updated 10/29/2006 11:28:39 PM ET 2006-10-30T04:28:39

A U.S. manufacturer of touch-screen voting machines confirmed Sunday it was being investigated by the federal government for alleged ties to Venezuelan President Hugo Chavez but flatly denied any connection.

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Sequoia Voting Systems Inc., based in Oakland, Calif., said the Committee on Foreign Investment in the United States, or CFIUS, was conducting the formal inquiry into it as well as its parent software company, the Smartmatic Corp., at the firms’ request after news articles suggested improper ties.

The inquiry was focusing on last year’s acquisition of Sequoia by Boca Raton, Fla.-based Smartmatic, which is owned by three Venezuelans, and whether Chavez’s leftist government has any influence over their operations.

Chavez is a longtime foe of the Bush administration who drew criticism from lawmakers of both U.S. parties last month after he called President Bush “the devil” in a speech at the United Nations.

“Sequoia and Smartmatic are not connected, owned or controlled by the Venezuelan government whatsoever,” Jeff Bialos, a Washington attorney representing the two firms, said in a telephone interview.

“There’s no basis for the allegations. We were trying to prove a negative, so the two companies voluntarily submitted a notice asking CFIUS to review the acquisition to put to rest the press allegations,” he said.

Brookly McLaughlin, a spokeswoman for the Treasury Department, which oversees the foreign investment committee, said Sunday that CFIUS has been in contact with Smartmatic but declined to comment as to whether there was a formal investigation.

The probe, disclosed in the final days before the November congressional elections, comes amid growing concern about the reliability of electronic voting machines in what are expected to be many tight races nationwide.

Security questions
A report released earlier this month by The Century Foundation think tank found problems with malfunctioning voting machines in 10 states it sampled. Activists, meanwhile, have filed lawsuits in at least nine states contending the new electronic voting machines are not secure.

The inquiry also comes after the political furor earlier this year over a buyout that put a Dubai company in control of some operations at six American ports. The outcry led the Dubai company, DP World, to promise it would sell the U.S. operations to an American company.

Rep. Carolyn Maloney, D-N.Y., said Sunday she welcomed the formal review after she asked the government in May to examine the Sequoia takeover.

“It’s a national security issue,” she said in a telephone interview. “Having a foreign government investing or owning a company in this country that makes voting machines could raise a question about the integrity of the elections.”

According to Smartmatic, the firm is owned primarily by three individuals and their families: Antonio Mugica, a dual-Spanish-Venezuelan national who is the chief executive officer (78.8 percent); Alfredo Anzola (3.9 percent); and Roger Pinate (8.5 percent). Investor Jorge Massa as well as Smartmatic employees and other friends own the remainder.

“No foreign government or entity — including Venezuela — has ever held an ownership stake in Smartmatic,” Mugica said in a statement late Sunday.

The two companies said they have been cooperating with CFIUS after initial questions were raised last spring but decided to seek a formal review more recently.

Sequoia, which has been operating since the late 1800s and providing electronic voting equipment since the 1980s, currently provides electronic voting machines for 16 states as well as the District of Columbia.

“Sequoia is very confident our equipment will perform as well as it has over the course of history,” said Sequoia spokeswoman Michelle Shafer. “It wouldn’t matter if the voting equipment is created by Martians, because it all goes through a very vigorous testing process at the federal and state level.”

The investigation by CFIUS was first reported Saturday by The Miami Herald.

Separately, activist Patricia Axelrod of Reno, Nev., sued Sequoia on Wednesday, claiming her vote in the 2004 general election was not counted because of a defective machine.

Public testing
The complaint accuses Sequoia of negligence and property damage and seeks more than $10,000 in damages, as well as a court order to require the public testing of all Sequoia machines in Washoe County, Nev., and the repair of any defective machines.

“Sequoia management and product defect and negligence lost my 2004 vote, impaired the accurate results of the 2004 election and threatens the outcome of the 2006 elections,” Axelrod said.

Shafer said Sunday she had not seen the suit and could not comment on it. But she cited the equipment’s track record, saying, “We’re very proud of how it’s performed and the state is pleased with how it’s performed, and voters can feel very confident when they go out to vote.”

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