The US is investigating Smartmatic over allegations of bribery in the Philippines

The U.S. Department of Justice is investigating whether the voting machine company Smartmatic engaged in corrupt business practices in the Philippines.

The investigation does not concern the 2020 U.S. election and is not looking at whether any votes were changed, according to a company lawyer and two other people familiar with the Justice Department inquiry. But it adds an unexpected turn to one of the highest-stakes legal actions to come out of Donald Trump’s failed effort to stay in power, Smartmatic’s $2.7 billion lawsuit against Fox News over the unfounded election conspiracy theories that spread on the network.

Federal investigators are conducting an intensifying inquiry, which began in 2019 under President Trump, into whether Smartmatic violated the Foreign Corrupt Practices Act, according to the two sources and a document connected to the case reviewed by Semafor. That law bars U.S. citizens and companies from paying bribes to foreign officials.

A lawyer for Smartmatic, J. Erik Connolly, confirmed the inquiry and stressed the limits of its scope.

“Companies working in the election industry always face scrutiny and inquiries,” he said in an email. “Smartmatic has cooperated with the authorities since learning about this inquiry and will continue to do so. It is important to note that it has nothing to do with election security or integrity. We have been informed that it is on business in Asia almost a decade ago by one of our subsidiaries there.”

The U.S. federal investigators are focused on how Smartmatic won a contract to administer the Philippines elections in 2016. The subjects of the investigation include a payment of hundreds of thousands of dollars, which investigators believe could violate the Foreign Corrupt Practices Act.

The investigation, which is focused both on specific employees and the company itself, has been underway for at least two years, the sources said. The Department of Justice also searched at least one Smartmatic employee’s house this summer, one person familiar with the investigation said.

A spokesman for the DOJ’s criminal division, Joshua Stueve, declined to comment on the investigation.

The Department of Justice is not investigating claims that Smartmatic rigged election results in the Philippines, much less in the U.S. In fact, Smartmatic,which was founded in Florida but works almost entirely in other countries, had no meaningful involvement with the 2020 U.S. election, in which its machines were only used in Los Angeles County.

The current investigation centers on allegations that emerged after the 2016 election in the Philippines, in which Ferdinand “Bongbong” Marcos Jr. — who is now the country’s president — claimed he had been robbed of the vice presidency. He blamed both Smartmatic and the country’s Commission on Elections (known as Comelec) for the outcome. Last year, the country’s Supreme Court unanimously dismissed the claims of a stolen election.

But the allegations of financial malfeasance proved more damaging. In 2017, the estranged wife of the chairman of the country’s election commission claimed that the chairman, Andrew Bautista, had received a “commission” from a law firm that also served as Smartmatic’s legal counsel, CNN Philippines reported.

In a telephone interview, Bautista told Semafor that he did receive a “referral fee” from the law firm representing Smartmatic, but that it was before he joined government and had “nothing to do with Smartmatic.”

Bautista noted that Smartmatic had also been awarded a contract for the 2010 and 2013 elections. “Any implication that I was ‘bribed’ to secure the contract is untrue because a) Smartmatic had been working with Comelec years before I was appointed; b) Smartmatic was already the chosen provider for the 2016 elections when I joined and c) Smartmatic continued to be Comelec’s technology partner for the 2019 and 2022 elections,” Bautista wrote. He resigned in October 2017, and reportedly relocated to the United States amid an investigation of his finances.

Bautista, who said he had left the Philippines but declined to give his location, citing safety concerns, declined to say whether he’d been contacted by U.S. investigators.

“If they did, that would be a confidential proceeding that I would not be able to disclose to you,” he said.

It’s unclear how closely, if at all, the specific public allegations regarding Bautista are connected to the current U.S. investigation of Smartmatic.

The Fox News Lawsuit

The fact that Smartmatic had no involvement in American swing states didn’t stop allies of former President Donald Trump from spreading false theories about Smartmatic’s role in the election. Smartmatic responded by filing a $2.7 billion lawsuit against Fox News. The company alleges that outlandish theories spread on Fox and other pro-Trump outlets did lasting damage to its global reputation, and cost it contracts around the world. (Fox denies it did anything wrong.)

But the federal investigation of Smartmatic could take pressure off Fox, as defamation lawsuits typically focus on reputational damages, and charges under the Foreign Corrupt Practices Act could also do deep damage to Smartmatic’s reputation. “This inquiry is not relevant to the damages that Smartmatic would claim in the defamation litigation,” Connolly said.

Smartmatic became the target of populist right-wing figures in the Philippines and the United States after they lost elections.

But Trump has, coincidentally, also been an outspoken critic of the Foreign Corrupt Practices Act, which can carry heavy penalties for companies and executives. In 2020 Goldman Sachs and its Malaysian subsidiary paid a record $2.9 billion in fines to resolve FCPA charges.

Before being elected president, Trump described the act as a “horrible law” that prevents U.S. businesses from competing on a level playing field in markets in which bribery is routine. “The world is laughing at us,” he said.

That may not provide much comfort to Smartmatic. Though the investigation began under the Trump Justice Department, it has deepened under the Biden Administration.

• “The Earth is round. Two plus two equals four. Joe Biden and Kamala Harris won the 2020 election for president and vice president of the United States.” That’s the opening of Smartmatic’s lawsuit against Fox, and the subject of an episode of The Daily in 2021, in which the company’s CEO and lawyer describe the damage they say Fox’s claims did to their company.
• The allegations of corruption in Smartmatic’s contract bled quickly into claims that the election wasn’t fair, and Marcos made the most of them. “The Marcos network aimed to sow distrust in the country’s electoral and democratic processes,” Rappler concluded in an analysis of the country’s Facebook-centric politics.