Diebold Drops Troubled E-voting Machine

Diebold Inc. has sold its U.S. election systems subsidiary, Premier Election Solutions, to Election Systems & Software Inc. (ES&S) of Omaha, Neb.

The company will receive $5 million in cash plus 70% of the Allen, Texas-based subsidiary's accounts receivable as of Aug. 31, Diebold said in a statement announcing the sale, which closed yesterday. The deal is expected to result in a pre-tax loss of between $45 million and $55 million stemming from certain "retained legal liabilities" loss of assets and other transaction costs, Diebold said.

Diebold entered the U.S. election systems business in January 2002 via its purchase of Global Election Systems Inc., a unit that was later renamed Diebold Election Systems. That name, in turn, was changed to Premier two years ago, when Diebold decided to set up the company as an independent unit.

According to Diebold, the election system business, which last year generated about $88 million, or less than 3% of overall revenue, has been "non-core" to the company's operations since 2006.

In the seven years since Diebold's entry into the U.S. voting machine market, the company has found itself in the news more for controversies surrounding the quality and reliability of its voting machines than anything else.

In January, for instance, California Secretary of State Debra Bowen's office released a report slamming Diebold for numerous problems with its voting machines during the 2008 general election. Among the issues identified in the report was one that resulted in the deletion of nearly 200 votes from the official election results for one county in the state. Other problems included one that allowed operators of some e-voting machines from Premier to delete crucial federally mandated audit logs, and a software glitch that generated inaccurate data and time stamps.

Last August, Diebold admitted that a "logic error" in the Global Election Management System software used to manage its Premier voting machines had resulted in the systems dropping hundreds of votes during state primarie elections in Ohio. The company originally blamed the problem on buggy anti-virus software from McAfee Inc.

In other instances, the company found itself in the news over leaks of source code involving its voting machines. Security analysts said the source code could have allowed someone with malicious intent to rig Diebold voting machines. In May 2006, a voting watchdog group published a report warning of numerous backdoors in Diebold's touch-pad voting machines that allowed new software to be installed on the system.

ES&S has also had its share of issues, though they have not been as high-profile as the problems involving Diebold. According to numerous blog posts that track the reliability of e-voting machines, security problems have been identified in systems from ES&S by elections officials in Ohio, Florida and Texas.

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