ShinRa wanted to cover up the Nibelheim Incident (they rebuilt Nibelheim and populated it with actors, and pretended that nothing happened). Zack and Cloud, having been there, knew too much, so they were "donated" to Hojo and his experiments. When they escaped from Hojo's lab they were deemed a threat to ShinRa and so were targeted for execution (Cloud escaped because Zack hid him before the battle). In the original game, the soldiers ignored Cloud him because he was psycologically broken and could not reveal anything.