Kneecap Fox News

What Dictators, Corruption and Threesomes Have to Do With a Lawsuit That Could Kneecap Fox News

Fresh from settling with Newsmax, Smartmatic’s CEO braces for mud-slinging.

By Michael Schaffer

Michael Schaffer is a senior editor and columnist at POLITICO Magazine. He has covered national and local politics for over 20 years and spent seven years as editor-in-chief of the Washingtonian. His Capital City column chronicles the inside conversations and big trends shaping Washington politics.

To combat a smear based on lies, the CEO of the voting machine firm Smartmatic may have to lean into a totally different set of ugly stories — involving alleged corporate bribery, ties to a foreign strongman and his own role in a threesome hookup app called Feeld.

Antonio Mugica, whose firm was slimed by unfounded far-right conspiracy theories about a stolen 2020 election, made a confidential settlement last week in his defamation suit against Newsmax, months after scoring another confidential settlement in a proceeding against OAN. But he’s due in court early next year for a case against the biggest conservative network of all: Fox News, which Smartmatic is suing for $2.7 billion over alleged false claims related to former President Donald Trump’s loss.

And that matter is still being fought over — especially in the court of public opinion.

In fact, no sooner had the Newsmax settlement been announced last Thursday than Fox’s PR operation was out with a statement seemingly unrelated to the question of whether or not the voting-machine company was defamed in 2020: “Smartmatic’s President and Co-Founder, as well as one current and one former executive, were federally indicted for bribery” involving a Philippine government contract.

It wasn’t so different from the communications strategy deployed by Newsmax right up until they settled: Talk a lot about things that have little to do with 2020. Days earlier, the pro-Trump network had put out a statement slamming Mugica’s firm as “the preferred election company for Venezuela’s brutal Chavez/Maduro regime” and sniffing that the court should never have allowed “a company with such a sordid reputation to pursue a defamation claim against a media company.”

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You can expect to hear a lot more like that — and beyond — as Fox and Smartmatic gird for battle.

That’s because the thing about defamation suits is that they’re premised on the idea that the plaintiff actually has a good name that can be besmirched. And that premise, in turn, encourages unfriendly parties to air dirty laundry ahead of trial.

Mugica’s PR team knows this, which is surely how I found myself talking to him last month not just about election sanctity, but about cringier subjects he’d rather avoid: That bribery case; those alleged ties to his country’s autocratic late president Hugo Chavez; and Mugica’s personal views on sexual monogamy and what they have to do with his dating app investments, among other things.

On paper, they seem awfully far afield from the question of whether a news organization devastated Mugica’s business via defamatory lies about the 2020 U.S. election. In the real world, it’s a different story.

These days, a political trial can look a lot like a political campaign, complete with communications pros, oppo research and gobs of dollars. Sources familiar with the case against Fox say it could cost Smartmatic upwards of $100 million (a figure that the undisclosed recent settlements may help reach). Given that Dominion Voting Systems scored a nearly $1 billion settlement from Fox News in a similar case last year, that could prove a good investment.

“The business of power is messy,” Mugica said. “Politics is messy. It’s definitely an extreme sport. And unfortunately for us, we’re in the middle of it.”

And to win at this particular extreme sport, he figures, it’s time to start talking about some of the muck likely to come his way as the trial nears.

Unlike the allegations that Smartmatic rigged the 2020 elections, these stories aren’t all make-believe. Mugica’s firm really did handle elections in Venezuela, his home country as well as that of his Smartmatic co-founders. One was a controversial recall election that Chavez won. “There are a million reasons to criticize President Chavez,” Mugica said. “I think for me, the biggest one is, he destroyed the country. But one thing that he didn’t do is he didn’t tamper with these results.”

On the other hand, when the opposition boycotted a national assembly election under successor Nicolás Maduro — allowing the new president’s allies to run essentially unopposed — Mugica blew the whistle on the regime’s manipulation of voter turnout numbers. “And, of course, immediately we were politically persecuted out of the country,” Mugica said, noting that the firm moved dozens of local employees out. “I have never been able to return to Venezuela.”

For good measure, Mugica also said the regime stiffed Smartmatic on $100 million in payments and expropriated its local business. It’s a history that, his team thinks, makes it pretty tough for opponents to cast him as a hatchet man for the dictatorship. Or maybe not: The Venezuela questions are all over the briefs Fox has filed in the case.

The Philippine indictments, which earned significant press this summer, are also likely to get an encore during the trial. According to federal prosecutors, three top Smartmatic executives, including president and co-founder Roger Pinate, violated the U.S. Foreign Corrupt Practices Act by conspiring to funnel $1 million to the head of the country’s election commission in order to snag a lucrative elections contract.

The company wasn’t indicted, and the alleged crime didn’t involve tampering with elections. But the whole thing still looks sleazy — in just the way you’d want if you’re a defense lawyer who needs to beat back Smartmatic’s claims that its reputation was damaged.

Here, Mugica spoke cautiously. “I’m not aware of that being true,” he said of the alleged bribe. “I’m very confident that my executives are going to clear their names.” He was less circumspect when it came to some things he thinks are fishy about the case, starting with the size of the alleged bribe (“kind of a really small amount compared to what they usually prosecute, which is hundreds of millions or billions of dollars”) and the long-ago timing (the contract in question was for a 2016 election) as well as the context (he says it involves a longstanding vendetta against the election commissioner on the part of the incumbent Philippine president). The case has yet to go to court.

But when you’re talking about something as fuzzy as a company’s reputation, the supposed shortcomings of a federal indictment only matter so much to the general public.

Ditto the ostensibly unrelated parts of the boss’ investment portfolio and personal life.

Take Feeld, the dating app for “polyamory, consensual non-monogamy, homo- and heteroflexibility, pansexuality, asexuality, aromanticism, voyeurism, and kink,” according to its website. Mugica is a top investor in the service, which he praises as a female-led company that’s filling a need in a little-noticed community that happens to be part of his own life.

“I’ve always been more of an open-relationship type of person,” Mugica, a separated father of two, told me. “That’s one of the reasons the couple that founded this company came to me, and I thought, look, there is a big market of people that have more of an open mind about these things. … And it proved to be right,” because the app is growing rapidly.

So far, Mugica’s involvement in Feeld hasn’t been part of any pretrial publicity campaign. He suspects that won’t be true for long. One odd coincidence that might complicate efforts to tar him by association: One of the highest-profile mentions of Feeld in U.S. media was a rapturous 2021 Vanity Fair item headlined “Three-Way Sex With Couples Has Made Me a Better Person.” The author was Caroline Rose Giuliani, whose father Rudy is also a focus of Smartmatic’s defamation actions. (The younger Giuliani this week endorsed Kamala Harris.)

“It’s been very tough because I’m running the business at the same time that I need to manage the litigation against Fox and Newsmax,” Mugica told me. “What I tell my friends is, it’s not the legal battle, which I think I have an excellent team of lawyers, but it is more the invisible battle that happens under the table, people trying to bring you down. … These are the things that have really taken the fight to a different level.”

Mugica said he hasn’t resorted to raising money specifically for the litigation. But Smartmatic recently took in a multimillion-dollar investment from Reid Hoffman, the billionaire LinkedIn founder and Democratic donor. At the time, a Hoffman advisor told reporters that the investment was a good business opportunity but that it also was a way “to provide capital that would allow the truth to be found in the courts.”

One of the ironies of the whole affair is that London-based Smartmatic never did much American business. In 2020, its only U.S. contract was in Los Angeles County, far from the states where Donald Trump’s supporters claimed fraud. But, Mugica said, America’s prominence meant the disinformation had “obliterated” his business, which just had its worst revenue year in 21 years.

“To take the biggest company in the election technology space that has never had a breach in 25 years, and to say they rigged the U.S. election is devastating,” Mugica said, claiming the falsehoods dried up scores of opportunities after the firm had invested millions in growth. “I think that lie was actually devastating not only for our company. It was devastating for the industry as a whole. So many countries that wanted to bring technology into their elections said, ‘We don’t want to be in that situation.’”

In its complaint, Smartmatic is demanding a massive $2.7 billion for economic and reputational damages. It is also asking the court to hit Fox with punitive damages, which could theoretically bump up the award to a devastating $5.4 billion (double) or $8.1 billion (triple). There’s no cap on punitive damages in New York.

I wouldn’t go spending those extra billions just yet: Before the Newsmax matter settled, the judge in that case had ruled out punitive damages, saying the network hadn’t set out to harm Smartmatic even as it aired false statements. The Fox case, of course, involves a different company and a different jurisdiction.

Fox has denied defaming anyone and says free speech could be damaged by a lawsuit against a news organization that was merely reporting on allegations. “Smartmatic’s damages claims are implausible, disconnected from reality, and on their face intended to chill First Amendment freedoms,” the company declared.

Mugica, who lived for a decade in the U.S., has family here and still visits frequently, including recent trips to prep for trial. In a conversation, he sounded confident about the American legal system.

All the same, the fallout from 2020 has added a sense of danger to the United States, too, something Mugica never expected to see. Election deniers wielding megaphones shouted outside Smartmatic’s U.S. offices. Anonymous messages and emails threatened rank-and-file employees. “Location acquired … here we come,” read one. The company’s Los Angeles office got a package in the mail featuring photos of mangled human remains. “The 14-year-old son of my co-founder received a call saying, ‘We’re going to kill you and your family for what you have done,’” Mugica told me.

I asked Mugica, whose firm works elections around the world, to compare America to other countries he’s watched. Whatever you think of Fox News’ culpability for the falsehoods of 2020, his answer ought to give you pause.

“We’ve participated in elections in, I think, 37 countries, many of them in the developing world — immature democracies, or whatever you want to call them,” he said. “Like Venezuela, which is not a democracy anymore. Or the Philippines or Kenya, places that are definitely at a different stage in their democracies and in their socioeconomic development. And I think what’s been happening in the U.S. recently, and more specifically with the last election, was kind of a regression into that stage. So the U.S. has basically behaved as if it was any other developing country on the political front.”