swft
Needs a life
Full throttle!
Posts: One MEEEEEELLION
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posted August 02, 2002 02:20 AM
Remember Znetix?
Aug. 2 - Znetix founder Kevin Lawrence was led away in handcuffs yesterday morning as eight FBI agents arrested the Bainbridge Island man on 64 counts of fraud and money laundering in what regulators have described as the largest stock swindle in the state's history.
Lawrence, who was arrested at a Bainbridge Island residence at 8:30 a.m., pleaded innocent in a preliminary court appearance yesterday afternoon in Seattle. The 37-year-old remains in custody awaiting a detention hearing next Tuesday.
Lawrence, who was voted "Most Romantic" and "Biggest Spender" by his Bainbridge High School Class of 1984, faces a maximum sentence of 560 years in prison for allegedly bilking more than 5,000 investors, including thousands in Washington state, out of as much as $91 million.
The criminal indictment accuses Lawrence of squandering much of the money on jewelry, homes, swords, boats and exotic cars, including a Ferrari 360 Modena Spider F-1, a Porsche 911 Carrera Cabriolet and several Hummers. Court documents also reveal that investor money was transferred to offshore accounts in the Bahamas and the Caribbean island of Nevis.
"Whether (Znetix) started out as a legitimate business concept and snowballed into a fraud or was a fraud from the get-go, I really don't know," said Assistant U.S. Attorney Jeffrey Coopersmith, who is prosecuting the case. "Our allegation against Mr. Lawrence is that he simply lied to investors to get their money."
Znetix was touted as a revolutionary concept -- combining heath care and fitness -- through software and exercise equipment.
Lawrence's court-appointed attorney could not be reached for comment.
Under current sentencing guidelines, Coopersmith said Lawrence could spend more than 25 years in jail if he is found guilty.
Three other defendants in the case -- Donavon Claflin, Kevin McCarthy and Clifford Baird -- pleaded guilty to charges of fraud late last month. Claflin, a Redmond resident and former treasurer of Health Maintenance Centers, an affiliated company of Znetix, faces a maximum of 10 years in prison.
McCarthy, the former director of investor relations at HMC, pleaded guilty last week to mail fraud, money laundering and conspiracy to commit fraud. The Woodinville resident and former minister faces up to 10 years in prison.
Baird, an inspirational speaker and author of the book "Power of a Positive Self Image," faces five years in prison. The Scottsdale, Ariz., resident, who led Cascade Pointe, an affiliated company of Znetix and HMC, pleaded guilty Tuesday to conspiracy to commit fraud as well as money laundering.
Claflin and Baird will be sentenced Oct. 4 while McCarthy will be sentenced Nov. 1. All three men are cooperating with authorities, Coopersmith said.
The investigation of Znetix, HMC, Cascade Point and other entities is being conducted by the FBI, the Securities and Exchange Commission, Internal Revenue Service and several state securities agencies. The investigation, which began more than 16 months ago, is ongoing. Coopersmith declined to say whether any more indictments will be handed down.
Znetix, which was purportedly developing a next-generation fitness and health care concept, maintained a high-profile during its short history. It sponsored community events on Bainbridge Island, two hydroplanes, a motorcycle team, offshore racing boats, a billboard at Safeco Field, an Oscar party in Hollywood and other events. Basketball star Shaquille O'Neal even wore a Znetix cap after the Los Angeles Lakers won the National Basketball Championship last year.
But many of those high-profile sponsorships and parties were only used to promote the scheme, according to the criminal indictment.
The indictment also alleges that Lawrence and others made false statements and promises related to the size and timing of a Znetix initial public offering, a $500 million contract from an investor group in China, a billion-dollar contract with the U.S. Department of Defense and the technology behind the companies.
He also allegedly lied about his previous employment, saying he had worked for investment bank Morgan Stanley in Japan. Lawrence also told investors that he wasn't being paid for his duties at Znetix and HMC, something the indictment says is false.
Investors and creditors greeted the news of Lawrence's arrest with relief and happiness.
Steve Huff, owner of Huff Motor Sports in Seattle, says Znetix still owes his company $470,000 for sponsoring his motorcycle racing team last year. Because of the missed payments, Huff said he has reduced his staff from five full-time employees to one employee. He also has been selling off equipment and parts in order to raise money to attend races across the country.
"It's about time," said Huff. "Just when we are starting to lose faith in the system and we hear the press and media and even the president saying we got to do something, here's the perfect example where something is done to stop the thieves, to stop the criminals."
Huff, who met Lawrence at a fund-raiser on Bainbridge Island, now believes Znetix was a scam from the beginning. He said he knows people who have lost homes, friends and retirement savings in the deal.
Wendi Meisner of Newberg, Ore., borrowed money from a life insurance policy in order to make an investment in Znetix.
She and her husband were told by a friend that the company was on the verge of going public, so they wrote a $6,000 check and waited patiently for the IPO. When it didn't happen, they began to worry.
"I am extremely ecstatic that he is in jail," said Meisner. "It is good to see that they have done something about it."
She believes her $6,000 investment is gone for good.
But Coopersmith said they will attempt to get money back to investors.
An asset sale has been scheduled for Aug. 22-24 at the James. G. Murphy Co.'s auction facility in Kenmore and the former Znetix headquarters on Bainbridge Island. More than 20 cars, several Rolex and Cartier watches and an assortment of jewelry will be sold.
But the court-appointed receiver, who took control of the company's assets and financial records in February, stated in a forensic accounting report in June that he has been unable to find much cash. As of February, the companies had only $48,389, the report said.
Coopersmith said the plea agreements with McCarthy and Baird indicate that "a lot of money was transferred offshore" especially to the Caribbean island of Nevis.
Deborah Bortner, director of the securities division at the state's Department of Financial Institutions, said her agency devoted nine employees, out of a staff of 45, to the Znetix/HMC investigation. She said the cooperative effort behind the investigation and yesterday's indictment shows that those who attempt to defraud investors will be prosecuted.
"This case, I think, does send a message about the kinds of cases we are seeing on TV every day: companies that are lying to investors. That is what this is about," Bortner said. "We want investors to know that we are trying to clean up the market."
Word of Lawrence's arrest was slow to leak out on Bainbridge Island, where Lawrence maintained several homes and spent most of his life. A bartender at the Harbor Public House, located next door to the former Znetix headquarters, said he had not heard about the arrest. He declined to give his name.
Lee Jorgenson, owner of the San Carlos Restaurant, located across the street from the former HMC gym, also was unaware of Lawrence's arrest.
"I think that is a breakthrough really," said Jorgenson. "Everyone was wondering why he is still walking the streets and why he is not in South America."
  
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ZHooligan
Moderator
Post Whore Extraordinaire!
Posts: 3829
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posted August 02, 2002 07:18 AM
What a scam. He certainly enjoyed his oops I mean their money. For those who don't know about this guy, he bought a 996R for a learner bike. He wanted something cheap that he could crash or throw away as he learned to ride. He also bought one of those jet motorcycles like Jay Leno has.
When he went into The Brothers Powersports one day last year he bought the 996 and a couple of quads. He noticed one of the Yamaha boats. Asked a question about it. The sales guy said you know you would make my month if you bought that boat. The guys said what the hell. He spent over $80,000 on the boat, 996 and quads that day. He had a storage yard and shop on bainbridge where all of the stuff was stored. Feraris, vipers, porshes, rolls, you name it. The guy had bill board in Safeco field etc. The company had a huge image. And it was all investors money and the only product the company actually made was it marketed itself to investors and the guy had a blast!!!
____________
To those who do not count their life in years, but in how life
has touched them in the past and how much it can hold in the
future; -- Youth is forever.
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frEEK
Administrator
ummm... yeah
Posts: 9660
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posted August 02, 2002 01:16 PM
rot in hell assholes!
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madmike
Moderator
FEAR THE BLACK FLAG!!!!!!!!
Posts: 6579
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posted August 02, 2002 02:28 PM
wow, dude how much did you loose in that deal??
MM
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frEEK
Administrator
ummm... yeah
Posts: 9660
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posted August 02, 2002 05:34 PM
if ya mean me...none. but i absolutely fucking hate this kinda shit. same goes fer worldcom & the rest too. top executives make 10s or hundreds of millions off stock options & the whole company goes bankrupt taking countless people's retirement savings with it. 50 years or more ago i'll bet these executives would be lynched by a mod, but now i guess we're more civil so they get away with this shit.
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beansbaxter
Needs a life
Posts: 5911
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posted August 02, 2002 07:35 PM
My stocks are in the rutt...and another reason why.
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ZHooligan
Moderator
Post Whore Extraordinaire!
Posts: 3829
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posted August 02, 2002 09:45 PM
The wild part is is this guy almost got to Swft and I. They marketed us heavy about helping them with their race team. Sounded pretty legit. But we were skeptical enough that someone else bit first!!!
____________
To those who do not count their life in years, but in how life
has touched them in the past and how much it can hold in the
future; -- Youth is forever.
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madmike
Moderator
FEAR THE BLACK FLAG!!!!!!!!
Posts: 6579
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posted August 03, 2002 05:07 AM
Oh man lucky you! these guys are snake's!
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