Privaris Head Helped Other Project

The president of a fingerprint technology company, which received more than $300,000 from the state Tobacco Trust Fund despite creating no new permanent jobs, helped the state-funded North Carolina’s Northeast Partnership with another project just as he launched his own business.

Barry Johnson, chairman, president, and chief executive officer of Privaris, Inc., compiled an evaluation report in August 2001 on now-defunct biotechnology company CropTech Corporation, at the request of the Northeast Partnership’s executive director, Rick Watson. Like Privaris, CropTech sought millions of dollars in financial incentives from North Carolina in order to relocate from Virginia. Both companies also received significant assistance from State Senate President Pro Tem Marc Basnight’s chief assistant at the time, Rolf Blizzard.

Johnson is a professor of electrical and computer engineering at the University of Virginia who is currently on leave, according to Privaris’s website. He co-founded the company as Transforming Technologies in 1998, and the company received its initial private funding in January 2001. According to a PowerPoint presentation obtained by Carolina Journal, the company hired its first employee in March 2001, when it also registered as a corporation in Delaware. The company became Privaris in October 2002.

Privaris’s core technology is a biometric security device that reads a fingerprint to authenticate an individual’s identity. The company created a “laboratory prototype” in June 2001 and continued to develop the product throughout 2002. Meanwhile, Privaris board member Ernest Knighton of Edenton, a “preferred investor” in the startup company, lobbied Blizzard to get the N.C. Division of Motor Vehicles to conduct a pilot security project using the technology.

The DMV agreed to oversee the project but would not contribute any financial resources for it. Instead, Watson persuaded the Tobacco Trust to grant $350,000 for the pilot in October 2002. A month later, Watson transferred oversight of the grant from the Northeast Partnership to the Martin County Economic Development Corporation. Sources with direct knowledge of the project, who requested anonymity, told CJ that Watson is an investor in Privaris, although he would not confirm or deny to the Washington (N.C.) Daily News whether he is. When Knighton, one of Privaris’s four directors, was asked recently by CJ whether Watson was one of the company’s investors, he said he didn’t know.

As Johnson tried to get his company off the ground, he was asked by Northeast Partnership consultant Cathy Scott to spend the weekend of Aug. 10-12, 2001 investigating CropTech for Watson. The partnership, along with officials from Chowan County and the Town of Edenton, had negotiated incentives that they hoped would entice CropTech to relocate there. Among those local officials working on the CropTech project was Anne Marie Knighton, Edenton’s town manager and Ernest Knighton’s wife.

Johnson returned with a report compiled from information collected through Internet research, and through interviews with individuals who, he said, were knowledgeable about CropTech.

Johnson rated CropTech’s patented process, in which genetically engineered plants grow proteins for pharmaceutical uses, as “excellent,” even though “the technology is not in my specific area of expertise.” He justified his characterization based on the fact that the company had already received more than $7.7 million in federal funding from “highly competitive and peer reviewed research grant programs.” He also cited the Commonwealth of Virginia’s willingness to invest in CropTech (more than $1 million funneled to the company).

While Johnson praised CropTech as a research company, he raised doubts about its abilities to commercialize its products. “The missing feature in CropTech’s portfolio right now is a commercial product that someone is interested in paying to purchase or use,” Johnson wrote in his report for the Northeast Partnership.

He also questioned whether any of the money that CropTech obtained from Virginia might need to be repaid should the company leave for another state.

The Northeast Partnership immediately delivered Johnson’s report to what they called their “higher powers” — that is, Blizzard.

“Rolf Blizzard, on behalf of Senator Basnight, has reviewed this information and has indicated that the Senator’s support for this project remains intact,” wrote Cathy Scott, a consultant for the Northeast Partnership, to a local economic developer in Elizabeth City.

Blizzard helped secure a $3 million grant from the Tobacco Trust for CropTech, part of a larger package that included local incentives. Blizzard served as a focal point for negotiation among all parties for the project. However, the biotech company announced in May 2002 that it was relocating to South Carolina. It later declared bankruptcy.

Blizzard served a key role in getting public agencies’ help for both CropTech and Privaris. With CropTech, he was to secure the $3 million from the Tobacco Trust, $250,000 from the Governor’s Competitive Fund, and $200,000 from the N.C. Rural Economic Development Center. According to Northeast Partnership records, “Senator Basnight want[ed] this project very much.”

“Mr. Blizzard was able to assemble all the funding agencies together in order to negotiate a recruitment incentive package attractive to CropTech,” said Peter Rascoe, a lawyer for Chowan County.

With Privaris, Blizzard pressured DMV officials, including former Commissioner Carol Howard, to devote its human resources to the project. Some DMV officials thought the HAZCAP project was not worthwhile, although Howard said she thought the technology held promise.

Both companies also stood to provide a personal financial benefit for Watson, the alleged investor in Privaris. Watson proposed that CropTech give ownership equity to the Northeast Partnership in exchange for helping the company get financial incentives.

Privaris benefited from the DMV project other than just the $308,000 it received through the Tobacco Trust grant, because it gave the company’s technology some legitimacy. Privaris used its North Carolina project to pursue greater financial investment and contracts with other government agencies and private companies.

Johnson told CJ in January 2004 that he did not know why the Northeast Partnership sought him out to conduct research about CropTech.

According to Tobacco Trust records, Privaris created three jobs in Martin County, short of the 10 to 15 required in its agreement to receive the Tobacco Trust grant. But Johnson told CJ in January 2004 — one month after the DMV project was complete and Privaris had vacated its Williamston offices — that he had filled only two of the positions. He said that an offer had been extended to another candidate for the third position, but that the job was never filled.

“We are still committed to Martin County,” Johnson said at the time. He and other Privaris officials have not responded to recent messages left by CJ.

Paul Chesser is associate editor of Carolina Journal. Contact him at [email protected].