http://www.newsday.com/business/ny-bzelec0227.story

Election.com Sold To Group Tied To Saudi Nationals

By Mark Harrington
Staff Writer

February 27, 2003

Election.com, a struggling Garden City start-up scheduled to provide online absentee ballots for U.S. military personnel in the 2004 federal election, has quietly sold controlling power to an investment group with ties to unnamed Saudi nationals, according to company correspondence.

In a letter sent to a select group of well-heeled Election.com investors Jan. 21, the online voting and voter registration company disclosed that the investment group Osan Ltd. paid $1.2 million to acquire 20 million preferred shares to control 51.6 percent of the voting power.

In a Newsday interview in October, Charles Smith, a representative of Osan who sits on Election.com's board, declined to name the Saudi Arabian investors with a stake in the company, other than to say they were "passive” and part of a larger group that included Americans and Europeans. Smith didn't return phone calls Wednesday.

A federal law enforcement official who follows election issues said he was surprised to hear about the ownership of Election.com, which is one of several contractors working on the online Federal Voting Assistance Program, primarily for overseas military personnel.

Concerns about the ownership stake were first raised following the September 2001 terrorist attacks. Smith at the time accused critics of unfairly focusing on the issue because the terrorists were Saudi.

Several shareholders of the company said they were surprised by the recent buyout and have asked for securities regulators to investigate.

Election.com spokeswoman Amy Parker said the company continues to work on the federal voting project but refused to discuss the Saudi ownership stake, saying, "We are a privately held company and have no comment on questions related to ownership or finances.”

Election.com as of December had a negative net working capital position of $790,000 and said without Osan's investment it "would have been forced to close its doors before New Year's Day,” according to the letter signed by its board of directors.

Glenn Flood, a Defense Department spokesman, said he wasn't aware of the foreign connection to a contractor of the Federal Voting Assistance Program. Asked how the department screens the background of contractors, he said: "We don't look into that [country of origin] part of it. ... It's the process we're interested in, not the company, unless they screw up.” Election.com made headlines in 2000 when it administered Arizona's Democratic primary for the U.S. presidency.

Stressing that an increased Saudi connection isn't necessarily a problem, Penelope Bonsall, director of election administration for the Federal Election Commission in Washington, said tracking issues like Election.com's change of control don't fall under the purview of any federal agency.

Meanwhile, the change in voting power at the company took many of the roughly 200 common shareholders of Election.com by surprise. Two consider their shares worthless and have complained to the New York State attorney general's office and the Securities and Exchange Commission, according to letters shown to Newsday. Neither agency would comment.

It's unclear how those now controlling the company will change it. The online listing of the board of directors has been removed, and Osan in its letter said the change in ownership would give it three of five board seats.