Category: Electronic Vulnerability

Groups endorse and recommend remedies to the merger of ES&S and Dieblod/Premier <read>

RE: ES&S Purchase of Diebold/Premier: Remedies for Unlawful Concentration of Market Power and Other Public Injuries Within DOJ Jurisdiction

Dear Attorney General Holder, Assistant Attorney General Varney, and Assistant Attorney General Perez:

The undersigned organizations and individuals possess nationally recognized expertise in voting systems technologies, local and State election administration, and in removal of barriers to voting participation. We have cooperated in the preparation of this letter thatseeks to address appropriate remedies for ES&S’s anticompetitive disruption of the relevantmarkets and the threats thereby posed to American election integrity.

We are deeply concerned about the public impact of ES&S’s purchase of Diebold’s Premier Election Solutions, Inc. (“PESI”), referenced here as the “merger.” Fortunately, the Federal Government has expedited its research into purchaser ES&S’s accelerated absorption of PESI assets into ES&S and the business goliath’s concerted attempt to achieve a de facto dissolution of PESI before the DOJ can act.

This purchase represents a dangerous concentration of election equipment, maintenance, and management in one company.  To understand the extent to which companies can control elections and hold election officials and government hostage, we recommend the VotersUnite report and our comments on the risks to Connecticut.

We are very much impacted by this purchase.  It seems that it is now highly unlikely that there will ever be significant software upgrades to our Diebold AccVote-OS optical scanners, and even less chance that there will be a hardware upgrade to fix their(our?) ancient failure prone memory cards.

We have only one other company supplying ballots in Connecticut in addition to Diebold.  Only one company programming all the memory cards in five New England states, including Connecticut.

ES&S has a track record that adds to our concerns. From the letter:

C. History of ES&S Anticompetitive Market Conduct:

Buyer ES&S’s record of anticompetitive market conduct includes:

1. Legally proscribed tying arrangements to achieve vertical integration and marketdominance;

2. Predatory pricing of goods and services; and

3. Threatened breaches of contracts on the eve of elections, unless the election jurisdiction agreed to ES&S’s unilaterally determined price increases for essential goods (e.g. ballots) and services (e.g., technical maintenance and testing of voting equipment) that had been previously negotiated and approved for local or State fiscal planning.

D. ES&S Conduct Post-Merger Designed to Obstruct DOJ Remedial Options

ES&S engaged in conduct which appears to have been deliberately designed to vitiate the Antitrust Division’s (AD) scope of available remedies, and specifically the Government’s ability to unwind the sale as by a divestiture of PESI. Given the market share of theresulting corporate entity and other factors that justify DOJ review, buyer ES&S should reasonably have known that DOJ-AD would examine the merger. ES&S conduct that soughtto obstruct DOJ’s vindication of the antitrust laws and larger public interest includes:

1. Taking physical possession and control of all PESI intellectual property and business records within a few days of the sale/merger;

2. Rapidly renegotiating contracts with local election jurisdictions, to transfer them to ES&S products and services at steep discounts if the contracts were executed quickly, thus eviscerating the PESI business relationships;

3. Discharging PESI employees, so that virtually no qualified workforce would remain to manage and execute PESI’s business if DOJ required ES&S to divest PESI; and,

4. Undertaking an arguably deceptive sales effort to excise some low-value PESI assets in order to unilaterally and superficially restructure the voting products and services markets, with the objective of superficially restoring competitive market conditions while also not actually reducing or endangering the ES&S dominant market share.

In sum, ES&S’s restrictive contractual provisions intensify the dependence of local and State governments on one privately held firm for their mission-critical election operations. ES&S’s vertically integrated business model and standard terms greatly reduce the opportunities for smaller vendors to offer goods and services to governmental units. The terms also augment the opportunities for ES&S vendor intimidation of governmental customers in ways that threaten the integrity of elections. ES&S’s oligopolistic control over the market (an estimated 70% share) and the injuries inflicted by this degree of market power will likely escalate unless DOJ-AD redresses ES&S’s problematic contractual provisions as part of the remedies ordered.

With the discharge of employees etc. the purchase cannot be undone to leave Diebold/Premier viable. Yet there are remedies that can mitigate and reverse the damage. From the letter (read the full letter for the details):

A. Prohibit ES&S From Conducting Business Under Contractual Provisions that Undermine Competitive Market Conditions and Unfairly Perpetuate Oligopolistic Market Share

B. Require Continuation of PESI’s Efforts to Achieve Increased Electoral Transparency

C. Require ES&S to Continue PESI’s Effort to Serve Voters With Disabilities By Identifying Alternatives to the AutoMark Voting Machine

D. Require Buyers of PESI Assets to be Qualified to Compete in Jurisdictions that Mandate Paper Ballots

F. To mitigate the increased threat to national security generated by this merger, require ES&S to divest sufficient assets, reduce its contractual control over election jurisdictions, and take other appropriate actions.

We are pleased to join the other signatories in urging strong action.

Update: 2/18/2010:  From Bo Lipari’s blog: Dominion [Voting Systems] Sues to Stop New York City Contract with ES&S <read>

A current example of the hardball we may face with possible questionable/illegal tactics by a single company driving further to monopolize election equipment and maintenance:

In court papers, Dominion argues that the New York City Board of Elections failed to comply with New York State and New York City Procurement Laws, Rules and Regulations, and awarded the contract on the basis of illegal criteria. Further, the lawsuit argues that the New York City Board of Elections:

1) Did not conduct a lawful bidding and procurement process;

2) Did not disclose the method and criteria used in evaluating bidders;

3) Did not award the contract to the lowest responsible bidder.

The city used a point system to evaluate the two companies. In the final evaluation, ES&S received 3,417 points, while Dominion received 3,395, a difference of only 22 points. Dominion claims that the slightly higher overall score for ES&S in the city’s evaluation is due to extra points given to the ES&S DS200 scanners for an option called “Easy Startup”. This option is said to include electronic machines pre-programmed in the warehouse prior to delivery to poll sites, and the ability for poll workers to open the machines without a password (such a configuration is not only an obvious security risk, but disallowed under New York election law). The lawsuit claims that the State Board of Elections explicitly ruled that the DS200 Easy Startup option does not comply with state law, and informed the New York City Board that it would reject any contracts that included it.

Bo also points to an article on a lobbiest for ES&S <read>

While a Republican lawyer was under federal investigation in a Yonkers corruption case, he was paid nearly $50,000 last year to help a Nebraska company win a contract to provide New York City with new voting machines.

Anthony Mangone was indicted this month with Yonkers Councilwoman Sandy Annabi and former city GOP Chairman Zehy Jereis on extortion, bribery and other federal charges related to payments made to Annabi for her to change votes on city projects.

Coincidentally that same day, the New York City Board of Elections voted to buy thousands of new electronic voting machines — a contract expected to be worth more than $40 million — from Mangone’s client, Election Systems & Software

Is this what Connecticut look forward to, totally dependent with most other jurisdictions on one company?

Update: 12/27/2009 Gainesville editorial: Bad Business <read> For once Florida is leading toward voting integrity:

Corporate mergers can be good for business. But if mergers lead to less competition and innovation, they are not necessarily good for consumers.

This is especially true when the “consumers” are voters and the product voting machines.

Case in point is the recent purchase of Diebold Inc. by Election Systems & Software. The result is that a single company will now make the voting machines used by 92 percent of Florida voters … and by two-thirds of the nation’s voters.

“Each of Florida’s 67 counties must negotiate its own contract with the vendor,” says Dan McCrea, president of Florida Voters Foundation. “With no competition, Florida counties and taxpayers are over a barrel.”

The good news is that state Attorney General Bill McCollum announced ths week that he will conduct an anti-trust investigation of the merger. Given Florida’s embarrassing showing in the 2000 presidential election, the last thing this state needs is to become a captive market for a single voting machine vendor.

Update: 12/19/2009 New York Post:  U.S. opens probe of Diebold unit sale -report <read>

he U.S. Department of Justice and 14 states have opened investigations into the sale of Diebold Inc’s (DBD.N) voting machines business to Election Systems & Software that could lead to the unwinding of the September sale, the New York Post said on Saturday.

Update: 11/2/2009:  Secretary Bysiewicz letter to Senator Schumer <read>

Update: 10/29/2009 New York Times Editorial: Trust, Antitrust and Your Vote <read>

The interests of voters should be part of this lawsuit. The Justice Department and state attorneys general should consider formally joining the suit, so they can argue that the combination of Election Systems & Software and Diebold would make the voting experience worse and reduce the reliability of election results. The Justice Department’s antitrust division could also make its own attempt to block the sale. The enormous market share that the newly combined company would control should by itself set off anticompetitive alarms.

Since the 2000 presidential election, the public has rightfully been skeptical about how elections are run. We fear that if any one voting machine maker is allowed to dominate the market, there will be even greater reasons to worry about the nation’s flawed voting system.

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Our friends at VerifiedVoting have released a statement articulating concerns with the acquistion of Premier Election Solutions by ES&S <read>

The recently announced acquisition of Premier Election Solutions (formerly Diebold) by its largest competitor, Election Services & Software (ES&S), requires close scrutiny, as it raises greater concerns about the security, transparency and cost of elections and creates a profound anti-competitive effect in the shrinking marketplace for voting systems…

Without competitive alternatives, a post-merger ES&S has jurisdictions over a barrel when it comes to renewing or negotiating new contracts. We can expect higher costs for ongoing services as well as future procurement of voting equipment and support services including ballot programming, printing, equipment maintenance and supplies.

We can also expect to see substantial increase in vendor control over key contract provisions. Contracts between election jurisdictions and voting system vendors have been demonstrated in some instances to present significant barriers to election transparency. Contracts may limit jurisdictions’ access to source code, or restrict their ability to conduct independent evaluations of voting systems performance and security. There are even two known cases of a contract between a county and ES&S containing a provision that stipulated that the terms of the contract itself were confidential. Lacking the negotiating leverage that robust competition provides, counties could face pressures to accept contracts that do not provide sufficient transparency.

The merger will make a risky, expensive situation worse.  Connecticut, like most jurisdictions, uses a single vendor for equipment and maintenance.  We are also dependent on a single source, our distributor LHS Associates, for memory card programming.  A single more dominant vendor portends additional problems.  Its quite possible that the optical scanners we own, the AccuVote-OS will be discontinued.  Its less likely that there will be a soluntion to our memory card problems.  For more on the dangers of outsourcing our elections see the Voters Unite Report and our associated coverage.

Party to boycott election based on reports of hacking of electronic voting machines. <read>

CHENNAI: AIADMK general secretary Jayalalithaa on Wednesday observed that her party’s boycott of the coming by-elections was“to ensure that democracy in its true sense is brought back to the State.”
In a statement, the former chief minister, reiterated that the electronic voting machines could be tampered with. “In a democracy, every voter should know whether the vote cast has gone to the candidate or party it was meant for. In the absence of such certainty, the entire democratic process would be rendered a mockery. It is to ensure that democracy in its true sense is brought back that AIADMK decided to boycott the by-polls.’’
She noted the media reports that on August 2, Hari Prasad, a software engineer from a Hyderabad firm demonstrated on behalf of the NGO, Jan Chaitanya Vedika,  that EVMs could be tampered with.

Without paper ballots, no voting system is safe from errors and tampering, especially insider attack.