SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17664 / August 7, 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.)
KEVIN LAWRENCE CHARGED WITH CRIMINAL SECURITIES FRAUD IN LARGEST FRAUD CASE EVER IN STATE OF WASHINGTON
On August 1, 2002, the United States Attorney for the Western District of Washington announced the filing of criminal securities fraud, wire fraud, mail fraud, money laundering and conspiracy charges in federal court in Seattle against Kevin Leigh Lawrence, 36, of Bainbridge Island, Washington. The 64-count indictment alleges that Lawrence, also known as Kevin Lawrence Millar, defrauded over 5,000 investors of more than $72 million. The United States Attorney also announced that three other defendants, Donovan C. Claflin, Kevin McCarthy, and Clifford G. Baird, entered guilty pleas as part of its investigation.
Federal Bureau of Investigation agents arrested Lawrence without incident outside his fiancée's home on August 1, 2002. Lawrence was arraigned the same day and detained pending a hearing concerning his pre-trial detention is set for August 6, 2002. Lawrence's trial in federal court in Seattle is scheduled for October 7, 2002. If convicted on all counts, Lawrence faces a maximum prison sentence of 560 years.
On July 30, 2002, Claflin pled guilty to securities fraud and conspiracy and faces a maximum prison term of ten years. McCarthy pled guilty, on July 23, 2002, to mail fraud and conspiracy and also faces a maximum sentence of ten years imprisonment. On July 30, 2002, Baird pled guilty to conspiracy and faces a maximum prison term of five years. Claflin and Baird are scheduled to be sentenced on October 4, 2002, while McCarthy is scheduled to be sentenced on November 1, 2002.
Previously, the SEC filed an emergency action on January 23, 2002, against Lawrence, as well as Znetix, Inc., Health Maintenance Centers, Inc., three related companies, their controlling executives, and several family members of Lawrence, alleging that Lawrence and other executives falsely promised investors lucrative profits from the supposedly imminent initial public offering of Znetix. Additionally, the SEC alleged that Lawrence spent more than $14 million of investor funds on personal expenses, such as luxury cars, real estate, jewelry and boats. On January 23, the SEC obtained an order freezing the assets of the defendants, and temporarily enjoining Lawrence and other controlling executives from future violations of the registration and antifraud provisions of the federal securities laws. On February 15, 2002, the federal court preliminarily enjoined the defendants from such future violations and appointed a permanent receiver over the companies. Without admitting or denying the Commission's allegations, the companies, on June 6, 2002, consented to the entry of a judgment permanently enjoining them from future violations of the antifraud and securities registration provisions. Finally, on July 9, 2002, the federal court held two of Lawrence's relatives in contempt of the February 15 order.