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Report: E-voting firms in hostile-takeover tussle

A flurry of attempts by Sequoia Voting Systems to avoid hostile takeover by electronic-voting competitor Hart InterCivic has not only failed to stave off the acquisition, according to reports, but led to a series of legal maneuvers that a Delaware judge has described in terms such as "too outlandish to survive summary judgment."

A flurry of attempts by Sequoia Voting Systems to avoid hostile takeover by electronic-voting competitor Hart InterCivic has not only failed to stave off the acquisition, according to reports, but led to a series of legal maneuvers that a Delaware judge has described in terms such as "too outlandish to survive summary judgment."

According to court documents, Hart notified Sequoia of their intention to purchase the US$2 million note held by Smartmatic on February 15th, giving the group of owners and share holders of Sequoia 60 days to match the offer.

Sequoia lawyers filed multiple motions to stymie Hart's bid, but their efforts have failed to impress Vice Chancellor Stephen P. Lamb of the Court of Chancery in Delaware.

In a rather testy opinion letter ( PDF format ) filed last Friday, Lamb shot down every legal challenge posed by Sequoia, writing that he would "not play referee to the parties' contract negotiations" and critiquing various points in the filing as "allegations... insufficient as a matter of law," "baseless," "completely frivolous," a "truly odd claim," and "too outlandish to survive summary judgment."

The Sequoia takeover attempt is part of the continuing fallout from the 2006 discovery that the Oakland firm's previous ownership, an offshore consortium called Smartastic, had ties to Venezuelan leader Hugo Chavez. After a failed sale attempt, Smartastic was forced to give up control of Sequoia, which passed to SVS Holdings.

Smartastic continued to look for a buyer for a $2 million note it was holding from that transaction, and appeared to have found one in Hart InterCivic, a Texas-based competitor and the nation's fourth-largest e-voting firm. ( Premier Election Solutions -- previously known as the Diebold Election Services division -- is the second largest, behind Nebraska-based Election Systems & Software .)

It's unclear at the moment how a Hart-Sequoia takeover would affect various legal proceedings currently filed against the two companies. Hart is currently the subject of a federal qui tam (fraud) complaint ( PDF format ) filed after a company whistleblower took his observations on company misstatements and misrepresentations to first state and then federal officials.

Sequoia, meanwhile, has run afoul of various states as their e-voting machines have been tried and found wanting; in a recent notorious case, the company threatened to sue researchers and voting officials in New Jersey if they examined the state's purchased Sequoia Voting Systems AVC Advantage voting machines.

Sequoia machines are expected to play a role in next week's Pennsylvania primary, several Pennsylvania counties having purchased the same machines that ran aground in New Jersey's elections.

In addition, the takeover could affect several major Sequoia contracts that are pending, including a $10 million agreement with the city of San Francisco and a $100 million contract with the State of new York. The latter deal is a cooperative agreement with Canadian-owned Dominion Voting Systems Corporation.

More information about the Hart InterCivic-Sequoia takeover battle is available at The Brad Blog .

Additional reporting by Angela Gunn


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