Posted on 05/28/2004 9:03:50 AM PDT by JesseHousman
The Venezuelan government has a 28 percent ownership of the company it will use to help deliver voting results in future elections.
Chávez opponents claimed the deal to scrap the country's 6-year-old machines was a maneuver to manipulate votes amid growing political turmoil.
CARACAS -- A large and powerful investor in the software company that will design electronic ballots and record votes for Venezuela's new and much criticized election system is the Venezuelan government itself, The Herald has learned.
Venezuela's investment in Bizta Corp., the ballot software firm, gives the government 28 percent ownership of the company it will use to help deliver voting results in future elections, including the possible recall referendum against President Hugo Chávez, according to records obtained by The Herald.
The deal to scrap the country's 6-year-old machines -- for a $91 million system to be built by two fledgling companies that have never been used in an election before -- was already controversial among Chávez opponents who claimed it was a maneuver to manipulate votes amid growing political turmoil.
Chávez opponents told The Herald on Thursday they were stunned to learn the government has a proprietary stake in a company critical to the election process.
''The Venezuelan state? Are you kidding?,'' said Jesús Torrealba, an official in the Democratic Coordinator opposition group. ``It impugns the credibility of the process. That is shocking.''
Government officials insist the investment is an effort to help support private enterprise and its interest in a ballot software company is merely coincidental, one of a dozen such investments made to help struggling companies.
''The whole process led to a decision that was best for Venezuela,'' said Bernardo Alvarez, Venezuela's ambassador in Washington.
But Venezuela is a nation bitterly polarized by Chávez's leftist populist rule. Nearly every move by the government is scrutinized by opponents who accuse Chávez of trying to impose an authoritarian regime.
GOVERNMENT FUNDS
Until a year ago, the Bizta Corp. was a struggling Venezuelan software company with barely a sales deal to its name, records show. Then, the Venezuelan government -- through a venture capital fund -- invested about $200,000 and bought 28 percent of it.
The government's investment in Bizta made Venezuela Bizta's largest single shareholder and, ultimately, its most important client.
The decision to replace the $120 million system built by Omaha-based Election Systems & Software was made Feb. 16 under unusual circumstances. Two of the five National Electoral Council members sympathetic to the opposition complained that they had been largely shut out of the process.
''The selection process was secret and it didn't allow us to get any information about the bidders and their products,'' board member Sobella Mejías said after the decision.
Other members knew about the government's investment, according to one member who asked not to be identified.
The new system is to be built by the Smartmatic Corp., which is incorporated in Florida, and programmed by Bizta, which also is registered in Florida and Venezuela.
Pro-Chávez government officials and company executives interviewed by The Herald say the Smartmatic-Bizta machines are among the most secure in the world, and that the government's investment in Bizta was unrelated to Bizta's bid for the voting machine contract.
''The companies that were chosen have the highest technical capacity,'' said Alvarez, the ambassador. ``In Venezuela there have been many fair elections and there will be many more fair elections.''
But the Atlanta-based Carter Center, which has observed every major Venezuelan electoral process since Chávez's election in 1998, said the disclosure of the government's role in Bizta reinforces the need for independent election audits.
''What we look at in any electoral process is whether each of the components is transparent and auditable. In this case, we would include these new machines,'' said Jennifer McCoy, who is leading the Carter Center's mission in Venezuela. She said she was unaware of the government's investment in Bizta.
Even without the political implications, the use of electronic voting machines has been widely debated since the United States' 2000 presidential election. Stanford University Professor David Dill, who has studied voting machines but is not specifically knowledgeable about the new Venezuelan system, said almost any programmed electronic machine is subject to possible manipulation.
'People just don't understand how easily these machines could fail to record votes accurately -- even by being `fixed,' '' he said.
PAPER TRAIL
Smartmatic does produce a paper trail of votes as well, but Venezuelan government critics claim it will be useless since an election recount would be supervised by the Electoral Council, perceived as pro-Chávez.
The National Electoral Council members have hailed Bizta's software-writing role as contributing to Venezuelan ''sovereignty'' over their voting system, which replaces American-designed machines. Chávez, an outspoken critic of U.S. policy, is viewed as leftist and anti-American.
According to Bizta's 2002 financial statement, the most recent one filed by the company in Venezuela, it was then a dormant firm that had no sales and was slowly losing money.
In June 2003, however, a venture capital company called Sociedad de Capital de Riesgo (SCR) invested about $200,000 in Bizta. The SCR is owned by the Venezuelan government's Industrial Credit Fund.
In January, a top official in Venezuela's science ministry, Omar Montilla, joined Bizta's board of directors to represent the government's three million shares, records show.
Montilla, who is one of five directors, canceled a meeting with The Herald and did not reply to repeated Herald queries.
One month after Montilla joined the board, the National Electoral Council awarded Bizta and partners Smartmatic and CANTV the $91 million contract to develop new voting machines. Bizta was hired to write the electronic code that configured the names and parties of candidates on the touch screens. Smartmatic would build and design the machines. CANTV, the publicly held phone company, would provide the phone lines for the system and election-day technical support.
The venture is largely the work of two little-known Venezuelan engineers: Antonio Mugica Rivero and Alfredo Anzola Jaumotte, childhood friends and recent engineering school graduates.
Mugica, 30, is the president of Smartmatic and a founder of Bizta. Anzola, 30, is the president of Bizta and the vice president of Smartmatic, corporate records from Venezuela show.
NO CONNECTIONS
Both executives say they have no political allegiances. Neither signed a petition drive seeking Chávez's recall.
Anzola initially told The Herald that one of the reasons the electoral council selected the group was that it had no connection to either the government or the opposition.
When told in a subsequent interview in Caracas that Bizta papers showed the government had an investment in his company through SCR, Anzola and Mugica said they viewed the investment as a loan.
''We really don't want to be involved in politics,'' said Wladimir Serrano, head of the governments venture capital fund. ``Our role is strictly financial and technical.''
Bizta ''remains a private company, with some government shares but without any say on our part on its day to day activities or its strategic programs and policies,'' Serrano said.
SUBSTANTIAL POWER
But Harvard Professor Ricardo Hausmann, a former Venezuelan official who also has worked as the chief economist of the Inter-American Development Bank, said any investor holding a 28 percent stake in a company would likely have substantial power to make decisions.
''For example, Verizon is the largest shareholder in CANTV, holding 28 percent, and it has control of the company's management,'' said Hausmann, who sits on the CANTV board. With Bizta, ``The government's influence will depend on the arrangement between the government and other shareholders.''
SCR's stock purchase in Bizta was part of a broader effort to help start-up companies that could bring Venezuela international prestige in a wide range of industries, Serrano said.
He provided a list of a dozen other companies in which SCR has invested.
Most of the 20,000 Smartmatic-Bizta machines will be delivered over the summer from the factory in Italy, officials say.
Kerry and the rest of the DemocRATs will watch this unfold and if, God forbid, they take over the White House again look for much nationalizing of such enterprises useful to the socialist/communist state America will become!
Think they'll plant a lot of bananas, too? All seriousness aside, I know these guys hate being called "banana republics", but just look at 'em! They are a stereotype of themselves!
Could we please stop impugning the respectable term "republic" and call this kind of mob rule by elites what it is?
It's a Banana Democracy.
Thank you.
It's looking more and more like a banana dictatorship.
Just when you think Chavez can't get any more blatant about his absolute determination not to be removed...
There was a great article in today's WSJ also asserting that Chavez had no intention of going anywhere, or even of letting the election happen in the first place. The article enumerated the many, many roadblocks he has thrown up (as well as the outright coercion indulged in by his followers).
Ping to CW.
Paging the InfoSec pinglist... Let me know if you want to be 1 or 0.
(That's ON or OFF, for those who are not binary-compliant)
Bruce Schneier, noted cryptologist and security technologist, wrote an interesting article on the topic of electronic voting recently.
His position is that even when there is no funny business going on, Bad Things can happen. Also, eliminating paper audit trails leads to all sorts of new and exciting avenues for fraud.
His article is located at http://www.schneier.com/crypto-gram-0312.html#9
Some excerpts:
There are dozens of stories about computerized voting machines producing erroneous results. Votes mysteriously appear or disappear. Votes cast for one person are credited to another. Here are two from the most recent election: One candidate in Virginia found that the computerized election machines failed to register votes for her, and in fact subtracted a vote for her, in about "one out of a hundred tries." And in Indiana, 5,352 voters in an district of 19,000 managed to cast 144,000 ballots on a computerized machine.
These problems were only caught because their effects were obvious--and obviously wrong. Subtle problems remain undetected, and for every problem we catch--even though their effects often can't be undone--there are probably dozens that escape our notice.
Computers are fallible and software is unreliable; election machines are no different than your home computer.
Even more frightening than software mistakes is the potential for fraud. The companies producing voting machine software use poor computer-security practices. They leave sensitive code unprotected on networks. They install patches and updates without proper security auditing. And they use the law to prohibit public scrutiny of their practices. When damning memos from Diebold became public, the company sued to suppress them. Given these shoddy security practices, what confidence do we have that someone didn't break into the company's network and modify the voting software?
And because elections happen all at once, there would be no means of recovery. Imagine if, in the next presidential election, someone hacked the vote in New York. Would we let New York vote again in a week? Would we redo the entire national election? Would we tell New York that their votes didn't count?
(snip)
If you are interested in this topic, the entire article is worth a read. I think he's right on the money. His article also has a good collection of links about this topic.
a late InfoSec ping. You are added to the list now.
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