Axact Chief Executive Arrested in Pakistan Over Fake Diplomas ScandalBy SABA IMTIAZ and DECLAN WALSH

Axact CEO arrested (Credit: deccanchronicle.com)

Axact CEO arrested (Credit: deccanchronicle.com)

KARACHI, May 27 — Pakistani investigators arrested the chief executive of Axact, a software company accused of running a global diploma mill, early Wednesday after discovering a storage room filled with blank fake degrees.

The chief executive, Shoaib Ahmed Shaikh, and four other Axact executives were initially charged with fraud, forgery and illegal electronic money transfers, law enforcement officials said. The charges were later expanded to include money laundering and violating Pakistan’s electronic crimes act.

The arrests were a sharp blow to a company that claimed to be Pakistan’s biggest software exporter and that was on the cusp of starting a major television network. Axact has been under investigation since May 19, after an article in The New York Times described how the company had made millions of dollars by running hundreds of fake online education websites.

Since then, federal investigators have sealed Axact offices in Karachi and Islamabad and requested help from Interpol and the F.B.I. Mr. Shaikh sought to defend himself in a series of television interviews and video appeals, and asked the courts to halt the investigation.

But his legal move proved unsuccessful, and late Tuesday, after hours of questioning, he led investigators to a building next to the Axact headquarters in the upscale Karachi neighborhood of Defence.

Inside, they found a room filled with blank certificates bearing the letterheads of dozens of fake universities and high schools operated by Axact under names like Bay View, Cambell State, Oxdell and Nixon.

“There were hundreds of thousands of documents there,” said Shahid Hayat, head of the local office of the Federal Investigation Agency, which is leading the inquiry.

Pakistani television networks broadcast images of the room, and of Mr. Shaikh, wearing a black polo shirt with the Axact logo, being led to a car waiting outside the office. As he got into the car, he could be heard telling officials of the investigation agency that he would “see to every one of them.”

Mr. Hayat, the investigator, expressed surprise at the remark. “I don’t think he can threaten us,” he said.

Mr. Shaikh appeared in court later on Wednesday. A judge granted the Federal Investigation Agency custody of Mr. Shaikh and the four other executives until June 4. Investigators had said earlier that they would seek to extend his detention by 14 days while they examined the Axact network, which spans a number of countries and includes several offshore companies.

Axact’s online activities appear to have effectively shut down. Attempts by a reporter to contact sales agents at 221 of the company’s websites in recent days produced no response. Several of the fake accreditation bodies set up by the company, in a bid to bestow legitimacy on the universities, have gone offline.

Pakistan has requested F.B.I. assistance because many of the universities run by Axact purported to be based in the United States, operated bank accounts and mailboxes there and sold fake degrees to Americans. Axact sales agents also sold State Department authentication certificates bearing Secretary of State John Kerry’s signature.

Experts say that fake degrees can pose dangers to public safety and national security in many parts of the world and can enable immigration fraud. They can also have serious consequences for customers who are caught using them.

Two former Axact officials, speaking separately, said that in 2009, an American married couple, both members of the United States military serving in Iraq, had emailed Axact to say that they faced courts-martial for having presented academic credentials bought from a university run by Axact.

The couple requested an accreditation certificate from the university to help defend themselves, said Ahmed, a former sales agent who asked that his last name not be used. An Axact manager instructed subordinates to block the couple’s calls, he said.

Mr. Shaikh has vehemently denied any wrongdoing but admitted some involvement in the online degree business. In his last video message before his arrest, he said that Axact provided telephone support and what he termed “document management services” for other companies. He did not identify those companies.

The scandal has cast a cloud over Bol, the Axact television and newspaper group that had planned to begin broadcasting in June. On Saturday, the network’s editor in chief and several leading journalists resigned, after Pakistan’s interior minister spoke of “substantive” evidence against Axact.

Saba Imtiaz reported from Karachi, and Declan Walsh from London. Griffin Palmer contributed reporting from New York.

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