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Get Four
|  | APRIL 16, 2004
Way Down in the Valley Amr Mohsen started a tech outfit, got rich -- and then self-destructed. How did "a genius" get into such a mess? Editor's Note: This is an updated and extended version of the story that appears in BusinessWeek's Apr. 19 issue. He seemed to be the epitome of the Silicon Valley success story. A brilliant engineering student from Egypt, Amr Mohsen breezed through the California Institute of Technology doctorate program in the 1970s. In 1989, after co-founding Actel Corp. (ACTL ), he got backing from top-shelf investors such as Kleiner Perkins Caufield & Byers to launch Aptix Corp., which makes technology that allows electronics manufacturers to quickly turn designs into prototypes. All this made Mohsen a wealthy man, with a $10 million, 17-acre hilltop estate in opulent Los Gatos. And his success led to a 2003 Man of the Year award from the Egyptian American Organization. "He is a genius and well-respected," says Mohamed Abdou, a UCLA professor and old Mohsen friend from high school. Yet, in a story of self-destruction that has shocked even his closest friends, the 55-year-old father of three sits today in a lockup near San Francisco. On Mar. 27, just days before he was to go on trial on perjury charges, Mohsen was arrested as he was preparing to flee the country, prosecutors say. He had $20,000 in crisp bills in his possession (he had recently withdrawn $40,000 from various local banks, according to prosecutors), a newly issued Egyptian passport in violation of his bail agreement, and a flight reservation for the Cayman Islands the following day. DOUBLE BOOKS? Jailed without bail, his trial is now set to begin on May 10. He has pleaded not guilty on 16 counts of perjury, obstruction of justice, and mail fraud, plus a new contempt-of-court charge related to the allegations that he was attempting to flee the country. Mohsen's attorney declined comment for this story. How did Mohsen get into such a mess? His downfall began in 1998, when as chief executive of Aptix, he licensed its technology to design-software giant Mentor Graphics (MENT ) for $1 million in cash and $3 million in loans -- and Mentor's assurance that it would sue Aptix' stronger rival, Quickturn Design Systems, for infringing on a patent Mohsen had been granted in 1989. To strengthen Mentor's case, Mohsen allegedly embellished the engineering notebook he had used the decade before to document his invention. Quickturn's lawyers allege that he also created an additional notebook from scratch that claimed he invented the technology a year earlier than he actually did, in 1988. When he handed copies of these documents over to Quickturn's lawyers in April, 1998, Mohsen didn't know they would obtain a copy of his original notebook from the law firm he had retained to handle his initial patent application. Many of the pages he faxed to the lawyers had information that wasn't on the older copy -- and much of the new material was highly relevant to the topics at issue in the lawsuit. That made Quickturn's lawyers suspicious. DEEPER HOLE. Things went downhill from there for Mohsen. His old law firm had never heard of any 1988 notebook. Upon closer examination, ink experts testified in the Aptix-Mentor civil suit against Quickturn that Mohsen dated multiple entries in the "1988" notebook as having occurred in 1998 and then went back over the entries to make the third numeral, a "9," look like an "8." As these discrepancies surfaced, Quickturn's lawyers insisted on deposing Mohsen. He brought the actual notebooks with him but refused to leave them with the lawyers. When the lawyers demanded that he make the notebooks available for forensic testing, Mohsen dug a deeper legal hole for himself, according to court documents. Ignoring his lawyer's insistence that he leave the notebooks locked in the safe in his home, he said he took them to work with him on Dec. 14, 1998 -- and then mistakenly left them in a bag on the floor of his black Mercedes 600. That evening, he testified, thieves broke his car window and swiped the bag. STARTLING TURN. Quickturn's investigators claimed Mohsen staged the break-in himself -- a claim the judge later agreed with in his final ruling. "There was no obvious reason [for anyone] to break into the car, much less the back side window, even less to steal a nondescript bag," wrote U.S. District Court Judge William H. Alsup. "The circumstances of the 'theft' strongly suggest that Amr Mohsen staged the incident." Mohsen kept trying to prove the 1988 book and the theft were real -- but not very convincingly. One example: He put entries in his 1989 Daytimer referencing the "1988" notebook -- but in a kind of pen ink that didn't exist until 1994. Then, more than a year after the alleged theft, Mohsen declared another startling turn of events: He told Judge Alsup that an anonymous Good Samaritan had mailed him scraps of the stolen notebooks, which had been found in this stranger's backyard. This, too, was dismissed by the judge. "None of the documents showed any signs of weathering," Alsup wrote. Mohsen invoked his Fifth Amendment right against self incrimination when questioned in court on these allegations. MOUNTING WOES. Not only did Alsup throw out the Aptix-Mentor patent-infringement suit but he also ordered Aptix to cover Quickturn's legal fees of $4.2 million. And the court referred the case to the U.S. Attorney's office, says Assistant U.S. Attorney Ross Nadel. That led to a grand jury indictment in May, 2003. Mohsen's 51-year-old brother Aly, a doctor from Springfield, Mo., has also been charged with aiding the fraud by signing his name as witness on the 1988 notebook. Aly has pleaded not guilty to obstruction-of-justice charges and is free on $500,000 bail. He declined to comment for this story. In March, 2004, prosecutors grew wary when Mohsen asked Judge Alsup's permission to refinance his house and collect $1 million. But the judge ruled that the money would have to be used to pay Aptix' legal bills, and Mohsen showed no further interest. Mohsen's company also faces mounting troubles. On Apr 1, Alsup ruled that all of Aptix' sales receipts from current and future customers must go directly to Quickturn. That's because Quickturn, now part of Cadence Design Systems (CDN ), has been trying to collect its $4.2 million in legal fees for years -- with little success. While Aptix has paid Mohsen $1.6 million during that time in loan repayments, it has never made a voluntary payment to Quckturn. BANKRUPTCY AHEAD? Instead, Aptix has closed several bank accounts and moved its cash before Quickturn could seize the funds, according to the judge's ruling. In February, 2004, Quickturn did manage to grab $231,896, but according to Aptix, that was all its remaining cash, says the ruling. Aptix Chief Financial Officer Alaa Ismail denies it has tried to hide its cash, and he says it has notified Cadence on occasion when it had to pay its 35 employees and key creditors to keep the company afloat. And he says hasn't made any loan repayments to Mohsen since the court clarified that his debt was subordinate to Quickturns' claim. But as a result of the judge's ruling, Ismail says "it will be pretty hard to avoid bankruptcy." Now, Mohsen is no longer running the company he founded, and to which he has loaned nearly $15 million dollars since 2000. A company statement says, "We wish Dr. Mohsen the very best in this difficult time." But for the one-time Silicon Valley success, the tale is all too familiar: a shooting star who reached the zenith with hubris, and allegedly, a few too many lies.  By Peter Burrows in San Mateo, Calif. Edited by Douglas Harbrecht
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