged nearly 30 percent of the company shares and a seat on the board to the government. Bizta has been folded into Smartmatic, and Mugica said the grant, which he characterized as a loan, has been repaid. He added that a government representative never showed up at board meetings.

Venezuela's government said yesterday that it had no ownership in Smartmatic. "The Chavez administration does not have any type of relationship with the Smartmatic Corporation," said the Venezuelan ambassador to the United States, Bernardo Alvarez.

Rep. Carolyn B. Maloney (D-N.Y.), ranking member on the House committee that oversees the CFIUS, asked the Treasury Department in May to review Sequoia's acquisition. "The ownership of the company that makes machines that we use to exercise our democracy should also be looked at from a national security perspective," Maloney said yesterday.

Election experts said the Smartmatic concern would not be pressing if voting machine companies were more open about their technology. "If things were done truly transparently and it was auditable and there was accountability, it wouldn't really matter," said Warren Stewart, executive director of VoteTrust USA. "Unfortunately, that is not the case."

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