April
19, 2005
ZNETIX
STOCK SALESMAN SENTENCED FOR SECURITIES FRAUD
ALFONSO D. LACSON, Jr., 36 of Kirkland, Washington was sentenced to
30 months in prison and three years of supervised release yesterday
for securities fraud relating to the sale of stock in Znetix, Inc.,
Health Maintenance Centers, Inc., Cascade Pointe LLC, and affiliated
entities. U.S. District Judge Marsha J. Pechman ordered LACSON to pay
$623,500 in restitution for his part in the fraud. The $91 million Znetix
stock fraud is the largest ever in the State of Washington.
The charge against LACSON arose out of the government's investigation
of the offer and sale of over $90 million of securities by Znetix, Inc.,
Health Maintenance Centers, Inc., Cascade Pointe, LLC, and affiliated
entities. The conspiracy's ringleader was KEVIN L. LAWRENCE, who is
currently serving a 20-year prison term. Over the course of about seven
years, LAWRENCE and his co-conspirators defrauded thousands of investors
out of approximately $91 million through a massive conspiracy 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.
The State of Washington's Department of Financial Institutions issued
a Cease and Desist Order in April, 2001, directing HMC and its agents
to stop selling securities. In his plea agreement, LACSON admitted he
willfully sold HMC stock to one investor without informing that investor
of the Cease and Desist order. At the sentencing hearing held on April
18, 2005, Judge Marsha J. Pechman, who has handled all of the criminal
and civil cases arising out of the Znetix scheme, heard from several
witnesses presented by the government and found that LACSON had continued
to sell over $600,000 worth of securities to other investors after the
Cease and Desist Order barring further sales of HMC stock. In one instance,
according to the evidence presented by the government, LACSON convinced
a man who knew about the Cease and Desist Order against HMC to invest
$75,000 by telling him that HMC had changed its name to "HPC."
The fraud on investors was facilitated, in part, by the expenditure
of millions of dollars of investors' funds to launch an advertising
campaign that included placing a large sign at the Seattle Mariner's
Safeco Field, and having sports stars such as Shaquille O'Neal wear
a Znetix cap after the Los Angeles Lakers' 2001 NBA championship. The
advertising campaign was designed only to sell more stock, as Znetix
had no products or services to offer and little or no revenue. Znetix
had been touted as a company engaged in providing cutting-edge health
and fitness products and services. Judge Pechman enhanced LACSON's sentence
based on the companies' use of mass marketing, such as the sign at Safeco
Field, to ensnare investors. A representative of the Seattle Mariners
testified at the sentencing hearing that Znetix had its sign up at the
ballpark during the latter part of the Mariners' 2000 season and for
the entire 2001 season. The Mariners' representative also testified
that Znetix sponsored a "bat night." Judge Pechman commented
that despite all the Znetix advertising, LACSON had "nothing to
sell."
A court appointed receiver has recovered some of the money lost by
investors, through auctions and by pursuing civil actions, such as a
lawsuit against the Seattle law firm that represented HMC and LAWRENCE.
The Receiver estimated earlier this year that investors may see a return
of 20 cents on the dollar.
This case was investigated jointly by the State of Washington Department
of Financial Institutions, Securities Division, the Federal Bureau of
Investigation, the Securities and Exchange Commission, the Internal
Revenue Service, and the securities enforcement authorities in several
other states, including the states of Illinois, Hawaii, Wisconsin, and
Oregon. U.S. Attorney John McKay expressed his gratitude in particular
for the work of the State of Washington Department of Financial Institutions,
Securities Division, which took the lead in analyzing over 600 bank
accounts used in the course of the conspiracy to defraud investors.
Assistant United States Attorneys Jeffrey B. Coopersmith, Richard E.
Cohen, Ye-Ting Woo and Special Assistant United States Attorney Todd
Brilliant prosecuted the case.
More information regarding this case, a copy of the Court's Judgment,
and other court documents and press releases are available by following
the victim-witness and Znetix links on the web site for the United
States Attorney's Office. Information about the case also is available
on the Receiver's web site. For
further information, please contact Richard E. Cohen, Assistant United
States Attorney at (206) 553-7970, or Emily Langlie, Public Affairs
Officer for the United States Attorney's Office, at (206) 553-4110.
