2004-06-28 21:49:00
Embassy Caracas
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C O N F I D E N T I A L CARACAS 002108 



E.O. 12958: DECL: 06/26/2014


Classified By: Mark Wells, A/PolCouns, for Reasons 1.4(b) and (d).


C O N F I D E N T I A L CARACAS 002108



E.O. 12958: DECL: 06/26/2014


Classified By: Mark Wells, A/PolCouns, for Reasons 1.4(b) and (d).


1. (C) Venezuela's new automated voting system will make its
premiere in the August 15 recall referendum against President
Hugo Chavez. The consortium behind the untested system, led
by the U.S. company Smartmatic, has yet to finalize its
contracts with the National Electoral Council (CNE). The
consortium has imported 16,000 of the 19,200 touch-screen
machines that will be deployed to voting centers, and is
installing the dedicated network throughout Venezuela to
connect them. Critics have attacked nearly every aspect of
the system including the reliability of the machines, the
vulnerabilities to "backdoor" tampering, and the expedited
manner in which the CNE granted the concession to Smartmatic.
Consortium reps maintain that the system is highly
auditable, dependable, and will have been fully tested before
August 15. But as this is Smartmatic's first venture into
electoral technology, we cannot rule out significant problems
during the referendum due to unforeseen technical or
organizational problems. End summary.

The Smartmatic-led Consortium

2. (C) The National Electoral Council (CNE) on February 16
awarded the concession for a new automated voting system to
the SBC Consortium (see ref). The Consortium is led by
Smartmatic, a Delaware-registered firm founded by Venezuelans
with offices in Boca Raton, Florida. The firm maintains a
research and development office in Caracas and has offices in
Mexico. Smartmatic's owners are Antonio Mugica, Alfredo
Anzola, and Roger Pinate, young Venezuelan computer engineers
who went to the U.S. several years ago to make it in
business. There are diverse rumors over the true identity of
Smartmatic's investors; among them are Caracas daily El
Universal, owners of Caracas' renowned Tamanaco Hotel, and
even Vice President Jose Vicente Rangel. Jorge Tirado, an
electoral expert working with Smartmatic, told poloff June 23
that Mugica and Anzola come from upper class anti-Chavez

families -- Anzola's father is a member of the Coordinadora
Democratica -- but the two engineers have kept quiet about
their politics.

3. (C) Tirado said Smartmatic is responsible for providing
the networking technology (i.e., Smartmatic's high-speed,
encrypted network platform),electoral software, totalization
services, and 19,200 voting machines and the programming and
warehousing thereof. About 16,000 of the machines have been
imported from Italian manufacturer Olivetti. Tirado said
Smartmatic also purchased 1,000 backup machines and several
hundred display models for a public education campaign. As
Smartmatic has no previous electoral experience, the company
formed a joint venture with Tirado's Caribbean Government
Consultants (CGC),of Puerto Rico, to assemble the team that
will operate the system. CGC will total the votes on
election day and deliver the results to CNE Director Jorge
Rodriguez, said Tirado.

4. (C) Venezuela's privatized telephone company, CANTV
(28-percent owned by Verizon),will provide site support and
transmission of data to the CNE. CANTV General Manager for
Businesses and Institutions Ramon Ramirez told poloff June 23
they have hired 8,000 on-site representatives to connect the
machines and attend to basic maintenance problems (paper
jams, power supply, etc.). CANTV reps will also be present
at smaller centers that will use manual ballots (covering
five percent of the electorate) and transmit the data by
cellular telephone or satellite. An additional 1,000
technicians will be on call throughout Venezuela to handle
other problems, such as removing a defective unit and

transferring voting data to the replacement.

5. (C) The final consortium member, Bizta, is a small
Venezuelan software company run by a Venezuelan software
engineer. Smartmatic's owners, according to Tirado, were
Bizta's principal investors. As reported by the Miami
Herald, Bizta had received a $200,000 investment from a
Venezuelan venture capital fund last year and named a GOV
science ministry official to Bizta's board. Tirado described
these as one-year loans, carried out in two $100,000
tranches. The final tranche was reimbursed, said Tirado
around the time the Miami Herald story broke. Bizta's role
in the Consortium, said Ramirez, is to adapt Smartmatic's
software and machines to Venezuela's electoral regulations.
For the referendum, Ramirez said, this amounts to designing
the touch screen image that will be displayed to voters. For
the more complex regional elections, Bizta will oversee the
application of formulas for figuring the proportional
representation of municipal councils.

6. (C) Ramirez said the CNE held a private bidding process
due to time constraints, which meant the CNE invited specific
companies to present bids. After winning the bid, Smartmatic
signed a $63 million contract (vie a GOV letter of credit)
with the CNE to buy the voting machines and other computer
equipment. Two service contracts -- about $24 million for
the referendum and $28 million for the regional elections --
have not been signed. Ramirez attributed the delays to
budget shortfalls at the CNE, which by law cannot sign a
contract unless the obligated funds are in its accounts.
Ramirez said the CNE Director Rodriguez's recent purchase of
fingerprint readers for the election (see para 11) caused the
budget shortfall. Of the approximately $52 million in
services, Tirado said Smartmatic will receive 51 percent,
CANTV 47 percent, and Bizta 2 percent.

How It Works

7. (C) The Smartmatic machines are re-engineered lottery
machines with a six-inch touch screen, a built-in printer,
and a network connection. Machines are pre-programmed to
accept a specific number of votes corresponding to its
assigned electoral table. Tirado said the maximum number of
votes one machine can accept is 600 -- hence, a voting center
with 1,500 votes will be assigned three machines, two with
600 votes each, one with 300. Voters will read the
referendum question, press "yes" or "no" boxes on the screen,
and lock in their votes. The machine prints a receipt that
confirms the vote. The receipt is deposited in an electoral
urn. The Smartmatic system makes five electronic and two
paper records of each vote. At the end of the day, the
machine prints a tally sheet of the votes (acta) to be signed
by the poll workers. The workers then transmit the results
to the CNE via CANTV regional data centers.

8. (C) The CNE continues to debate the referendum procedures,
though CANTV's Ramirez said the system is designed to be
"highly auditable," in its software, hardware, and paper
trail. It remains unresolved, therefore, whether the poll
workers will tally the paper receipts and match them against
the computerized results, known as a "hot audit."
Representatives of the Coordinadora Democratica have told us
they will insist on the "hot audit," though CNE Director
Rodriguez has suggested publicly that this extra step could
delay the certification of results. Tirado said the "hot
audit" is not necessary and would probably cause more
problems than it solves. Tirado said the CNE may authorize
an expanded acta that lists every vote cast on the machine.
Tirado said the CNE does not plan to give actas to
international observers, though the system could be
programmed to do so (party representatives will get a copy).
Tirado said if everything goes smoothly with the data
transmission, his team would have preliminary results for the
CNE by midnight on election day.

Critics Attack the System

9. (C) Electoral experts, some of them linked to Smartmatic's
competitors, raised multiple questions about the system.
Generally, there is doubt whether re-engineered lottery
machines, never before used for an electoral event, can do
the job, such as whether the touch-screens will be properly
calibrated or the printers will function smoothly. There are
also doubts as to the electronic security of the machines and
data network. Since the votes are stored electronically,
critics say, manipulation is possible no matter how
sophisticated the machines. (Tirado said a team of 20
computer programmers -- 10 from the GOV and 10 from the
opposition -- are currently testing the machines to ensure
their reliability on this and other points.) Software codes,
to which the CNE will have complete access, can also be
changed, critics charge. Ramirez commented that some Chavez
supporters have alleged the USG will "use its satellites" to
manipulate the referendum results.

Where's The Fraud?

10. (C) Consortium reps defended the security of their
system. Ramirez pointed out that the 19,200 machines will be
sending their data on election night in short bursts of no
more than two minutes, making widespread tampering nearly
impossible. Sumate representative Roberto Abdul told poloff
June 23 he is not worried about the machines, but rather the
computer server to which the machines report. Tirado said
his team -- not the CNE informatics department -- would total
the results and give them to the CNE. Abdul said Smartmatic
can give whatever results they want to the CNE, but he did
not rule out that the CNE could still change them. Tirado
discounted the possibility, saying it would be difficult for
the CNE cover up documented results. Asked whether he was
prepared if the CNE decided to falsify the results, Tirado
hinted that he had prepared a "contingency" plan to preserve
the true results. Tirado said that he has consulted on more
than 60 elections worldwide under shadier conditions; he
asserted it would be a clean election.

Fingerprints A No-Go

11. (C) Fraud aside, there is still a possibility that some
unforeseen operational glitch crashes the system. The
Consortium plans to stage a simulation of the system on July

18. Tirado said he is confident the system will work, but
said there are two backup plans if there are interruptions,
one of which is a manual vote. Ramirez said the CNE's
insistence on using fingerprint readers to prevent multiple
voting will jeopardize the system's success. Ramirez said
the CNE plans to purchase 12,000 to 16,000 readers, fewer
than the number of voting machines. The readers will scan
the thumb and index finger prints from every voter, send the
data to the CNE, where it will be checked against the prints
of everyone who has already voted. Ramirez said the
fingerprint readers have a 1 in 120 error rate, which could
result in thousands of Venezuelans being denied the right to
vote. Tirado said the plan is unworkable and doubted the CNE
could get it deployed before the referendum.


12. (C) The touch-screen system is a fait accompli The
opposition has largely accepted it, and is now focused on
imposing enough controls on the system. The Consortium reps
make good arguments to rebuff the criticisms, many of the
which are not systemic, generalized issues. A system
collapse cannot be ruled out completely, however, due to lack

of experience. Fraud and manipulation are still possible,
though it seems to be more likely at level of the CNE board
rather than among the technicians. All of this makes it more
imperative than ever that the Carter Center, the OAS, and
possibly the EU bring in as part of their observation team
experts in automated voting systems and information
technology. The sooner they arrive, the better they will be
able to prevent fraud through manipulation of the Smartmatic