Ptech CEO says probe put firm on ropes
By Thanassis Cambanis and Ross Kerber, Globe Staff, 12/13/2002
company run by Saudi financier Yasin al-Qadi, who is now on the US Treasury Department's list of individuals suspected of financing terrorism, channeled $5 million to Quincy-based Ptech Inc. as start-up capital in 1995 and over the next four years helped recruit other investors for the software company, founder and CEO Oussama Ziade said yesterday.
Al-Qadi promised another $3 million in 1999, but never delivered, Ziade said in an extensive interview with the Globe. He added that Ptech has had no business dealings with al-Qadi since he was placed on the ''blocked list'' of suspected terror financiers the month after the Sept. 11 attacks.
When Ziade ran into al-Qadi in a Saudi Arabian hotel in May, al-Qadi insisted he was not involved in financing terrorists and was trying to clear his name with the US government, according to Ziade.
In a three-hour interview, Ziade said al-Qadi had been a strong advocate for the company but was never a direct shareholder.
The federal probe into Ptech, which was widely reported after a search of the company's headquarters last week, has brought the company to its knees, Ziade said, tainting it with alleged terror ties, even though no one has been charged and Ziade said he was assured by the US attorney's office that neither he nor any other company employees were a target of the investigation.
''I feel that what has happened here is un-American,'' said Ziade, 38, who has been a US citizen for four years.
Ziade and James Cerrato, Ptech's cofounder and chief product officer, painted a dire picture of a company crumbling under the weight of the allegations. In the interview they frequently emphasized the company's assistance to investigators.
They were speaking out, they said, partly at the urging of concerned Ptech employees. About $1 million in contracts for the next two months have been canceled or put on hold, they said. Ptech sells software to a host of federal agencies, including the White House, the Federal Aviation Administration, and the FBI.
Without a public clean bill of health from authorities, the executives said, Ptech faces major hurdles, and many of the 200 people who have worked for the company since its creation in 1994 will be unfairly tarred by their association.
''I am right now a victim of the aftermath of Sept. 11,'' Ziade said. ''I'm damaged, I'm tainted, and until the government comes back to say something to clarify this, my life is in danger, my employees are in danger, and the people who work for Ptech might never find a job.''
Ziade said he still hopes the US attorney's office in Massachusetts, which is coordinating the federal investigation, will ''come forward to say that I'm not a target and that I haven't done anything wrong and to clarify the whole thing.''
Federal investigators do not confirm who their targets are, but people can become targets at any point during the course of a probe. In federal investigations, someone is only considered a target if prosecutors have enough evidence to seek an indictment.
The US attorney's office does not comment on ongoing investigations, but chief of staff Robert Krekorian yesterday repeated last week's official statement that ''any characterization of this as a terror investigation is premature.''
Ziade questioned the motives of the whisteblower who told federal investigators in October of 2001 that al-Qadi secretly controlled Ptech. The whisteblower, reportedly a former Ptech employee named Jeffrey Goins, continued to work with Ptech throughout 2002, even selling Ptech software to the Executive Office of the White House in April 2002, according to records Ziade showed reporters yesterday.
Goins did not return calls yesterday seeking comment. Law enforcement sources familiar with the ongoing investigation say officials are interested in whether al-Qadi laundered money through Ptech.
Yesterday, Ziade and Cerrato discussed in detail the company's financial relationship with al-Qadi and with BMI, Inc., a New Jersey Islamic investment fund that has been the subject of federal investigations and folded in 1996.
Ptech's chief scientist, Hussein Ibrahim, came to the company from BMI in 1995. Both Ibrahim and BMI president Soliman Biheiri were Ptech board members in 1995.
Federal investigators are looking at links between BMI investors and terrorist organizations.
Ibrahim, an American citizen, now splits his time between Boston and Egypt, where his family lives, Ziade said. Ibrahim, a Columbia University-educated computer scientist, helped introduce Ptech to al-Qadi.
''Mr. Qadi was never a direct shareholder in Ptech,'' Ziade said. Shortly after Cerrato and Ziade cofounded Ptech in 1994, they turned to BMI to help them raise start-up capital. BMI, in turn, introduced them to a company called Sarmany, Ltd., based in the Isle of Man. Al-Qadi was one of two directors at Sarmany.
In March of 1995, Sarmany invested $5 million in Ptech. ''Was it his money? Who knows,'' Ziade said, when asked whether al-Qadi controlled the Sarmany investment.
That spring, al-Qadi made his only visit to Ptech's offices, which were then in Westborough, and praised the company's prospects, Ziade recalled. ''He said hopefully we'll all make a lot of money with this company,'' Ziade said.
Ziade says al-Qadi never made another investment in the company after that, but continued to serve as a cheerleader for Ptech in Saudi venture-capital circles. He arranged meetings for Ptech employees on many fund-raising trips to Saudi Arabia between 1995 and 1999, Ziade said.
In 1999, al-Qadi told Ziade that he had sold his interest in the company, Ziade said. ''I have no way to verify this, because Mr. Qadi was never a direct shareholder,'' Ziade said. Asked if it was possible that al-Qadi was a secret shareholder, Ziade said, ''Nobody ever told me he secretly owns any part of the company.''
When Ziade bumped into him in the lobby of the Meridien Hotel in Jeddah this May, Ziade said, ''He told me, `I am innocent, I have no connections to terrorism,''' adding, ''I have not sought him out.''
Since Sept. 11, other individuals with connections to Ptech have come under federal scrutiny.
Yaqub Mirza, a Pakistan-born US citizen, served as a Ptech director from January 2001 until August 2002. Several business linked to Mirza were raided in March as part of the US Customs Service's Operation Greenquest, the ongoing terror-money probe.
At the time, Ziade said, Mirza offered to resign from the board, but Ziade felt such a move was unnecessary since Mirza had not been charged with any crimes. Mirza left the board in August, when Ziade decided to make himself the sole board member in order to make business decisions more quickly.
Ziade said he had heard from Ptech consultants that at least one customer was uncomfortable doing business with a company that had Mirza on its board.
Federal agents didn't tell Ptech about the investigation until the day of the search last Thursday night, Ziade said. He and his lawyer had learned the FBI was interrogating former employees and called the bureau in August 2002 to offer their cooperation, he said, but the FBI never called back.
Yesterday Ziade and Cerrato listed a host of financial problems that have arisen since the search, including the cancellation of their business account by Citizens Financial Group. FleetBoston Financial Corp. has also terminated the individual accounts of several employees, they said.
Spokesmen for both Citizens and FleetBoston said the companies couldn't comment on customer matters.
The publicity surrounding the search has scared away customers, Ziade said, with $1 million in sales through January ''up in the air, if not lost totally.''
That's a huge problem for Ptech, which says its revenue is less than $10 million.
Another blow came Monday, when Gartner Inc., a technology- analysis firm that advises many software buyers, suggested in a report that Ptech's customers ''should begin looking for alternatives.''
''Regardless of the eventual outcome, the federal investigation will strain Ptech's finances and divert its management team,'' Gartner said in the report.
Ziade said he asked the firm's researchers for a more positive recommendation. ''I told them we'll be cleared, we need your help,'' he said.
The Gartner note went to tens of thousands of other technology companies, said Richard Hunter, a vice-president and research director at Gartner. ''We would take the same line with any company that was the subject of a massive, ongoing federal investigation,'' he said.
Ziade, who has four children, grew up in Tripoli, Lebanon and came to the United States in 1985 to study physics at Harvard.
Since the search, Ziade said, the company and its employees have been deluged with threatening messages. He showed reporters a stack of dozens of abusive e-mails.
The criticism is all the more upsetting, Ziade said, because he is as devoted to his adopted homeland as he is to his Islamic faith.
''I love this country,'' Ziade said. ''This is my country.''
Thanassis Cambanis can be reached at tcambanis@globe.com. Ross Kerber can be reached at kerber@globe.com.
This story ran on page B1 of the Boston Globe on 12/13/2002.
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