U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18483 / December 3, 2003
UNITED STATES OF AMERICA v. KEVIN L. LAWRENCE, STEVEN J. REIMER, MICHAEL J. CULP, LARRY L. BEAMAN, HARVEY W. KUIKEN, ALEX LACSON, AND ALFONSO LACSON, JR., Criminal Action No. CR02-260P (W.D. Wash.)
KEVIN LAWRENCE SENTENCED TO 20 YEARS IMPRISONMENT IN ZNETIX STOCK FRAUD
On November 25, 2003, United States District Judge Marsha J. Pechman in Seattle, Washington, sentenced Kevin Leigh Lawrence, 37, of Bainbridge Island, Washington, to 20 years in prison for his role in the Znetix stock fraud. On July 28, 2003, Lawrence entered guilty pleas to one count of securities fraud, one count of wire fraud and one count of conspiracy to commit securities fraud, wire fraud, mail fraud, unlawful sale of unregistered securities, money laundering, and engaging in monetary transactions with proceeds of unlawful activity. Judge Pechman also ordered Lawrence to pay $91,644,845.86 in restitution. The U.S. Attorney believes that this restitution order is the largest in Washington state history.
As part of his guilty plea, Lawrence waived any right to appeal, and agreed to cooperate fully with the U.S. Attorney and the receiver appointed as part of the Securities and Exchange Commission's related case in identifying assets. Additionally, Lawrence agreed to forfeit a number of previously-seized assets. Originally indicted on July 31, 2002 in a 64-count indictment, Lawrence admitted that over the course of about seven years he intentionally, knowingly, and willfully defrauded thousands of investors out of up to $100 million through his leadership of a massive conspiracy and scheme to defraud involving false representations and failures to disclose truthful and accurate information in connection with the sale of the securities of Znetix, Inc., Health Maintenance Centers, Inc., Cascade Pointe, LLC, and affiliated entities. He further admitted that he intentionally, knowingly, and willfully used the funds received from investors for his own personal use and benefit and for the use and benefit of his co-conspirators and others, including for the purchase of luxurious homes, cars, boats, merchandise, and travel. Finally, he admitted that he intentionally, knowingly, and willfully made false statements and directed others to make false statements to the State of Washington's Department of Financial Institutions, Securities Division, and to the Securities and Exchange Commission.
Previously, the Commission 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 Commission 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 Commission 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. Subsequently, the Commission entered into settlement agreements with relief defendants Vicki Lawrence, Stacy Gray, and Bonnie Couch, the ex-wife, fiancée and mother of Lawrence, respectively. Without admitting or denying the Commission's allegations, defendant Clifford G. Baird, on October 3, 2003, consented to the entry of a judgment permanently enjoining him from future violations of the antifraud and securities registration provisions. Baird also agreed to disgorge his ill-gotten gains from the stock offerings in the amount of $374,077.36 and pay prejudgment interest in the amount of $8,875.48. The Court retained jurisdiction to determine the penalty, if any, Baird must pay for his violations of the securities registration provisions. The Commission's case is pending against the remaining defendants, Kevin L. Lawrence, Donovan C. Claflin, and Kimberly Alexander.
For more information see Litigation Release Nos. 18423 (October 23, 2003), 18291 (August 18, 2003), 18240 (July 21, 2003), 17664 (August 7, 2002), 17613 (July 15, 2002), 17587 (June 26, 2002), 17372 (February 21, 2002), and 17335 (January 24, 2002).