(USA) 3/10 - HIDDEN RAMIFICATIONS OF ...

Author Message   Bev Harris Board Administrator Username: Admin Post Number: 11028 Registered: 12-2004 Best of Black Box?  Votes: 2 (A keeper?) Posted on Tuesday, March 9, 2010 - 11:45 am:        Here's a quick analysis of the possible impact of the USDOJ antitrust decision: The acquisition by ES&S of Diebold's Premier Election Solutions has been (supposedly) nixed by the US Department of Justice on antitrust grounds. However, the DOJ erred by not acting promptly to protect the Premier Elections operation from being gutted by ES&S. The Dept. of Justice claims that the deal flew under the radar so they couldn't stop the pillaging of Premier in time. That's not the case. The records will show that the Dept. of Justice had received -- and acknowledged -- formal complaints in time to put a protective halt on the mass firings of Premier employees. HERE'S WHY THIS ERROR IS SO SIGNIFICANT: The USDOJ failed to act to protect the assets of Diebold's Premier Elections unit, resulting in the problem that they now cannot mandate full divestiture of Premier by ES&S, and instead have ordered ES&S to remove itself from Premier's current locations only partially -- or perhaps, not at all. That's right. If the acquisition were to stand, ES&S would have over 70% market share. But under the current Dept. of Justice decision, ES&S may still end up with over 70% market share. Here's why: Because ES&S gutted Premier and fired over 100 employees, no other entity can swoop in to acquire an intact company. According to my sources inside Diebold, the Diebold corporation has no intention whatsoever of taking its Premier Elections unit back. Diebold Inc. considers the current situation to be ES&S's problem. If another entity were to step in and buy the gutted Premier entity, they would not have enough support staff to service the accounts. We are in the midst of an election year, with primaries coming down the road pell-mell. Counties with the Premier equipment still need to run their elections. Under the USDOJ decision, they can choose to sign with ES&S to take over their election support, or they can opt to wait and sign with an "acquirer" -- an entity that does not yet exist. The expedient action will most likely be to sign with ES&S. THIS LEAVES THE FOLLOWING POSSIBILITIES: a) Most or all current Premier voting systems customers may sign with ES&S to support their Premier equipment, because they have elections coming up. Firm deadlines with no other support available could effectively force counties to sign with ES&S. b) Hart Intercivic or Sequoia might step in to become the "acquirer", and under the USDOJ agreement the "acquirer" can scramble around trying to re-hire the Premier employees that were let go months ago. Hart and Sequoia could use their existing staff to help handle election support pressure, which will be intense. c) One or some of the subcontractors, like LHS Associates (northeast U.S.) or GBS (midwest) could expand into servicing and controlling more states. They may be licking their chops on this. In other words, LHS Associates could say "Hey, Pennsylvania, whether or not any "acquirer" shows up to buy ES&S's divestiture of Premier, we'll support you with your existing equipment." d) Some crony of ES&S, possibly waiting in the wings all along, could step in and may perhaps have already networked with former Premier employees to take over in the event of an antitrust rollback. Since we still don't know who actually owns ES&S, and we won't necessarily know who owns some new "acquirer" entity if it is privately held. Who knows, it could even be the same guys who are quietly involved in ES&S. e) A group of angel investment bankers may jump in and theoretically that could be an opportunity for the citizenry to jump on this to form a kind of public utility. Don't hold your breath on this outcome, which might be cool but would scare the pants off some of the dirtier players in the elections industry. BRC VOTING MACHINE ANTITRUST SITUATION, REVISITED This proposed agreement has similarities to the 1997 deal when ES&S got into antitrust problems after buying a massive voting machine company called Business Records Corp. Under the antitrust order, ES&S was allowed to service existing accounts and Sequoia was allowed to sell and service new accounts. The current USDOJ decision allows ES&S to service existing accounts, but only an "acquirer" can sell new Premier equipment (if anyone even wants it!) If any jurisdiction wants to replace more than 50% of its existing voting system with new Premier stuff, they can't go to ES&S for the new stuff, but have to buy it from the "acquirer" instead. So, it would make sense for Hart or Sequoia or one of the subcontractors like LHS Associates to jump in to grab the cash on new equipment sales. Essentially, this would only rearrange the deck chairs, and the US elections industry would remain overconcentrated. ROLLBACK OF THE NONDISCLOSURE AGREEMENTS One interesting situation: Former Premier employees and the ES&S employees who were involved with supporting the Premier product line recently will be released from their noncompete and nondisclosure agreements. The decision doesn't seem to cap or limit that requirement, from what I can see. So the potential for spilling some more beans exists. HERE IS FULL USDOJ DECISION http://www.floridavoters.org/downloads/DoJ%20docs%20-%202010-03-08.pdf

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