U.S. Drops Inquiry of Voting Machine Firm

By Zachary A. Goldfarb
Special to The Washington Post
Saturday, December 23, 2006

A federal investigation into possible ties between a U.S. maker of electronic voting machines and the Venezuelan government has ended after the company's Venezuelan owners announced they will sell it.

Smartmatic Corp. announced yesterday that it agreed to sell its subsidiary, Sequoia Voting Systems Inc., the third-largest supplier of voting equipment in the United States. Smartmatic, which was owned through a series of trusts by Venezuelan entrepreneurs, acquired the firm last year from a British company.

Concerns about the purchase arose this year in the media and in Congress, which prompted a review by the Committee on Foreign Investment in the United States (CFIUS). The secretive interagency committee, which probes multinational deals with national security implications, received 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 questions were raised on Capitol Hill.

This time, the concerns focused on whether, through its complex corporate structure or former business arrangements, the company had benefited from relationships with the government of Venezuelan President Hugo Chávez, a foe of President Bush.

In addition, Smartmatic has provided the election technology used in Venezuelan elections that opposition groups have called into question.

International observers have cleared the elections, and Smartmatic says the Chávez government has no ownership in or control over the company.

In the November midterm elections, more than a dozen states and the District of Columbia used Sequoia technology.

"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," Antonio Mugica, Smartmatic chief executive officer, said in a statement.

Treasury Department spokeswoman Brookly McLaughlin told the Associated Press that CFIUS has allowed the companies to withdraw from the investigation. "CFIUS will closely monitor the sale process," she said.

Rep. Carolyn B. Maloney (D-N.Y.), who in May raised questions about Smartmatic and Sequoia with the Treasury Department, said, "It seems the company could not overcome the cloud of doubt surrounding this deal -- had they been able to, we would not be talking about a sale of Sequoia today."

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