Verified Voting Blog: Monopoly, ES&S, and Nassau County, Part 2

In last week’s post, I reported on the surprise decision of New York State’s Nassau County to dump it’s 450 Dominion ImageCast voting machines after an intense effort and behind the scenes deal making by ES&S. As the purchasing proposal shows, ES&S spared no expense to convince this large county to dump the small upstart competitor who had won the contract, offering perks, discounts, and a highly unusual arrangement to resell Nassau’s current ImageCasts and split the profits with the county. But the real surprise here, and surely one that will be of interest in the rumored upcoming DOJ investigation into the ES&S/Diebold merger, is that ES&S is actually paying more for Nassau’s used ImageCasts than the county paid for them new! According to the contract pricing posted by New York’s Office of General Services, Nassau paid $11,097.50 per ImageCast (assuming they received the 3.5% discount).

According to the ES&S purchase proposal, here’s what ES&S is paying Nassau for the used machines:

• Trade-in Allowance for ES&S Purchase of 450 ImageCast Units is $4,692,012.50, or $10,426.69 per machine.

• An additional $500,000 immediate credit against sale of the used machines – $1,111.11 per machine.

Add the two together and we see that ES&S is paying Nassau County $11,537.80 per machine. That’s $440.30 more for a used machine than Nassau paid for them brand new! [Note – if Nassau did not receive the state 3.5% pre-payment discount, the original price per machine was $11,500,in which case ES&S is still paying$40 more for the used machines than the original purchase cost.]

And this is before any profits from sales of the used machines. Nassau stands to make even more money on the trade-in than they are now as the used machines are sold off. I have no idea what ES&S intends to sell the used ImageCasts for, but for purposes of illustration let’s assume a bargain basement price of $6,000 (remember, by selling ImageCasts to New York counties, ES&S further erodes Dominion’s sales, so it makes sense for them to offer the machines at a deep discount). Selling all of Nassau’s 450 ImageCasts would yield $2.7 million dollars, of which Nassau gets half, minus the $500,000 already received up front. So after the sale, Nassau nets another $850,000 in cash, or $1,888.89 per Image Cast. Add that to the per machine total calculated above, and we find that ES&S is effectively paying Nassau County $13,426.69 per ImageCast – $2,329.19 more per used machine than Nassau paid for them new!

Like I said last week, a pretty sweet deal for Nassau County, with lots of cash and incentives provided by ES&S to dump the ImageCasts systems that Nassau poll workers have been training to use for two years. Now, I’m neither a lawyer or an economist, so I can’t tell you what variant on monopolistic practices this is. Is it predatory pricing? Price discrimination? All I know is that when a big company uses their financial muscle to buy up the competition’s systems at more than their original cost, and then seeks to dump them on the market below the standard price, something rotten is going on. And that cannot bode well for election officials and voters around the United States.

One response to “Monopoly, ES&S, and Nassau County, Part 2”

  1. Nathanael says:

    The monopolistic practice here is technically known as “bribery”. That’s the economist’s term, I believe.