News and Press Releases

ZNETIX STOCK SALESMAN SENTENCED FOR SECURITIES FRAUD

FOR IMMEDIATE RELEASE
April 19, 2005

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.

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