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["Alan Crandall" <ipix@xxxxxxxxxxxxx>]

Voting machines face two tests
As voters try new systems, experts call for a paper trail
By William Spain, CBS.MarketWatch.com
Last Update: 9:33 AM ET Nov. 4, 2003

CHICAGO (CBS.MW) -- One year ahead of the presidential election, a drive to
replace aging voting machines with computers has been challenged by
questions about security and reliability.


As some voters cast touch-screen votes in Tuesday's local and state
elections, information-technology experts, activists and even some elected
officials have raised the alarm about devices that gather and store votes in
digital form without a paper version that could be used to verify and
recount results.

Touch-screen machines have grown in popularity as replacements for the punch
cards made infamous in the 2000 Florida election mess. Fueling adoption is a
federal law that sets deadlines for states to update systems and provides
funds to help them do so.

Business has been brisk for the three companies making the electronic voting
machines: Canton, Ohio-based Diebold (DBD: news, chart, profile) and two
privately-held companies, Election Systems & Software of Omaha, Neb., and
Sequoia Systems in Oakland, Calif.

Tens of thousands of the new machines have been used in recent elections,
and more are on order.

Experts who studied the systems say software glitches, vulnerability to
hacking and the possibility of manipulation by company insiders or election
workers are among the major concerns. But the biggest worry is that the
machines provide no hard-copy paper trail, making it hard to detect and
correct those problems if they occur.

David Dill, a professor of computer science at Stanford, likens using a
touch-screen machine to "walking into a polling place and dictating your
votes to a guy behind a curtain," who then puts the ballot in a locked box
without letting the voter check his or her picks.

"There is lack of accountability," he said. "The right solution is to have
an independent way of checking the ballot."

Waiting for a paper trail

The companies say they'll modify the systems to produce a paper trail, and
Dill is one of hundreds of IT professionals who signed a resolution calling
for the deployment of the devices to be halted until that happens. A task
force convened by the California Secretary of State earlier this year
reached the same conclusion, though there was disagreement among the
members.

In addition, Web sites such as "Black Box Voting" have proliferated,
compiling allegations of negligence and fraud - and publishing leaked
company documents about the machines.

Although Diebold is a newcomer to the voting business, as the biggest and
most visible of the trio, it has come in for the most fire. The company,
best known for its automated teller machines, entered the voting business
last year with its purchase of Global Election Systems.

While the unit makes up less than 6 percent of overall sales, Diebold had
33,000 digital voting machines in use in 2002 and expects to have at least
another 11,000 up and running by next November. Voting systems are is one of
the company's biggest growth areas, bringing in $111 million in revenue last
year, a figure that it hopes to grow between 15 percent and 30 percent this
year, according to a recent investor presentation.

Diebold has been accused of being careless with the codes needed to run the
voting machines. Some of those codes have leaked out along with internal
e-mails in which employees question the reliability of the systems. Also
raising hackles: The company's CEO, Walden O'Dell, is a big Republican Party
donor who is on record with his determination to help deliver Ohio to the
GOP next year.

Mark Radke, director of the Diebold Election Systems unit, rejects charges
that the company's systems are flawed or that politics could affect how it
writes software. The company's equipment is certified by election officials
before use, he said, and is subject to rigorous testing before, during and
after the voting process.

"Look at the track record of the Diebold equipment," he said. "The 33,000
voting machines out there [have] proven the reliability and accuracy of our
voting systems."

Something for investors to watch

The controversy certainly has not hurt Diebold stock. Shares of the company
closed at $57.43 Monday -- a 52-week high -- up from a nadir of $33.50 in
March. Even if the machines have problems, an analyst says the impact on
Diebold won't be severe.

"It is absolutely something that investors need to keep within their
peripheral vision," said Matt Summerville of McDonald Investments. "But they
made an extremely modest investment in this space and there is not a lot [of
business] for the company to lose. Voting as a percentage of their total
revenues is still pretty minimal."

What it could do, however, "is make the sales cycle more protracted [and] a
little more challenging to predict."

The market will decide when the machines are updated to add the printed
paper trail, said Aldo Tesi, CEO of ES&S. "We do have a prototype device
designed with that capability in mind. ...We will be there when the industry
needs us to be there."

That day will be soon if one Congressman has anything to do with it. In May,
Rep. Rush Holt (D-N.J.) introduced the Voter Verification Act, which would
require an independently verifiable audit trail for use in recounts and
challenges.

"I don't want to spread unsubstantiated fears, but how do you know" the
machines really work, he said. "If the verification process doesn't belong
to the voter, people will lose confidence in democracy."

He said his legislation is non-partisan and is in no way "a payback for
Florida," but it has nonetheless languished for lack of a sponsor across the
aisle.

"This is about good practice," he added. "Everybody should care about that."

William Spain is a reporter for CBS.MarketWatch.com in Chicago.

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