News reports detailing Yasser Arafat’s link to the company that owns a bowling alley in Greenwich Village will probably hurt Bowlmor Lanes, especially among Jewish customers, the company’s CEO said yesterday.

“The pain has been personal, and I’m sure it will be financial as well,” Thomas Shannon said.

Addressing a throng of reporters in front of the shiny wood lanes off Union Square that have catered to dignitaries such as Mayor Giuliani and GOP delegates to this summer’s Republican National Convention, Mr. Shannon said he severed business relationships with a former classmate and money manager who invested $1.3 million from Palestinian Commercial Services Company, a Ramallah-based holding firm controlled by the Palestinian Authority.

“We don’t choose to be affiliated with any political organization, especially one that may or may not have ties to things we find abhorrent,” Mr. Shannon said. “I am glad that at least this came to my attention, so that we can prevent the PCSC from profiting by an investment in a good American company.”

Mr. Shannon said he was unaware of his company’s relationship to the holding company or to a related subsidiary that has links to Arafat, Onyx Funds, until he read a recent report in Bloomberg Markets magazine on Arafat’s finances.

Mr. Shannon also said the investments, which he said represent approximately 2% of his company’s equity, would be rescinded, without any profit realized by the Palestinian holding fund. The money is to be placed in escrow until attorneys for the company devise a mechanism for returning it, Mr. Shannon said, and he has terminated his money manager, Zeid Masri, with whom he had gone to school.

After speaking with him over the phone yesterday, Mr. Shannon described Mr. Masri’s reaction to the CEO’s “outrage” over Arafat’s investments as one of “bewilderment.” Mr. Masri didn’t see any problem in the arrangement, Mr. Shannon suggested.

Mr. Masri, founder and managing partner of SilverHaze Partners, a private equity fund based in McLean, Va., could not be reached for comment yesterday. He was taking the day off, according to a receptionist there. In a statement released by SilverHaze yesterday, however, the fund’s manager defended the investment by the Palestinian Authority and criticized news outlets for distorting a “transparent process.”

“The Palestinian National Authority, like all governments worldwide, invests money on behalf of their people in a broad spectrum of businesses and investments,” the statement reads. “Mischaracterizing this process to exploit complex political sensitivities serves no one.”

Mr. Shannon said that some time ago, his company performed due diligence with the federal Department of Homeland Security and the U.S. Treasury, and that all the holding companies involved were legitimate. “It’s a perfectly legal situation, just not a right one,” Mr. Shannon said.

When asked if the federal government should have more stringent thresholds for foreign companies looking to invest in America, he said: “I’m not qualified to answer that. I’m a small businessman caught up in a larger global issue.”

Mr. Shannon’s company, Strike Holdings, also runs bowling alleys in Long Island, Maryland, and Florida. Bowlmor, which charges $8 per game, is known to attract a clublike crowd at night and larger groups, often for bar and bat mitzvahs, during the day.