Funding scrutiny may spread

Enterprise software company Ptech Inc. may be only one of many firms that could be investigated for having possible links to terrorist financiers, experts on terrorism and crisis management are warning. And other companies do in fact have histories similar to that of Ptech, Computerworld has confirmed.
"It behooves a company to look at investors, their reputations and where they have invested in the past," said Leonard Fuld, founder of Fuld & Co., a Cambridge, Mass.-based competitive intelligence consulting firm. "The onus is still on the companies."
Start-up firms, which tend to be especially anxious to make sales and attract investors, need to do more research into whom they do business with, said Larraine Segil, an expert in strategic and business alliances at The Lared Group in Los Angeles. "They have not only a legal but also a fiduciary obligation to do this when dealing with sensitive products like the software sold by Ptech," she said.
Ptech CEO Oussama Ziade, however, isn't convinced that lack of research is what now threatens the life of his company (see story).
"How far are we going to go with making links between people?" he asked. "And how are we supposed to know before the fact?" he added, referring to the investigation into his company for ties to individuals who weren't on any government watch list when they were approached by Quincy, Mass.-based Ptech.
In fact, some of the same people whose past connections to Ptech raised federal investigators' suspicions can also be linked to other U.S. companies, according to former senior government terrorism experts and government documents.
For example, Yaqub Mirza resigned from Ptech's board in March 2002 after the FBI raided several Muslim charities and businesses he had helped set up in Herndon, Va.
According to Ziade, a disgruntled former Ptech employee sent an e-mail to the FBI last summer that identified Mirza as a close associate of Yassin al-Qadi, a Saudi businessman who invested in Ptech in 1994 and who has since been added to a government terrorism watch list. That association has been confirmed by at least two former U.S. intelligence officials.
But documents filed with the U.S. Securities and Exchange Commission in 1999 show that Mirza was also a member of the board of directors of Mylex Corp., a developer of RAID and network management technologies that was acquired by IBM that same year. Mirza owned 3.95% of the company, more than any of the other directors or executive officers, according to the SEC documents.
IBM declined to comment. But Kevin Brett, a spokesman for Milpitas, Calif.-based LSI Logic Corp., which subsequently acquired Mylex from IBM, said the Mylex board was dissolved upon the company's acquisition by IBM. He added that LSI has "no insights into the Mylex decision-making process relative to its board of directors during the course of its existence as an independent company."
Meanwhile, Hybridon Inc., a biotechnology firm in Cambridge, Mass., appears to be in a position similar to Ptech's with respect to its investors. A list of investors in a June 2001 Hybridon proxy statement filed with the SEC includes Abdelah bin Mahfouz, the son and business partner of Khalid bin Mahfouz, former head of the The National Commercial Bank of Saudi Arabia. Khalid was placed under house arrest by the Saudi government prior to the Sept. 11 attacks for allowing the bank to channel funds to al-Qaeda front companies, said Vince Cannistraro, former chief of operations at the CIA's Counterterrorism Center.
Earlier SEC filings show that another member of the family, Abdulrahman bin Mahfouz, also held stock in Hybridon. Also a board member of National Commercial Bank, Abdulrahman served on the board of Blessed Relief, a Sudan-based charity that U.S. intelligence officials have characterized as a front organization for Osama bin Laden.
Stephen Seiler, CEO of Hybridon, said his company has conducted "extensive due diligence" to "vet our shareholders." Seiler said his company is "unaware of any link between Mr. bin Mahfouz and any investigation."
But companies in Hybridon's position at the very least face a perception problem, analysts said. "Can these executives seriously expect the public to believe that they didn't know whence the money was coming?" Segil asked. "Is it that they didn't want to know and so didn't check? Or didn't know and didn't care because money is money?"

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