UTC Chairman Says Irresponsible Republican Voting Machine Company an 'Excellent Fit' in Letter Explaining Hostile Offer, Twice Rejected by Diebold...

Election Integrity Advodcates Bristle at 'Disastrous,' 'Surreal' News...

Brad Friedman Byon 3/3/2008, 12:17pm PT

Prices for Diebold stock shares are soaring out of the 7-year basement this morning, where they have been sitting for the past several months since a coordinated insider sell-off by a dozen or so officers on the very same day last August, when the stock had been near its 52-week high at $53.04/share. Within days after the sell-off, the company renamed its humiliated Diebold Elections Division to Premier Election Solutions, and the stock has been falling, some 50% in total, ever since. Until today.

Yesterday, the New York Times reported a take-over attempt of the entire company by defense contractor conglomerate United Technologies Corp. (UTC). The initial $3 billion hostile bid to buy Diebold at $40/share is "a 66 percent premium over Diebold’s Friday closing price of $24.12," according to the Times' report.

As of 2pm ET today, Diebold's share price has soared some 60% to more than $38/share.

Diebold's board had unanimously rejected a similar offer from UTC two years ago, and the company once again rebuffed a private offer in February, requesting that United Technologies "refrain from contacting any of its directors." Over the weekend, UTC went public with its offer, which has both Wall Street and Election Integrity advocates abuzz.

As The BRAD BLOG has covered in detail over the years, Diebold, the 150-year old company and second largest American manufacturer of faulty, hackable, error-prone voting systems, faces myriad financial and legal problems.

It is currently under investigation by the SEC, under investigation by the DoJ, is facing a Securities Fraud Class Action suit, was recently forced to restate earnings to admit that it had overstated its election business in 2007 by some 300% in the wake of report after report showing its voting systems to be failures, leading a number of states to decertify many of their voting machines. Last month the firm announced planned layoffs of 5% of its workforce, some 800 employees, as its share price continued to dive. As well, the company may be facing still more fraud suits and liabilities in the future in the wake of problems and failures with its voting machines found with alarming consistency in state after state.

The UTC offer seems like a difficult one for Diebold's board to justify turning down, at least to shareholders who have lost so much of their investment value in the company over the past six months, even though it has alarmed Election Integrity advocates, who are troubled to see yet another defense contractor encroach on the business of America's public electoral system...

"This transaction creates significant and immediate value for Diebold shareholders with no operational risk, while creating long-term value for U.T.C. shareholders," UTC's chairman and CEO, George David, said in a statement posted to their website on Sunday.

In his letter to Diebold's Board Chairman, John Lauer, released with the UTC announcement, David explained his reasons for announcing the hostile bid to the public.

"Failing an ability to engage in discussions with Diebold’s board and management, we believe it is in your shareholders’ interests to know of this proposal," he wrote.

His statement went on to say, "Diebold represents an excellent fit with UTC, with its strong market position, U.S. footprint, and balance between product and service revenues. In addition, Diebold will benefit from UTC’s international presence and disciplined operating systems."

The "excellent fit" is precisely what has Election Integrity advocates abuzz with concern since the announcement yesterday. Our email inbox is virtually bursting with folks writing in with their various concerns.

According to Wikipedia, UTC, which would effectively take control over 30% to 40% of the nation's privatized public voting systems, received more than $5 billion dollars in military contracts in 2005 alone. Diebold is also a major defense contractor.

Further, according to Wikipedia, UTC, like the company it hopes to take over, is a major sponsor of the Republican party. "During the 2004 election cycle, UTC was the sixth largest defense industry donor to political campaigns," says Wikipedia, "contributing a total of $789,561. 64% of UTC's 2004 contributions went to Republicans."

"This is really interesting, and scary," writes one BRAD BLOG emailer, describing UTC as "a big time defense contractor and war profiteer." He goes on to write that the company "did $22.5 billion dollars in defense contracts between 2002 and 2006, ranking them 7th among all defense contractors just behind KBR [formerly a subsidiary of Halliburton]."

"Do we really want these folks to count our votes?" he asks.

Mark Crispin Miller, the NYU media professor and author of FOOLED AGAIN , which chronicles an alleged Rightwing takeover of America's electoral system, wrote: "Considering the Framers' powerful aversion to the notion of a 'standing army' in the new Republic, and Eisenhower's last speech warning us against the toxic influence of 'the military-industrial complex,' this disastrous bid should [be] forbidden by an Act of Congress."

"It gave me the chills," another emailer wrote after seeing the report in the Times on the "major defense contractor's" bid for Diebold. "This should be banned by law, as should any private ownership of any aspect of public elections. This is becoming surreal," he wrote.

When it comes to corporate irresponsibility, UTC also sounds like an "excellent fit" with Diebold.

Once again, from Wikipedia:

Researchers at the University of Massachusetts Amherst have identified UTC as the 43rd-largest corporate producer of air pollution in the United States, with roughly 430,000 pounds of toxic chemicals released annually into the air...The Environmental Protection Agency has named UTC as a potentially responsible party for at least 23 Superfund toxic waste sites.

With a record like that, it's hard to figure how Diebold could turn their brothers at UTC down. Given that the Otis Elevator Company is another one of the many companies now controlled by UTC, perhaps they'll end up weathering the continuing "ups and downs" of the ongoing struggle against the corporatized privatization of America's voting system a bit easier than Diebold. Even if it's the voters who end up, yet again, getting the "shaft."

In a statement today, explaining the reasons for the Diebold's rejection of the offer, they say "the board believes that now is not the right time --- and that it would not be in the best interests of the corporation or its shareholders --- to pursue discussions with UTC." The release goes on to characterize the purchase attempt as "opportunistic."

CNN reports that financial analysts see it different than Diebold's board does. They quote Deutsche Bank's Nigel Coe as describing "Diebold as a 'fixer upper' that could benefit from United Technologies' track record of significantly improving 'problem-child' businesses."

Rich Smith at the Motley Fools writes excitedly today, "Diebold Lives!" and goes on to surmise "that Diebold thinks it's worth a bit more than what UTC wants to ante up. I'm not so sure it is." He says "UTC is offering an entirely fair price today."

As usual, though, Diebold knows best how to run it's company deepest into the ground at the expense of shareholders and, not incidentally, of American voters.

Phone messages left for comment with several UTC spokespersons have not yet been returned. The BRAD BLOG will, as you may have guessed, continue to follow the story. Unfortunate elevator company puns and all...

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