SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17372 / February 21, 2002
SECURITIES AND EXCHANGE COMMISSION v. HEALTH MAINTENANCE CENTERS, INC., ZNETIX, INC., CASCADE POINTE OF ARIZONA, LLC, CASCADE POINTE OF NEVIS, LLC, KEVIN L. LAWRENCE, DONOVAN C. CLAFLIN, CLIFFORD G. BAIRD, BAINBRIDGE HUMAN PERFORMANCE CENTERS, PLLC, KIMBERLY ALEXANDER, BONNIE M. COUCH, STACY GRAY, and VICKI L. LAWRENCE, Civil Action No. C 02-0153 P (W.D. Wash.)
FEDERAL COURT ORDERS PRELIMINARY INJUNCTION AND APPOINTS PERMANENT RECEIVER IN SEC ACTION, HALTING $74 MILLION SECURITIES FRAUD IN WASHINGTON STATE
On February 15, a federal judge in Seattle, Washington issued a preliminary injunction, in an action brought last month by the Securities and Exchange Commission ("Commission"), halting a $74 million securities fraud scheme by Kevin L. Lawrence ("Lawrence"), 36, of Bainbridge Island, Washington and his companies, Health Maintenance Centers, Inc. ("HMC") and Znetix, Inc. ("Znetix"). The court also placed a permanent receiver over HMC, Znetix and two LLCs allegedly created to funnel additional investor funds to these companies, Cascade Pointe of Arizona, LLC and Cascade Pointe of Nevis, LLC (collectively "Cascade"). HMC and Znetix, located on Bainbridge Island and in Seattle, purportedly developed and operated "medically integrated" health clubs.
The Commission's complaint alleges that the scheme induced more than 5,000 investors nationwide to invest with promises of (1) an initial public offering ("IPO") of Znetix occurring within a specific time (one month to three years) and with a specific price of $3 to $60 per share; (2) the existence of significant current operations of Znetix; and (3) the use of investor proceeds to fund HMC/Znetix operations and capitalize the Znetix IPO. The complaint further alleges that HMC/Znetix could not and did not go public. Znetix did not have significant current operations. A significant portion of investor proceeds, at least $16 million or 22%, did not go to fund company operations or fund an IPO. Rather, these funds went to support the lavish lifestyle of Lawrence, his right-hand man Donovan Claflin ("Claflin"), and their friends and family in the form of luxury cars, expensive boats, prime real estate and precious jewelry.
The Court preliminarily enjoined HMC, Znetix, Lawrence and Claflin from violating the antifraud and registration provisions of the federal securities laws. It also preliminarily enjoined Cascade and its managing director, Clifford G. Baird ("Baird"), from violating the registration provisions. Additionally, the Court continued the asset freeze over all of the named defendants: HMC, Znetix, Cascade, Lawrence, Claflin, Baird, and relief defendants Bainbridge Human Performance Centers, PLLC ("BHPC"), Kimberly Alexander ("Alexander"), Bonnie M. Couch ("Couch"), Stacy Gray ("Gray") and Vicki L. Lawrence ("Vicki Lawrence"). Finally, the Court prohibited the destruction of documents by HMC, Znetix, Cascade, Lawrence, Claflin and Baird and ordered accountings by HMC, Znetix, Cascade, Claflin, BHPC, Alexander, Couch, Gray and Vicki Lawrence.