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Breaking news from AP: California settles suit with Diebold, a suit initiated by Beverly Harris of www.blackboxvoting.org, and activist Jim March:

http://sfgate.com/cgi-bin/article.cgi?f=/news/archive/2004/11/10/financial1831EST0118.DTL

Calif. settles electronic voting suit against Diebold for $2.6M

RACHEL KONRAD, AP Technology Writer
Wednesday, November 10, 2004

(11-10) 15:31 PST SAN FRANCISCO (AP) --

California Attorney General Bill Lockyer announced Wednesday a $2.6 million settlement with Diebold Inc., resolving a lawsuit alleging that the company sold the state and several counties shoddy voting equipment.

Although critics characterized the settlement as a slap on the wrist, Diebold also agreed to pay an undisclosed sum to partially reimburse Alameda, San Diego and other counties for the cost of paper backup ballots, ink and other supplies in last week's election. California's secretary of state banned the use of one type of Diebold machine in May, after problems with the machines disenfranchised an unknown number of voters in the March primary.

Faulty equipment forced at least 6,000 of 316,000 voters in Alameda County, just east of San Francisco, to use backup paper ballots instead of the paperless voting terminals. In San Diego County, a power surge resulted in hundreds of touch-screens that wouldn't start when the polls opened, forcing election officials to turn voters away from the polls.

According to the settlement, the North Canton, Ohio-based company must also upgrade ballot tabulation software that Los Angeles County and others used Nov. 2. Diebold must also strengthen the security of its paperless voting machines and computer servers and promise never to connect voting systems to outside networks.

"There is no more fundamental right in our democracy than the right to vote and have your vote counted," Lockyer said in a statement. "In making false claims about its equipment, Diebold treated that right, and the taxpayers who bought its machines, cavalierly. This settlement holds Diebold accountable and helps ensure the future quality and security of its voting systems."

The tentative settlement could be approved as soon as Dec. 10.

The original lawsuit was filed a year ago by Seattle-based electronic voting critic Bev Harris and Sacramento-based activist Jim March, who characterized the $2.6 million settlement as "peanuts."

March, a whistle blower who filed suit on behalf of California taxpayers, could receive as much as $75,000 because of the settlement. But he said the terms don't require Diebold to overhaul its election servers -- which have had problems in Washington's King County and elsewhere -- to guard them from hackers, software bugs or other failures.

The former computer system administrator was also upset that the state announced the deal so quickly. Several activist groups, computer scientists and federal researchers are analyzing Nov. 2 election data, looking for evidence of vote rigging or unintentional miscounts in hundreds of counties nationwide that used touch-screen terminals. Results are expected by early December.

"This settlement will shut down a major avenue of investigation before evidence starts trickling in," March said. "It's very premature."

A Diebold executive said the settlement would allow the company to spend more money on improving software and avoid "the distraction and cost of prolonged litigation." Diebold earnings plunged 5 cents per share in the third quarter because of the California litigation, which could cost an additional 1 cent per share in the current quarter.

Diebold shares closed Wednesday at $53.20, up 1.22 percent from Tuesday in trading on the New York Stock Exchange.

"We've worked closely with California officials to come to an agreement that allows us to continue to move forward," Diebold senior vice president Thomas W. Swidarski said in a statement. "While we believe Diebold has strong responses to the claims raised in the suit, we are primarily interested in building an effective and trusting relationship with California election officials."