Diebold settles e-voting lawsuit

Judge's OK would end California's fraud claim

By Erika D. Smith    Akron Beacon    11 November 2004

Diebold Inc. shook loose an expensive albatross Wednesday, agreeing to pay California $2.6 million to end a lawsuit over electronic voting.

If the settlement is approved in court, it would put to rest rounds of finger-pointing that began back in November 2003. It also would let the Green-based company escape a trial. The plaintiffs were seeking as much as $57 million in damages.

``This is just our effort to put these issues behind us so we can move forward,'' Diebold spokesman Michael Jacobsen said.

In the lawsuit, the state of California accused Diebold of making false claims about the security and certification status of its electronic voting machines and tabulation systems. As a result, six counties were misled into buying the machines, the state said.

Diebold denies any wrongdoing and insists its voting machines are secure.

However, $500,000 of the settlement would go toward training poll workers, and Diebold would be required to bolster the security measures on its touch-screen and tabulation machines.

The company, which sells far more ATMs and security products than voting machines, expected these costs and others associated with the case. In early September, Diebold lowered its third-quarter earnings forecast and said it anticipates additional expenses of 1 cent per share in the fourth quarter.

On Wednesday, Diebold shares rose 64 cents, or 1.2 percent, to close at $53.20.

Other than the court's decision, another thing that could affect the settlement is comment from the lawsuit's originators, Bev Harris and Jim March. The e-voting critics are entitled not only to claim part of the settlement, but also to weigh in on whether it should go forward. They will get their chance in a court hearing in the next few weeks, said Tom Dresslar, a spokesman for California Attorney General Bill Lockyer.

Harris, who did not return a call seeking comment Wednesday, said in September that a settlement might not satisfy her. Asked if she would object, the Washington state resident said that would depend on the terms.

``What I want at this point is them out of the industry,'' Harris said of Diebold.

The court will determine how much Harris and March receive from the settlement. They also will be able to ask the court to make Diebold pay their legal costs.

Harris and March filed the whistle-blower lawsuit in 2003 under the ``qui tam'' provision of California's False Claims Act, which is often used to find fraud. Under the law, whistle-blowers Harris and March, in this case can collect 30 percent of the damages for tipping off the government to shoddy contractors. The law allows for damages of triple the amount paid to the contractor.

In this case, Diebold was paid $19 million by California and Alameda County, meaning the parties were seeking as much as $57 million.

Lockyer's office took over the case in September, opting for civil rather than criminal charges against the company. Problems with Diebold equipment in California's primary election were a catalyst.

Diebold supplies more than a dozen California counties with touch-screen and optical-scan voting machines. Californiahas already spent more than $139 million on voting machines from Diebold and three competitors.

There were no major problems in the Nov. 2 elections.