Election.com Sold To Group Tied To Saudi
By Mark Harrington
Staff Writer, Newsday http://www.newsday.com/business/ny-bzelec0227.story
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
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.
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
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
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