Hub firm denies tie to terror

The chief executive of a Boston private equity firm under federal investigation for its connection to groups that allegedly finance Islamic extremists denied yesterday that his company is linked to terrorism.

"We do everything appropriately and by the book, and we adhere not just to the letter of the law but to the spirit of the law," said James M. Godec of Overland Capital Group. "I am extraordinarily cautious about this kind of stuff."

The US Department of Justice probe centers on alleged criminal tax law violations by Overland. A federal grand jury in Boston is examining suspected tax evasion by the company, according to a filing last week in US District Court in Massachusetts, and Overland's offices at 111 Huntington Ave. in Boston and in Braintree were raided two weeks ago by Internal Revenue Service agents who seized numerous records.

The Justice Department lawyer named in the filing, Corey J. Smith, works in the terrorism financing unit of the department's criminal division; since the Sept. 11, 2001 terrorism attacks, prosecutors have increasingly used tax laws to bring terrorism cases against wealthy Middle Easterners suspected of funneling money to terrorist groups. The investigation was disclosed in yesterday's Wall Street Journal. A Justice Department spokesman declined to comment.

"By policy, we never confirm or deny whether or not there's an investigation into an entity or a person," said the spokesman, Dean Boyd.

Overland, which has more than $1.5 billion in assets under management, was founded in October 2001 by Godec and several other former KeyBank investment professionals. The 23-person firm represents international investors, particularly in Europe and the Middle East, seeking real estate and equipment-leasing investment opportunities in the United States.

The original majority owner of Overland was Islamic Investment Co. of the Gulf Ltd., a unit of Dar Al-Maal Al-Islami Trust, or DMI, a Geneva-based financial group founded by a senior member of the royal family of Saudi Arabia. DMI specializes in Islamic banking, which prohibits paying or receiving interest and dealing in liquor, pork, gambling, or pornography. The US government suspects that terrorist groups sometimes access money with support from people involved in Islamic banking.

A DMI affiliate called Faisal Private Bank was investigated by US counterterrorism agencies in the mid-1990s for suspected connections to extremists, and both DMI and Faisal are defendants in civil litigation in New York brought by families of Sept. 11 victims who claim they funded al Qaeda.

Overland's two primary institutional investment clients are Islamic Investment Co. of the Gulf Ltd. and Shamil Bank of Bahrain, according to Godec. He said Overland, which is audited by KPMG, goes through an extensive due diligence process with its investors, whom he described as "mature, sober, older guys in their 50s and up."

"I know these guys," he said. "I believe in these guys, and I believe in their integrity and honesty.

"I understand and sympathize with what the government needs to do for national security, but I believe in what I do and will stand up in defense of it," added Godec, noting that his family has a long history of military and government service. He said his father was a career member of the US Air Force, his mother was a 25-year IRS employee, and his brother, Robert F. Godec, is US ambassador to Tunisia.

"In my heart, I know what we've done is entirely appropriate and entirely correct," he said.

Godec said he has not been subpoenaed or contacted by prosecutors.

"We'd like to get to the bottom of this, and we have offered to cooperate," he added, "and it would be nice if people would be forthcoming with us so we can have the opportunity to be forthcoming with them."

Godec, 44, who lives in Brookline, left KeyBank in Cleveland to start Overland. He had previously practiced at several Boston law firms, including Bernkopf, Goodman & Baseman; Goodwin Procter; and Rackemann, Sawyer, & Brewster. He has bachelor's and law degrees from the University of Virginia, where he majored in Middle Eastern studies and studied Islam, Islamic history, Arabic, and Farsi.

Last week's filing in Boston federal court, which disclosed the grand jury probe, stemmed from a wrongful termination lawsuit filed by a former Overland employee, Laird Fairchild, who left the firm in March 2004 when Overland closed its Dallas office, according to Fairchild's lawyer, Geoffrey S. Harper. Fairchild, who is now with the Dallas office of Hunter Chase, a real estate private equity firm, did not return a call for comment.

But according to Harper, "Laird has been identified as a material witness in [the federal] investigation, and he has been providing them documents for the grand jury. . . . He has been working with them for some time."

Harper also said , "Overland wants to know what Laird has been telling the government, and the government doesn't want to answer that question."

Overland also has an office in Clifton Park, N.Y.

Sacha Pfeiffer can be reached at pfeiffer@globe.com; Steve Bailey at bailey@globe.com.