Desperate to Stop the Deal, Sequoia's Owners Frantically Seek Funding, Legal Options, All of Which Have so Far Failed Enough to Lead the Judge Working on the Case to Regard One Such Legal Argument as a 'Conspiracy Theory'
Merger of Two Companies Would Likely Create New E-Voting Powerhouse, Face Federal Scrutiny, Come as Surprise to Sequoia's Current Clients...
-- Brad Friedman
As if Sequoia Voting Systems doesn't have enough trouble already, the company now needs some $2 million dollars in cash...quickly. Without it, it is likely to be subsumed by one of its nearest competitors, Hart InterCivic of Austin, TX, as soon as next Tuesday, The BRAD BLOG has learned.
In what could well be a major shift on the American election industry landscape --- and certainly on elections themselves in dozens of states across the country --- voting machine company Hart InterCivic informed the current owners of the beleaguered Sequoia of their intention to acquire ownership of the company in a move which could take effect as early as next week.
The attempted hostile takeover --- which, we've learned, has been quietly in the works behind the scenes since mid-February --- has set off a building panic among the senior management and owners at Sequoia, whose money woes had already led them to schedule a shut-down of their Oakland headquarters. That shop is to close within a matter of months, as the operations for the company are to be consolidated at its Denver offices.
The takeover by Hart is made possible in the wake of a deal made by Sequoia's current owners, SVS Holdings, Inc., with its former owners, the off-shore consortium Smartmatic. Smartmatic was forced to give up control of the company after the media and Congress noticed in 2006 that the company had ties to Venezuela's Hugo Chavez. The officers and owners of SVS are comprised largely of previous Sequoia officials who took over the company after Smartmatic's failed attempt to find an outside buyer in 2006. The deal resulted in an agreement between SVS and Smartmatic for the latter to hold a $2 million note from the purchase. Smartmatic now appears ready to sell that note to Hart as part of a $16 million dollar deal which SVS has a contractual right to match within a 60-day period, ending on April 15th.
Sequoia is believed by election experts to be this country's third largest voting machine company, followed by Hart. The combined operation, should the takeover be completed, could well create a new powerhouse in the industry, displacing #2 Diebold/Premier, and coming up just behind the country's currently largest election vendor, ES&S.
Court documents obtained by The BRAD BLOG reveal that Hart notified SVS of its intention to purchase the $2 million note held by Smartmatic on February 15th, giving the group of owners and share holders of SVS --- including CEO and President Jack Blaine, and VPs Michelle Shafer and Edwin Smith (whose names BRAD BLOG readers may recognize) --- just 60 days to match the offer Hart had given to Smartmatic. As the deadline nears, Due Dilligence processes have begun, and are near the final phases of completion at Sequoia...whether company management likes it or not.
Hart's move has sent Sequoia/SVS executives into a legal and financial tizzy and --- perhaps taking a page from Hillary Clinton's campaign book --- the company seems to be throwing the legal kitchen sink at both Hart and Smartmatic in an attempt to nullify Hart's offer. Court documents reveal arguments that Hart's is not a "bona fide" offer that SVS is legally required to match. So far, however, those legal maneuvers, reflected by a dizzying array of motions and cross-motions, suits and counter-suits --- completely unreported by anyone in the media until now --- have all been summarily and soundly rejected by the Delaware magistrate adjudicating the matter.
Every legal effort by Sequoia and SVS to dispatch with the hostile takeover attempt has failed miserably so far, leading Vice Chancellor Stephen P. Lamb of the Court of Chancery in Delaware to even describe one such legal theory of SVS' as...(big irony alert!)...a "conspiracy theory"!
But while Sequoia faces a plethora of legal liabilities concerning their oft-failed voting systems, Hart InterCivic faces its own share of challenges with a pending --- and damning --- federal fraud/qui tam suit against the company, as unsealed late last month. Moreover, Hart's acquisition plan could face scrutiny from members of Congress and Treasury Department officials, as well as states across the country who thought they had turned over control of their elections to Sequoia, only to soon learn there will be a new owner, not of their choosing, of the secret software and devices which determine the results of their public elections.
While litigation over claims of fraud and failure in both company's voting systems await, so does at least one major prize to the victor of this grudge match: New York state's soon-to-be-completed $100 million deal with Sequoia...or maybe now with Hart...or...whoever...
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