I heard this on NPR the other day, now at Raw Story, so sorry if old news, will delete if so.

NPR said that Diebold uses a variety of code, and they blame it on Microsoft’s code as their excuse, and they won’t reveal the code in order to operate in NC and are therefore pulling the machines instead.

From The Register:

Diebold would rather lose all of its voting machine business in North Carolina than open its source code to state election officials as required by law, the Associated Press reports.

Due to irregularities in the 2004 election traced to touch screen terminals, North Carolina has taken the very reasonable precaution of requiring vendors of electronic voting gizmos to place all of the source code in escrow. Diebold has objected to the possibility of criminal sanctions if they fail to comply, and argued for an exemption before Wake County Superior Court Judge Narley Cashwell. The judge declined to issue an exemption, and Diebold has concluded that it has no choice but withdraw from the state.

And:

The company’s explanation is that their machines contain Microsoft software, which they have no right to make available to state election officials. This seems disingenuous, as it is hard to imagine Microsoft suing Diebold for complying with the law. It would hardly be Diebold’s fault if it released MS code to a lawful authority on demand; that issue would be something for MS and North Carolina to work out.

One far-fetched explanation would be that MS has licensed its software to Diebold with a provision that the company withdraw from jurisdictions where the law requires the release of its source code. It’s possible, but there’s no reason to believe it.

A considerably more plausible explanation is that Diebold is using this non-problem as an excuse to keep its bugware from the prying eyes of government regulators. And the most likely reason for that is that they’ve got a lot of blunders to hide. If North Carolina were to reject the machines on the basis of their software, other states would undoubtedly become suspicious, and begin doing their own investigations. So in that case, withdrawing from the market is the smartest move the company can make.

But if the software is as good as the company claims, then North Carolina’s future endorsement will make for excellent free advertising. Withdrawing from the market would be a very foolish move in that case, but, again, only if Diebold has nothing to hide.