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Ballot Firm's Ties to Venezuela Criticized

Some American officials worry that Sequoia Voting Systems' foreign link

could compromise the integrity of the U.S. election process.

By Marc Lifsher, Times Staff Writer

12:00 AM PDT, June 3, 2006

An Oakland company that provides electronic voting machines in California and 19 other states is drawing scrutiny over its acquisition last year by a group of Venezuelan investors with past business ties to the government of President Hugo Chavez.

Voters in 20 California counties Tuesday will use voting machines provided by Sequoia Voting Systems, the country's oldest maker of election equipment. Sequoia's ownership has barely caused a ripple in California, but it has prompted elected officials in Chicago and New York to raise questions about possible foreign influence in U.S. elections.

Rep. Carolyn B. Maloney (D-N.Y.) last month wrote U.S. Treasury Secretary John W. Snow asking whether the Bush administration had weighed the national security implications of "a company with possible ties to the Venezuelan government" selling touch-screen voting machines for U.S. elections.

The concerns echo the resistance that greeted Chinese efforts last year to buy El Segundo-based oil company Unocal Corp. and the more recent failed attempt by a company in Dubai to acquire U.S. port operations.

"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 Maloney, who is concerned that voting machines supplied by Sequoia could be especially vulnerable to fraud because of the company's foreign ownership.

A spokeswoman for the Treasury Department, which evaluates foreign acquisitions of U.S.-based companies, said officials were looking into Maloney's query but declined to comment further.

Sequoia, founded in Jamestown, N.Y., in the late 1890s, was acquired in March 2005 by Smartmatic Corp., a private company owned by Venezuelan investors through a series of holding companies based in Europe and the Caribbean. Sequoia's previous owner was the British firm De La Rue, best known for printing currencies for dozens of foreign governments.

Smartmatic emerged from obscurity the year before when it won a $100-million contract to supply touch-screen voting machines for an ultimately unsuccessful recall effort against Chavez in 2004.

Before the election, Smartmatic was part of a consortium that included a software company partly owned by a Venezuelan government agency.

Jack Blaine, president of Sequoia and Smartmatic, said his companies had no current ties to the Venezuelan government.

"Whether in the U.S. or Venezuela, the world of politics can be a breeding ground for unfounded conspiracy theories, and in such an environment, the facts about our company and its proven voting solutions can easily become lost," he said. International observers found no evidence of voter fraud in the recall election.

In the last several years, Sequoia has signed contracts to provide electronic voting equipment to more than a third of California's 58 counties — including Riverside and San Bernardino but not Los Angeles — and 245 other local governments across the country.

The company markets optical scanners, which electronically tabulate ballots marked by voters, and touch-screen machines, on which votes are recorded using technology similar to that found in automated teller machines.

Concerns about Smartmatic's offshore ownership are fueling broader worries that computerized voting systems are vulnerable to hackers and political manipulation.

"Anything that further erodes the public's confidence in the integrity of our system of counting votes is troublesome," said Rich Hasen, a specialist in voting law at Loyola Law School in Los Angeles.

The situation isn't helped by the current strained relations between the United States and Chavez, who refers to President Bush as "Mr. Dangerous" and is a key figure in the growing leftist challenge to U.S. influence in Latin America.

Indeed, the Bush administration has shown some interest in Sequoia's ownership. Latin America experts at the State Department asked Richard Brand, a former reporter who covered the Chavez recall election, to brief them last month about Sequoia's role in the balloting, Brand said. A State Department spokesman declined to comment.

Chicago Alderman Edward Burke cited Sequoia's Venezuelan ownership in his complaint about the company's performance during March primary elections in his city and surrounding Cook County. Problems with merging results from two new types of voting machines supplied by Sequoia led to a days-long delay in posting final results.

Burke, who chaired an investigation into the incident, said he was bothered by reports that Venezuelan technicians and engineers "were in the Chicago tabulating rooms counting votes" on election night. Sequoia President Blaine said the Venezuelans were providing assistance to local election officials unfamiliar with the new voting machines.

Burke contends that Sequoia's complex ownership "is designed to make it difficult to learn who the real controlling interests are."

Sequoia's parent company, Boca Raton, Fla.-based Smartmatic, is controlled by Smartmatic International Holdings of Amsterdam. The holding company is owned by Smartmatic International Group of Curacao in the Dutch Antilles, a string of Caribbean islands near the Venezuelan coast.

Antonio Mujica, a citizen of Venezuela and Spain who lives in Caracas, Venezuela, founded the parent company in 2000 and, along with his family, owns a 75% stake.

The company's Venezuelan owners made "extra efforts to make it appear that Smartmatic is purely a [U.S.] company," said Lowell Finley, co-director of Voter Action, an electronic voting watchdog group in Berkeley.

According to corporate filings, Smartmatic listed its principal officers, all Venezuelans, as living at one Boca Raton address "when there's been direct confirmation that they live and work the vast majority of the time in Caracas," Finley said.

Blaine said his companies had "always been open" about their ownership. He said the corporate structure was based on that of other offshore holding companies such as Royal Dutch Shell and "many other leading businesses with significant international operations."

Stories about Smartmatic's connections to the Venezuelan government emerged just a few months after Omaha, Neb.-based Election Systems & Software Inc. failed to win a contract to refurbish 6,000 voting machines it had sold to a pre-Chavez government in Caracas.

John Groh, Election Systems international president, said he was bedeviled throughout the lengthy negotiations by questions from Chavez administration officials about rumors that his company had links to the CIA.

California election officials who use Sequoia's voting machines said they were not concerned about the company's background. They said they were confident that federal and state technical certification processes would find software security glitches before they became problems or threatened election results.

Riverside was the first county in the nation to switch to all-touch-screen voting when it deployed Sequoia terminals for the November 2000 presidential election, Registrar of Voters Barbara Dunmore said.

"Since then," she added, "we've had 36 successful elections."

Jesse Durazo, the Santa Clara County registrar of voters, also said he didn't have a problem with Sequoia's equipment or its owners.

Sequoia "was owned by a British firm and is now owned by a Venezuelan firm," he said, "but on our level it's transparent."

Copyright 2006 Los Angeles Times