Subject: Testimony of Patrick Hinojosa Testimony of Patrick Hinojosa Chief Financial Officer and Vice President Panda Software U.S. before the Subcommittee on International Operations and Human Rights, International House Relations Committee July 11, 2001 Chairwoman Ros-Lehtinen and distinguished members of the Subcommittee. My name is Patrick Hinojosa. I am the Chief Financial Officer and Vice President of Panda Software US, which is part of Panda Software International. Panda is the fourth largest producer of anti-virus software in the world. The market for computer anti-virus software has grown to approximately one billion dollars per year and continues to expand. The biggest markets for Panda are the United States, Great Britain, France and Germany. Panda’s American clients include DaimlerChrysler, Panasonic and the U.S. and international offices of Boeing Corporation. It is widely recognized that in Europe our company is the industry leader. Madame Chairwoman, I greatly appreciate your invitation to testify today about the practice of religious discrimination in European Union countries, and how such discrimination can act as a trade barrier to U.S. and other foreign companies doing business in the European Union. As Panda Software’s recent experiences in France illustrate, governmental religious discrimination can have a serious commercial impact in the public and private sector on companies whose ownership or employees belong to a disfavored religious minority. Panda Software in France, which is majority- owned by Panda USA, has had government and private contracts cancelled, been permanently precluded from future procurements, and has been the subject of damning and false public accusations by French officials. Since Panda became the target of such religious and economic discrimination in France, which has been our third largest market after the United States and Great Britain, our French subsidiary operation has suffered a devastating 50% drop in revenue. In a matter of only a few months, a governmental campaign of defamation and unfounded accusations against Panda has taken hold – solely because the French government does not like the religious choice of Panda’s founder and so placed his religious denomination on a list of 172 “disfavored” religions along with Baptists, Jehovah’s Witnesses, Buddhists, Hindus and others. Panda’s founder, Mr. Urizarbarrena, and his wife have for many years been members of the Scientology religion. This French government discrimination has resulted in the current situation whereby Panda Software is now effectively barred from access to the French governmental and major private markets. Until several months ago, Panda Software’s main customers in France included major French and multi-national companies, and a host of government agencies such as the French Ministry of the Interior and regional education authorities. They all have reneged on their contracts with Panda. You might ask how can such devastating government-sponsored economic discrimination take place in an apparently modern industrial democracy such as France? At Panda Software, we have been asking the same question. We create and sell an excellent software product that has won countless awards and commendations from software industry groups and publications. I have attached a sample of these awards to my testimony and request that they be included in the record. Our product and our record, like that of any company, should be all that matters; however, a stack of cancelled French government and French private sector contracts proves otherwise. Being forced to investigate the motivation of the French government, I discovered that various commissions and ministries within the French state have been engaged in a systematic campaign of discrimination and intolerance against a wide range of minority religions and their members. Indeed, there is a list of 172 targeted religious groups, many of them American. Out of the blue, in April 2001 the allegations surfaced – without a shred of evidence to justify the accusation – that Panda's anti-virus software might be able to somehow access the confidential databases of the French Ministry of Interior and if this could happen then the information would be sent to the Church of Scientology. This allegation is patently absurd. All of the major international anti-virus certifying organizations have rigorously tested Panda’s products and given them their highest available levels of certification. It was also alleged that buying and leasing Panda’s products was equivalent to funding the Church of Scientology via the company, another patent falsehood. Panda and the Church of Scientology have no connection whatsoever; what religion our company’s founder belongs to is his personal and private decision, a protected democratic right enshrined in many an international human rights instrument. As you may have heard, similarly wild and unfounded allegations were made in early 2000 against American software manufacturer, Executive Software, by government officials in Germany. Executive Software CEO Craig Jensen testified about this nightmarish experience before the International Relations Committee just about a year ago. In short, he too happens to be a member of the Church of Scientology, a religion fully recognized by the government and courts in the United States. This was the sole reason that his company, and in fact the entire Microsoft Windows 2000 Operating System for which Executive Software supplies a component, was attacked causing serious and costly delays in the release and use of Windows 2000 in Germany. Indeed, an article in the French news magazine L'Express stated that the German Ministry of the Interior, quote, "had also had to confront a similar problem." However, L’Express omitted to mention the fact that the allegation against Executive Software was disproven when a year of German governmental inspections declared them completely unfounded – an outcome that was noted in the U.S. State Department's 2000 Annual Human Rights Report. Back to Panda’s own story of trade discrimination in France. A French Ministry of Education official, stated on national television that “We are asking the heads of schools not to acquire [software produced by Panda] and for those who already have it, to stop using this software.” From there the government’s campaign really took off. Some fifteen major articles have been published, which are attempting to discredit Panda Software as a so-called “sect company.” The media are amply supplied with material. The Education Ministry was followed by the Ministry of the Interior, and the regional governmental bodies of Créteil and Montpellier announced that they were terminating their agreements with Panda because of its founder’s religious adherence. Government councils of the Gironde, Côte d’Armor, and Aube regions also announced that they were canceling their contracts with Panda. More so, the religious discrimination that forms the basis for such commercially harmful actions was openly admitted. In a letter the Ministry of Education sent to French colleges, the Ministry wrote: "Even though this material [Panda software] presents no danger in its present form, I am asking you to cease using it." The letter went on to make the ridiculous accusation that Panda Software, is a “subsidiary of the Church of Scientology." How much more blatantly wrong and discriminatory can one be? Panda has no ties, financial or otherwise, to the Church; it is an independent company with more than 600 employees, managed by its own executives and board. The economic consequences for Panda of this religious discrimination have been brutal. Apart from numerous government agencies, many private entities in France have also reneged – some with disturbing public vigor – on their contracts with Panda Software. Not surprisingly, the private sector soon felt the pressure of governmental intent and soon followed its lead. All the major supermarket chains in France – Carrefour, FNAC, Auchan, Cora, Leclerc and Casino – announced that they are canceling their agreements with Panda. Likewise, the software wholesaler Ingram Micro has cancelled its contract with Panda Software in France. As Ingram Micro is a major distributor for the retail computer hardware and software market, Panda Software is now effectively barred from selling to this market segment. As one can imagine, projected economic losses are even greater than actual losses to date. Because of this discrimination campaign against Panda, the plan by Panda U.S. to bid for government security contracts in France has to be shelved. The government sectors in Europe tend to possess the largest computer structures and networks in the nation, and being unable to place bids for government contracts puts my company at an extreme disadvantage vis-à-vis our competitors. It is obvious that Panda Software has suffered by being denied the respect and status in the private sector that comes with being a contractual partner in the government sector. My company produces software for computer security. Having a major European government spread the false accusation that our software can lead to security breaches on a computer system has a very chilling effect worldwide for our company. Considering further that today we operate in the “global economy” that has been largely built by U.S. companies, the discriminatory and defamatory behavior of one of the G-7 countries affects Panda not only in France or Europe but has a highly negative effect on our business prospects in other world markets, too. The effective ban and boycott of Panda Software by the French government simply because of Mr. Urizarbarrena’s religious association and beliefs painfully highlights the existence in France of a deliberate government policy to attack and discriminate against companies, if its leaders have the audacity to belong to a religion that French politicians don’t favor and have blacklisted. I am afraid the economic damage and trade barriers that are being erected against foreign firms in France are likely to become more prevalent in the near future. As I mentioned earlier, for the past six years the French Government has taken increasingly brazen steps against members of minority religions, and recently France enacted an “anti-sect” law characterized by American religious observers as a vicious attempt to destroy minority religions in France. I am a businessperson. I don’t mind competition. In fact, we thrive because of competition. It spurs the creation of better products and better deals and service for the consumer. It creates jobs and prosperity – this is what makes us proud to be entrepreneurs and is the reward for the hard work and the risks. I am not asking for advantages or a favored position, all I ask for is a level playing field. I therefore implore, Mrs Chairwoman, that you and the U.S. Congress give serious consideration to the means available under existing legislation or other available instruments and vehicles to make the French government realize that discriminating against U.S. companies and persons, based upon the religious affiliation of their founders or executive staff, is a violation of international public policy and France’s international treaty commitments, and that it will not be tolerated by the United States. Thank you for hearing my testimony.