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Incoming Senate Ethics Committee chairman Chuck Hagel has now admitted ownership in the voting machine company that made and maintained all of the voting machines that were used in the Nebraska election that gave him his victory. As he has entered office, the director of the Senate Ethics Committee has resigned. "Hagel's ethics filings pose disclosure issue" according to "The Hill," 1/29/2003

On October, 10, 2002 Bev Harris, author of the upcoming "Black Box Voting said: Ballot-Tampering" in the 21st Century, revealed that Republican Senator Chuck Hagel has ties to the largest voting machine company, Election Systems &Software (ES&S). She reported that he was an owner, Chairman and CEO of Election Systems &Software (called American Information Systems until name change filed in 1997). ES&S was the ONLY company whose machines counted Hagel's votes when he ran for election in 1996 and 2002. The Hill, a Washington D.C. newspaper that covers the U.S. national political scene, confirmed her findings today and uncovered more details.

Hagel's campaign finance director, Michael McCarthy, now admits that Senator Hagel still owns a beneficial interest in the ES&S parent company, the McCarthy Group. ES&S counts approximately 60 percent of all votes cast in the United States. According to the Omaha World-Herald which is also a beneficial owner of ES&S, Hagel was CEO of American Information Systems, now called ES&S, from November 1993 through June 2, 1994. He was Chairman from July 1992 until March 15 1995. He was required to disclose these positions on his FEC Personal Disclosure statements, but he did not.

Hagel still owns up to $5 million in the ES&S parent company, McCarthy Group. But Hagel's office, when interviewed by Channel 8 News in Lincoln, Nebraska for the evening news on October 22, 2002, said he had sold his shares before he was elected. His office issued a fact sheet claiming that he had made full disclosure.

Last week, Hagel's campaign finance director, Michael McCarthy (currently an owner and a director of ES&S) admitted to Alexander Bolton of The Hill that Hagel is still an owner of ES&S parent company, the McCarthy Group, and said that Hagel also had owned shares in AIS Investors Inc., a group of investors in ES&S itself. Yet Hagel did not disclose owning or selling shares in AIS Investors Inc. on his FEC documents, a required disclosure, nor did he disclose that ES&S is an underlying asset of McCarthy Group, in which he lists an investment of up to $5 million in 1996, 1997, 1998, 1999, 2000, and 2001.

SENATE ETHICS COMMITTEE CHIEF COUNSEL / DIRECTOR RESIGNS

Harris spoke with Victor Baird of the Senate Ethics Committee office January 9, and asked him who is responsible for ensuring that FEC disclosures are complete. She asked whether anyone had followed up to see why Senator Hagel did not list his positions with the voting machine company, and she asked about his characterization of the McCarthy Group as an "excepted investment fund" and his failure to disclose that it owned ES&S. Baird was silent, and then said "If you want to look into this, you'll need to come in and get hold of the documents."

Unfortunately, according to Alexander Bolton, a reporter at The Hill, when he went to the Senate Public Documents Room to retrieve originals of Hagel's 1995 and 1996 documents he was told they were destroyed. "They said anything over five years old is destroyed by law, and they pulled out the law," says Bolton. However, when he spoke with Hagel's staff, they said had obtained the documents from Senate Ethics Committee files. Copies of the documents are available at OpenSecrets.org/pfds -- a repository for FEC disclosures.

In 1997, Baird asked Hagel to clarify the nature of his investment in McCarthy Group on his 1996 FEC statement. Hagel had written "none" next to "type of investment" for McCarthy Group. In response to Baird's letter, Hagel filed an amendment characterizing the McCarthy Group as an "Excepted Investment Fund," a designation for widely held, publicly available mutual funds. He never disclosed his indirect ownership of ES&S at all, but apparently no one questioned this omission, nor his curious characterization of the McCarthy Group, a privately held company that is not listed on any public brokerage.

Baird told Bolton that the McCarthy Group did not seem to qualify as an "excepted investment fund." He reportedly met with Hagel's staff on Friday, January 25 and Monday, January 27, 2002. Then, also on Monday, he stepped down. On Monday afternoon Baird's replacement, Robert Walker, provided a new, looser interpretation of "publicly available" (though experts disagree, saying that a privately held company like the McCarthy Group cannot be called "publicly available" in order to avoid disclosing underlying assets.)

Hagel's challenger in the Nebraska Senate race, Charlie Matulka, wrote to Baird in October 2002 to request an investigation into Hagel's ownership in and nondisclosure of ES&S. Baird replied, "Your complaint lacks merit and no further action is appropriate with respect to the matter, which is hereby dismissed," in a letter dated November 18, 2002.

SENATE CANDIDATE QUESTIONS HAGEL'S CONFLICT OF INTEREST

Charlie Matulka, the candidate who ran against Chuck Hagel in Nebraska's U.S. Senate race in November 2002, also wrote to the Nebraska Secretary of State and to state elections officials in October 2002. He pointed out that his opponent had ties to ES&S, and asked them to look into the conflict of interest, but received no answer.

Several Nebraska ES&S machines malfunctioned on Election Day, and Matulka filed a request for a hand count on December 10, 2002. It was denied, because Nebraska has a new law that prohibits election workers from looking at the paper ballots, even in a recount. The only machines permitted to count votes in Nebraska are ES&S.

CAN VOTING MACHINES BE TAMPERED WITH THROUGH ACCESS TO PROGRAMMERS?

The Washington Post characterized Hagel's election in 1996 as the biggest upset of the election season. At the time, voters did not know that he owned and had held key positions with the company that counted his votes. But is it improper for a candidate to have ties with voting machine companies?

Harris examines the issue of tampering security in the upcoming "Black Box Voting" book. One of her sources, Dan Spillane, a former Senior Test Engineer for a voting machine company, believes that the computerized voting machine industry is riddled with system integrity flaws.

"The problems are systemic," Spillane says, and he contends that the certification process itself cannot be trusted. Despite industry characterizations that the code is checked line by line, this does not appear to be the case. Spillane points to frequent, critical errors that occur in actual elections and identifies omissions in the testing procedures themselves. His own experience as a voting machine test engineer led him to address his concerns about integrity flaws with the owner of the voting machine company, who then suggested that he resign. He did not, but shortly before a General Accounting Office audit, Spillane was fired, and so was his supervisor, who had also expressed concerns about system integrity.

Election Technology Labs quit certifying voting machines in 1992. Its founder, Arnold B. Urken, says that the manufacturers, specifically ES&S (then AIS), refused to allow the detailed examination of code needed to ensure system integrity. Wyle Labs refused to test voting machine software after 1996; testing then went to Nichols Research, and then passed to PSINet, and then to Metamor, and most recently to Ciber.

But even if certification becomes adequate, nothing guarantees that machines used in actual elections use the same programming code that was certified. Machines with adjusted code can be loaded onto delivery trucks with inside involvement of only ONE person. To make matters worse, "program patches" and substitutions are made in vote-counting programs without examination of the new codes, and manufacturers often e-mail technicians uncertified program "updates" which they install on machines immediately before and on Election Day.

Both Sequoia touch screen machines and Diebold Accuvote machines appear to have "back door" mechanisms which may allow reprogramming after votes have been cast. Diebold's Accuvote machines were developed by a company founded by Bob Urosevich, a CEO of Diebold Election Systems and Global Election Systems, which Diebold acquired. Together with his brother Todd, he also founded ES&S, where Todd Urosevich still works. ES&S and Sequoia use identical software and hardware in their optical scan machines. All three companies' machines have miscounted recent elections, sometimes electing the wrong candidates in races that were not particularly close.

____________________________________________________ ____ Data from the Institute for Public Accuracy:

Bev Harris, "Black Box Voting," Blackboxvoting.com The Hill Article: thehill.com