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An accidental vote winner — and loser

A voter uses one of Diebold's electronic touch screen machines to cast his ballot in the 2006 elections.

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SCOTT JAGOW: The company Diebold will pay its shareholders a nice quarterly dividend today. Diebold is doing well, despite problems with its electronic voting business. Diebold hasn't been able to shake controversy about its voting machines, even though it still dominates the market. Pat Loeb tells us the story.


PAT LOEB: Diebold made its name in reliable security when its bank vaults were all that survived the great Chicago fire.

But Gil Luria, an analyst with Wedbush Morgan, says it's now better known for a small sideline.

GIL LURIA: The voting business is about 5 percent of Diebold's business, but it's been 100 percent of their bad PR over the last few years.

Luria says Diebold ended up in the voting machine business almost by accident. It purchased a Brazilian ATM company that had just gotten a contract to make the machines for Brazil's first electronic election.

What timing! That was right before the Help America Vote Act required states to replace paper ballots. That made electronic voting a multi-billion dollar business.

Diebold had a leg up, but it needed different machines for complicated U.S. elections with thousands of different ballots and procedures. So Diebold rushed new and largely untested, machinery to market.

The biggest concern was that the company forgot its stock-in-trade.

J. ALEX HALDERMAN: Diebold's voting machines have a very poor track record of security.

J. Alex Halderman was on the Princeton team that did a devastating report on how easy it was to hack into Diebold machines.

HALDERMAN: It's possible for someone to create a voting machine virus that would move from machine to machine silently switching votes. Another problem that we found is the keys that are used to lock the Diebold are a very common type of key that's used in hotel mini-bars.

MARK RADKE: Actually they're not insecure. I think we probably get more attention because we're the largest company in the industry.

That's Mark Radke, director of marketing for Diebold. He says the researchers used an out-of-date machine and ignored new security measures.

But the fatal blow to Diebold's reputation was self-inflicted.

In 2003, then-CEO Walden O'Dell wrote a fundraising letter to fellow Republicans, promising to "help Ohio deliver its electoral votes to the President." With that, the company became the Darth Vader of elections.

Mark Radke agrees O'Dell's political activity was a mistake. But he says the company has taken steps to correct it. Most significantly, it ousted O'Dell and the new CEO has imposed an ethics policy that forbids Diebold executives from fundraising.

In Los Angeles, I'm Pat Loeb for Marketplace.

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