US Elections Must Be Independent

Lessons in Public Trust from the Administrative State

Public trust is a required element of a republican form of government. Electing representatives to be our voice in government only works if there is trust. This isn’t a new concept.

False allegations of voter suppression and voter intimidation, coercion, and threats for the past two and a half years forced me to confront my speech, actions and, importantly, intentions since November 3, 2020. Preparing to defend myself in Federal Court meant examining the past three plus years with a critical eye.

The Plaintiffs in my case – three reputable civil rights organizations – made many assertions about my intentions, all tying back to “The Big Lie,” and the idea that I was so enamored with President Trump that I ignored the safety and security of Colorado’s gold standard elections. They also alleged that I intended to harm voters.

This was highly offensive from the outset, but it required that I spend months examining my intentions and preparing to persuasively articulate them in court. That meant reviewing all the evidence, including all my prior statements – of which there are many.

This was a painful process at times, but it helped me realize that my intentions haven’t changed since November 2020. And my intentions in 2020 were informed by years of training in the importance of Public Trust.

What is Independence?

I spent my formative professional years in the SEC audit world. I am not and was never an auditor, but from October 2003 to March 2017, I was an employee of a Big Four SEC audit firm. I worked internally on communications and change programs, and later worked for the Chief Operating Officer of the firm’s consulting vertical.

My lack of involvement in actual SEC audits did not impact the government requirement that I maintain independence. This was a requirement for everyone that worked there. Public trust demands that the institution – the audit firm – be above reproach because of their immense power over capital markets.

Auditor Independence is foundational for public trust in capitol markets.

The required training for independence for SEC audit firms covers all aspects of financial transactions and potential avenues for fraud, but because Big Four auditors conduct the audits of global businesses, the training explores auditor independence in countries that are considered by the US State Department to have problems with corruption.

This part of the training, covering bribery, anti-trust, money-laundering and other corruption-related crimes, was complicated and lengthy, and culminated in an exam. Its purpose was to ensure that the people charged with safeguarding the public trust in capital markets will guard against corruption — and that they can be held accountable if they don’t. Once you’ve attested to your independence, “I didn’t know,” can never be a reason for violating it.

Every single year that I was an employee, I had to be trained on these concepts, take the exam, pass the exam as a condition of my employment, and sign an attestation that I personally, as an employee of an audit firm, would not violate independence – in fact or appearance.

SEC auditors are governed by the Public Company Accounting Oversight Board (PCAOB), and the elements and principles of independence are outlined in the regulator’s “Auditing Standards.” Consider just a few to understand the importance of independence to public trust in capital markets:

• AS1005.01: “In all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditor or auditors.”

• AS1005.02: “…must be without bias with respect to the client since otherwise he would lack that impartiality necessary for the dependability of his findings…”

• AS1005.03: “It is of utmost importance to the profession that the general public maintain confidence in the independence of independent auditors. Public confidence would be impaired by evidence that independence was actually lacking, and it might also be impaired by the existence of circumstances which reasonable people might believe likely to influence independence.”

That last one is a doozy for our discussion about elections. It’s not just conflicts of interest; the perception of conflicts of interest can irreparably harm public trust.

After 15 years of being required to comply with Independence requirements, the concepts of what constitutes a proper relationship – and what does not – are ingrained.

While the history and academic analysis of public audit scandals are vast and complex, the three most common and consistent threats to independent audits and auditors are simple for anyone to understand. These are:

• Familiarity

• Self-Interest

• Self-Review

When you hear about a public company lying about their financials or defrauding their shareholders, one or more (often all) of these elements are present.

Didn’t the “Big Four” Used to Be the “Big Five”?

Consider the infamous case of Enron and Arthur Andersen.

Enron was an energy and commodities company headquartered in Houston, Texas. In 2001, they filed for bankruptcy after whistleblowers and investigative journalists revealed that executives were artificially inflating the company’s revenues and concealing losses from investors.

Enron’s audit firm, Arthur Andersen, was responsible for reviewing and attesting to the company's financial statements – providing assurance that the company’s shareholders and the broader capital markets could trust Enron’s financial statements; that they were true and accurate.

Instead, Arthur Andersen helped Enron conceal its financial problems, and even advised on the use of complex accounting techniques to hide their massive debts and inflated profits.

Familiarity was a foundational element of the Enron scandal. Arthur Andersen had been Enron's auditor since the beginning of the company in 1985.

This longstanding relationship was cozy, as evidenced by the revolving door between the company and the firm. For example, several key Enron executives, including Chief Accounting Officer Richard Causey, previously worked for Andersen. Causey was indicted on charges of securities fraud in 2004, pleaded guilty in 2005, and was released from prison in 2011 after serving a little over five years.

Self-interest also played a role. Enron was one of Andersen's largest and most lucrative clients. In 2000, Andersen earned $52 million in fees from the company.

Losing Enron would have been a substantial financial loss for Andersen, which ostensibly influenced the firm's decision to prioritize its own financial interests over their professional and ethical obligations to Enron’s shareholders and the public. Further, Andersen was a "Big Five" accounting firm, and that status was important. From appearances — and court records — the firm prioritized client satisfaction over rigorous auditing practices; sacrificing public trust to keep a key client happy and preserve the firm’s global brand and status.

Another aspect of Andersen’s self-interest was complicity. Helping Enron hide losses or inflate profits just one time made Anderson complicit, and that complicity likely incentivized the auditors to continue covering the crimes.

In other words, Andersen may have conducted a proper audit and detected the fraud at some point, but once they advised Enron on how to hide the fraud, they became complicit, and that influenced their behavior.

Then there is self-review.  

As I mentioned, Anderson took in $52M from Enron in 2000. Importantly, roughly half of those fees (~$27M) came from consulting work. A consultant is an advisor, and in Enron’s case, their advisory work was impacting the company’s strategy, structure, and operations.

Consider the types of work that Anderson reportedly engaged in for Enron:

• Strategy Consulting: Advising on business expansion, acquisitions, and deal structuring to maximize reported profitability.

• Technology Consulting: Designing and implementing information technology systems for financial reporting, risk management, and trading operations, enabling data manipulation.

• Performance Management and Executive Compensation: Designing performance metrics and incentives tied to financial targets, and consulting on executive compensation plans with the ability to create incentives for unethical executive conduct.

Andersen also reportedly advised Enron on structured finance, tax strategies and planning, risk management (ironically), and complex derivatives and trading strategies that were central to Enron’s core business model. And probably more.

If you’re thinking that this sounds like company management was also the “independent auditor,” you’re not far off. Because of all the work Andersen was doing to shape and direct the company’s business, they were essentially auditing their own work.

The familiarity, self-interest, and self-review in the Andersen/Enron audit relationship misled investors, regulators, and the public; compromised the integrity of the audit process and profession; and led to one of the most infamous corporate collapses in history.

It also resulted in the dissolution of Arthur Andersen. It’s been “Big Four” instead of “Big Five” ever since.

The Pinky Promise of Safe & Secure Elections

The parallels of the SEC audit world to that of US elections are significant. Both elections and capital markets run on public trust; however, while capital markets are governed by an entire industry of checks and balances to preserve that trust, no such industry, checks, or balances exist for US elections.

In the SEC audit world, safeguarding public trust is largely outsourced to the SEC audit firm. The audit firm attests to the truth and accuracy of a company’s financial statements, and the regulator relies upon this attestation unless evidence comes to light that proves they shouldn’t.

In elections, safeguarding public trust is the responsibility of bureaucratic public-private partnerships, where plausible deniability reigns.

Elections are the responsibility of the states, with the Secretary of State as the chief elections official. There is no federal regulator over elections – no SEC equivalent – but there is a bureaucratic ecosystem that, in theory, would play a similar regulatory role to that of the SEC. This ecosystem is a mashup of government, pseudo governmental, non-governmental, and private corporate entities.

Election technology vendors are largely private companies, though Smartmatic was publicly traded before it was taken private in 2008, and Election Systems & Software (ES&S) was public prior to 2010. Dominion Voting Systems, Hart InterCivic, and Runbeck have always been private entities.

Public companies are required to disclose financial information and business operations to the SEC. Private entities are not. For private companies, disclosures and audits are governed by the industry regulators, and requirements vary based on the industry.

For US election companies, oversight and audits are largely the responsibility of state and local election authorities. These activities focus on ensuring that the equipment and services provided by election companies meet legal and regulatory standards. These standards are set by federal agencies like the Election Assistance Commission (EAC).

Clear as mud? It gets worse.

Regulatory bodies at both the state and federal level rely on testing and certification organizations for several critical functions to ensure the integrity, security, and compliance of election systems. More plausible deniability.

Consider the development and implementation process of the “Trusted Build” in US elections. Messaged as a simple software update to prepare elections machines for the next election event, the Trusted Build is the master file — the golden image — of a US election.

Here is how it comes about:

1. The US Election Assistance Commission (EAC) accredits a Voting Systems Testing Lab (“the Lab”), such as Pro V&V or SLI Compliance, permitting them to test election technologies for certification.

2. The election technology vendors, such as Dominion or ES&S, complete their Trusted Build; that is, they finish coding the software that will be installed on election machines.

3. The Lab tests the Trusted Build, and reports to the Secretary of State that the vendor’s Trusted Build is compliant with all Federal and State Voting System Standards – or not, in theory, but based on the available record, they always seem to be good enough.          

4. The Secretary of State, an elected official who historically has little to no technology experience, takes the word of (read: outsources her responsibility to) the Lab and certifies the Trusted Build.

5. In a collaborative – or, highly familiar – relationship, State Department staff and the election technology vendor’s team deliver and install their Lab-tested, Government-approved Trusted Build into County’s voting machines.

6. At this point, the State team hands over the keys to the Clerk and the local IT team. Keep in mind that the Clerk has responsibility for the execution of the election and accountability for the integrity of its outcome.

On paper, the County Clerk (or equivalent in a state) is responsible for ensuring the integrity of the election in her county. In practice, the integrity of the election depends on the security, integrity, and availability of the hardware and software delivered to the county – which the local election official zero visibility into or control over.

Sounds like a scapegoat.

Even the state’s ability to verify the integrity of the Build is ceremonial at best. That’s because the lab is billed as the – seemingly independent – authority on the security of the system.

Can we trust the lab’s assessment?

Unfortunately, ethical hackers that work for the labs report that they are prevented from fully testing a voting system.

I caught up with Clay Parikh, a cyber security professional and certified ethical hacker who has tested voting machines for the Voting System Testing Labs. Parikh told me there are critical parts of US voting systems that the VSTL testers are prohibited from testing.

Further, the areas of the system that the lab’s ethical hackers are not allowed to test are not, at least on paper, tested or audited by anyone else.

“The lab always told me that level of testing would occur later. They never stated specifically who would conduct it, except in state certification, they said, ‘the state would do it,’” Parikh said. “I have yet to see where a state ever did a higher level of security testing.”

That’s astounding, because it means the only conceivable testing that is done on those parts of the system is the internal code reviews done by the vendor themselves. That’s self-review.

The Secretary of State has the sign-off authority – in theory, a type of review – but she is already effectively relying on the vendor as an extension of her office – so her review is also self-review.

Then there is self-interest.

At a micro level, the Secretary of State has a vested interest in the outcome of her own election and those of her party. More broadly, the complex public private partnerships that govern US elections is a fragile web of profit-motivated entities and personally-motivated public collaborators, all of whom have a stake in the outcomes of elections.

There is no reported independence training for US elections entities, workers, labs, vendors, officials, or oversight functions. There is no test to pass a requirement of keeping your job. There is, other than rhetoric, no focus on public trust.

If there were, obstruction into elections audits and other efforts aimed at transparency would be a scandal like that of Enron.

But it’s not.

To summarize, in our elections, there is:

• Familiarity: There is very little daylight between government entities and the election vendors and labs for which they have oversight.

• Self-Interest: Elected officials have a personal and professional interest in the outcome of elections and election audits.

• Self-Review: Elections officials – the people who run elections – are auditing their own work. Let that sink in.

One of the biggest red-flags about elections independence for me came on June 17, 2021, when Colorado Secretary of State Griswold tweeted that she had prohibited independent election audits in the state, calling them “Fraudits.” Her public statement came in response to the Arizona-ordered Senate audit in that state.

The legitimate action of a Republican-controlled State Senate was inferred by the Colorado Secretary of State – the chief elections officer in a Democrat-controlled State – to be fraudulent. She made these remarks while the Arizona audit was still underway.

Not a good look for public trust.  

Public Trust Demands Independent Oversight in US Elections

Independent audit and oversight functions are foundational to public trust in capital markets. Why are such principles abandoned when it comes to public trust in US elections?

When the Enron scandal began to unravel, Arthur Andersen shredded a literal ton of documents, deleted digital files, and proactively obstructed justice. Public oversight entities demanded accountability because the markets can’t properly function without public trust.

When the 2020 election began to unravel, the auditors needed only to deploy the Trusted Build. Calls to preserve the public trust were demonized. Those calling to preserve the public trust were prosecuted.

Why is this acceptable, America?

No publicly traded company would be allowed to audit themselves, and the SEC would never allow a publicly traded company to conduct themselves in the manner with which election officials and their vendors have done for years.

The elections industry must be independent and impervious to corruption.

Public trust demands it.

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Badlands Media articles and features represent the opinions of the contributing authors and do not necessarily represent the views of Badlands Media itself.

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