UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

UNITED STATES OF AMERICA,	)

)	NO.

Plaintiff,	)

)

v.	)	INFORMATION

)

CLIFFORD G. BAIRD,	)	(Felony)

)

Defendant.	)	FILED UNDER SEAL

_______________________________________)

THE UNITED STATES ATTORNEY CHARGES THAT:

COUNT 1

(Conspiracy)

From in or about 1995, and continuing thereafter until on or about January 23, 2002, at Bellevue, Seattle and Bainbridge Island, within the Western District of Washington, and elsewhere, the defendant, CLIFFORD G. BAIRD, together with other persons known and unknown to the United States Attorney, did unlawfully, willfully, and knowingly combine, conspire, confederate and agree among themselves and each other to commit certain offenses against the United States, as follows; defendant CLIFFORD G. BAIRD knowingly joined the conspiracy on or about June 22, 2001:

A.	INTRODUCTION

1.	Health Maintenance Centers, Inc., ("HMC") was incorporated in Washington State on May 12, 1995, and was administratively dissolved and reinstated at various times throughout the period from on or about December 6, 1995, through on or about October 30, 2000. The Articles of Incorporation for HMC provided that the corporate purposes of HMC were "[t]o operate health and exercise clubs, and related facilities" and "[t]o engage in any business, trade or activity which may be conducted lawfully by a corporation organized under the Washington State Business Corporation Act." The Articles of Incorporation for HMC also provided that "[t]his corporation is authorized to issue 10,000 shares of common stock and each share shall have a par value of $1.00." On February 5, 1997, HMC filed Articles of Amendment that provided, among other things, that "[t]his corporation is authorized to issue 15,000,000 shares of common stock and each share shall have a par value of $1.00." On or about December 26, 2001, HMC ceased to exist as a Washington State corporation and merged with a Delaware corporation known as HMC Acquisition Corp., a wholly-owned subsidiary of Znetix, Inc. Also on or about December 26, 2001, HMC Acquisition Corp. changed its name to Health Maintenance Centers, Inc.

2.	Project X, Inc., was incorporated in the State of Washington on November 3, 1999. On October 3, 2000, Project X filed Articles of Amendment with the Washington State Secretary of State changing its name to Znetix, Inc. On or about September 25, 2001, Znetix, Inc., ceased to exist as a Washington State corporation and merged with a Delaware corporation known as Znetix, Inc.

3.	From in or about 1995 through in or about January, 2002, HMC, Project X, and Znetix, and affiliated entities, through various sales agents and at the direction and with the participation of persons known and unknown to the United States Attorney, solicited and received in excess of $50 million from investors. At no time were the offers and sales of securities issued by HMC, Project X, Znetix, and affiliated entities registered with the United States Securities and Exchange Commission, the State of Washington Department of Financial Institutions, Securities Division, or with the securities regulatory authority in any other state.

4.	On or about April 9, 2001, the State of Washington Department of Financial Institutions, Securities Division, issued a Summary Order to Cease and Desist against HMC and an individual known to the United States Attorney. The Cease and Desist Order, among other things, barred HMC (and its employees, officers and directors) from selling securities through fraudulent representations and material omissions, and in violation of the State of Washington's securities registration statute.

5.	Cascade Pointe LLC was a limited liability company formed in Washington State on or about May 2, 2001. Cascade Pointe of Arizona LLC was a limited liability company formed in Arizona in or about July, 2001. Cascade Pointe of Nevis LLC was a limited liability company established in the Carribean nation of Nevis on or about July 26, 2001.1 From on or about June 22, 2001, through in or about January 2002, defendant CLIFFORD G. BAIRD served as the Manager of Cascade Pointe, but at all times relevant to this Information, the defendant was receiving instructions concerning the management of Cascade Pointe from persons affiliated with HMC and Znetix known and unknown to the United States Attorney.

6.	From on or about May 2, 2001, through in or about January 2002, persons known and unknown to the United States Attorney affiliated with Cascade Pointe, including defendant CLIFFORD G. BAIRD from on or about June 22, 2001, through in or about January 2002, solicited and received in excess of $12 million from investors. At no time were the offers and sales of securities issued by Cascade Pointe and affiliated entities registered with the United States Securities and Exchange Commission, the State of Washington Department of Financial Institutions, Securities Division, or with the securities regulatory authority in any other state.

B.	OBJECTS OF THE CONSPIRACY

The objects of the conspiracy were as follows:

1.	To unlawfully, knowingly, and willfully, directly and indirectly, by the use of means and instrumentalities of interstate commerce, and of the mails, use and employ, in connection with the purchases and sales of securities, manipulative and deceptive devices and contrivances, by (a) employing devices, schemes, and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary to make the statements made, in light of the circumstances in which they were made, not misleading; and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon other persons, in violation of Title 15, United States Code, Sections 78j(b) and 78ff(a), and Title 17, Code of Federal Regulations, Section 240.10b-5;

2.	To knowingly and willfully transmit and cause to be transmitted by wire communication in interstate and foreign commerce writings, signs, signals, pictures, and sounds in furtherance of a scheme and artifice to defraud and for obtaining money and property by means of false and fraudulent pretenses, representations, and promises, in violation of Title 18, United States Code, Section 1343;

3.	To knowingly and willfully use and cause the United States mail and interstate couriers to be used in furtherance and execution of a scheme and artifice to defraud investors in HMC, Project X, Znetix, Cascade Pointe, and affiliated entities, and a scheme and artifice for obtaining money and property of said investors by means of false and fraudulent pretenses, representations and promises, in violation of Title 18, United States Code, Section 1341;

4.	To conduct and attempt to conduct financial transactions affecting interstate commerce involving the proceeds of specified unlawful activity (mail fraud, wire fraud, and securities fraud), knowing that the property involved in the financial transactions represented the proceeds of some form of unlawful activity, and knowing that the transactions were designed in whole and in part to conceal or disguise the nature, the location, the source, the ownership, and the control of the proceeds of specified unlawful activity, in violation of Title 18, United States Code, Section 1956(a)(1)(B)(i);

5.	To transport, transmit, and transfer, and attempt to transport, transmit, and transfer, monetary instruments and funds from places in the United States to and through places outside the United States, and to places in the United States from and through places outside the United States, knowing that the monetary instruments and funds involved in the transportations, transmissions, and transfers represented the proceeds of some form of unlawful activity, and knowing that such transportations, transmissions, and transfers were designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, and the control of the proceeds of specified unlawful activity, in violation of Title 18, United States Code, Section 1956(a)(2)(B)(i); and

6.	To knowingly and willfully engage and attempt to engage monetary transactions by, through, or to financial institutions, which monetary transactions affected interstate and foreign commerce, in criminally derived property of a value greater than $10,000, such property having been derived from specified unlawful activities, that is mail fraud, wire fraud, and securities fraud, in violation of Title 18, United States Code, Section 1957.

C.	MANNER AND MEANS OF THE CONSPIRACY

1.	It was a part of the conspiracy and scheme to defraud that defendant CLIFFORD G. BAIRD and others known and unknown to the United States Attorney offered and sold, and caused to be offered and sold, and aided and abetted the offer and sale of, securities issued by HMC, Project X, Znetix, and Cascade Pointe to thousands of investors located in Washington State and many other states by means of false and fraudulent statements, representations, promises, and pretenses, including, but not limited to, the false and fraudulent statements that:

a.	investors who purchased the securities of HMC for one dollar per share would receive four shares of Znetix for each share of HMC at the point when Znetix purchased or merged with HMC;

b.	Znetix would imminently engage in an Initial Public Offering ("IPO"), after which Znetix securities could be freely traded on exchanges such as NASDAQ;

c.	Znetix shares would be valued at substantially more than one dollar per share after the IPO;

d.	Znetix had retained prominent investment banking and underwriting firms who were working on the IPO;

e.	Znetix had filed or would very shortly file a registration statement with the United States Securities and Exchange Commission;

f.	Znetix was in a "quiet period" just prior to the IPO;

g.	HMC and Znetix had developed proprietary medical and fitness software and equipment which would generate substantial revenues;

h.	Znetix had sold or would shortly sell licenses for approximately $1 million apiece to operate health and fitness clubs throughout the United States;

i.	leading sports and entertainment figures had agreed to franchise health and fitness clubs from Znetix;

j.	a health and fitness club owned by a company affiliated with HMC and located on Bainbridge Island, Washington, was profitable;

k.	Znetix would receive $500 million from an investor group from China;

l.	Cascade Pointe was a private investment firm founded and under management by individuals who were not affiliated with HMC and Znetix;

m.	Cascade Pointe was one of the nation's leading private investment firms, and believed in "diversification" and investments based on "rock-solid financials;"

n.	Cascade Pointe would and had the ability to fund, by means of cash or lines of credit, a "rescission offer" to be made by HMC to its investors, which rescission offer was a final step before the Znetix IPO and would afford HMC investors the opportunity to choose between a refund of their investments or keeping their investment with HMC in place;

o.	the rescission offer, and therefore the Znetix IPO, was imminent;

p.	Cascade Pointe would operate health and fitness clubs in Arizona and in international locations such as Japan, and would receive tens of millions of dollars of revenue;

q.	funds received from investors in Znetix would be placed in an escrow account;

r.	investors who received "units" in Cascade Pointe would receive more than one share of HMC stock for each unit, and would later receive four shares of Znetix for each HMC share;

s.	Znetix had or was about to obtain a contract with the U.S. Department of Defense worth billions of dollars;

t.	Various shell corporations established in the Carribean nation of Nevis would provide tens of millions of dollars in the form of lines of credit to Cascade Pointe;

u.	Cascade Pointe investors would receive million of shares in HMC after the rescission offer to be made by HMC.

2.	It was a part of the conspiracy and scheme to defraud that in the offer and sale of the securities issued by HMC, Project X, Znetix, and Cascade Pointe, defendant CLIFFORD G. BAIRD and others known and unknown to the United States Attorney knowingly and willfully failed to truthfully and accurately disclose in a registration statement, prospectus, private placement memorandum or in any other form material facts, including but not limited to:

a.	the uses to which investors' money would be put;

b.	the financial condition of the HMC, Project X, Znetix, and Cascade Pointe;

c.	the lack of financial controls at HMC, Project X, Znetix, and Cascade Pointe;

d.	the compensation to be received by defendants and others associated with HMC, Project X, Znetix, and Cascade Pointe;

e.	that HMC, Project X, Znetix, and Cascade Pointe were under common management and control;

f.	that HMC had sold more than its authorized amount of shares.

3.	It was a part of the conspiracy and scheme to defraud that defendant CLIFFORD G. BAIRD and others known and unknown to the United States Attorney used millions of dollars of funds received from investors for personal use, and for other purposes not disclosed to investors.

4.	It was a part of the conspiracy and scheme to defraud that defendant CLIFFORD G. BAIRD and others known and unknown to the United States Attorney established and used a series of shell companies in the United States, in the Carribean nation of Nevis, and elsewhere, to promote the scheme and to conceal the ownership and control of funds;

5.	It was a part of the conspiracy and scheme to defraud that the coconspirators used millions of dollars of investor funds to promote the scheme by sponsoring hydroplane and offshore racing boats, the Seattle Mariners major league baseball team, and other prominent organizations and events, by hosting lavish parties in Los Angeles and elsewhere, and by paying professional sports stars to wear items imprinted with the Znetix logo.

6.	It was a part of the conspiracy and scheme to defraud that defendant CLIFFORD G. BAIRD and others known and unknown to the United States Attorney paid employees and consultants of Znetix, HMC, Cascade Pointe, and related entities outrageously high salaries, commissions, and other compensation to work, wittingly or unwittingly, in furtherance of the conspiracy and scheme to defraud.

7.	It was a part of the conspiracy and scheme to defraud that the coconspirators misled and attempted to mislead the State of Washington, the U.S. Securities and Exchange Commission, and others with regard to the activities of HMC, Znetix, Cascade Pointe, and those affiliated with them;

8.	It was a part of the conspiracy and scheme to defraud that the conspirators employed multi-level marketing techniques and various sales agents to sell the securities of HMC, Znetix, and Cascade Pointe to over five thousand investors throughout the United States.

9.	It was a part of the conspiracy and scheme to defraud that defendant CLIFFORD G. BAIRD and others known and unknown to the United States Attorney lulled and attempted to lull investors, through oral and written communications containing false and misleading statements, into believing that their investments with HMC, Znetix, Cascade Pointe, and related entities, would result in the creation of significant wealth.

D.	OVERT ACTS

In furtherance of the conspiracy, and to promote the objects thereof, defendant CLIFFORD G. BAIRD and others known and unknown to the United States Attorney committed and caused to be committed, among others, the following overt acts:

1.	On or about May 2, 2001, persons affiliated with HMC and Znetix who are known to the United States Attorney caused the formation of Cascade Pointe, LLC, as a Washington State limited liability company.

2.	On or about June 26, 2001, defendant CLIFFORD G. BAIRD and a person affiliated with HMC known to the United States Attorney executed a "letter of intent" purporting to commit Cascade Pointe to provide $35 million to fund a rescission offer to be made by HMC to investors.

3.	On or about July 2, 2001, defendant CLIFFORD G. BAIRD received a letter from Julie S. Mills falsely stating that Palledium Capital Partners, Ltd., of Nevis would provide Cascade Pointe with a $5 million line of credit for an up front fee of $175,000.

4.	On or about July 11, 2001, defendant CLIFFORD G. BAIRD received a letter from Julie S. Mills falsely stating that Rutherford, York & Baxter, Ltd., of Nevis would provide Cascade Pointe with a $10 million line of credit for an up front fee of $200,000.

5.	On or about July 12, 2001, defendant CLIFFORD G. BAIRD received a letter from Julie S. Mills falsely stating that Winfield & Brundidge Investments, Inc., of

Nevis would provide Cascade Pointe with a $10 million line of credit for an up front fee of $150,000.

6.	On or about July 12, 2001, defendant CLIFFORD G. BAIRD sent a letter to investors stating, among other things, that:

a.	the contract between HMC and Cascade Pointe "discloses in excess of $60 million in promissory notes due to HMC, Inc. by other companies;"

b.	Cascade Pointe "has been awarded the state of Arizona by Znetix. The anticipated annual revenues will be between $50 million and $100 million within the first five years of operation;"

c.	Cascade Pointe "will also be participating in some portion of the international markets of the Znetix rollout;" and

d.	Cascade Pointe "has secured a $50 million line of credit from several private money groups."

7.	On or about July 16, 2001, defendant CLIFFORD G. BAIRD sent a letter to investors stating, among other things, that:

a.	"On Friday night last, July 13, I signed the final agreement to acquire HMC, Inc. rescission stock, some assets and some liabilities. This agreement now gives

HMC the ability to start its rescission process by providing the funding necessary for HMC to purchase back shares as requested"; and

b.	"With the retaining of a couple of new Fund Managers as consultants, we should be able to finish our $50 million round by the end of the week."

8.	On or about July 16, 2001, defendant CLIFFORD G. BAIRD received a letter from Kim Singh falsely stating that Hawkins & Holland, Inc., of Nevis would provide Cascade Pointe with a $10 million line of credit for an up front fee of $250,000.

9.	On or about July 16, 2001, defendant CLIFFORD G. BAIRD received a letter from Julie S. Mills falsely stating that Nurrell Marcos Capital, Ltd., of Nevis would provide Cascade Pointe with a $10 million line of credit for an up front fee of $150,000.

10.	On or about July 21, 2001, defendant CLIFFORD G. BAIRD sent an e-mail message to investors stating, among other things, that:

a.	"We are now negotiating to participate in a new foreign opportunity. We are entering discussions for the very real possibility of Cascade Pointe participating in the licensing of over 150 health club/fitness centers in Tokyo, Japan. This just continues to increase your future income stream as a founding member"; and

b.	"This past week someone gave me a great metaphor about this journey we have been on. He suggested it was like an Olympic marathon and we have just entered the Olympic stadium - Wow?"

11.	On or about July 24, 2001, defendant CLIFFORD G. BAIRD sent a letter to investors, stating, among other things, that Cascade Pointe would be moving its "legal venue" to the Carribean nation of Nevis, and that on or around August 15, 2001, Cascade Pointe would be "retaining the services of an investment banker like Bear Stearns or Stiffel, Nicolaus to assist us in raising money to build the facilities."

12.	On or about August 9, 2001, defendant CLIFFORD G. BAIRD and a person affiliated with HMC known to the United States Attorney executed an "Amended and Restated Stock Purchase Agreement" purporting to commit Cascade Pointe to provide $55 million to fund a rescission offer to be made by HMC to investors.

13.	On or about September 7, 2001, defendant CLIFFORD G. BAIRD received a letter from J. Michelle Williams falsely stating that Lloyd's & Lloyd's Financial, Ltd., of Nevis would provide Cascade Pointe with a $10 million line of credit for an up front fee of $150,000.

14.	On November 2, 2001, a wire transfer in the amount of $40,500, representing funds obtained from investors, was received by Cascade Pointe from an account controlled by John Brust at Royal American Bank.

15.	On November 2, 2001, funds in the amount of $125,000 were withdrawn from a bank account controlled by Cascade Pointe for the purchase of cashier's check number 0604963566 payable to HMC.

16.	On November 7, 2001, funds in the amount of $50,000 were withdrawn from a bank account controlled by Cascade Pointe for the purchase of cashier's check number 8590333743 payable to HMC.

17.	On November 9, 2001, funds in the amount of $100,000 were withdrawn from a bank account controlled by Cascade Pointe for the purchase of cashier's check number 8590333968 payable to HMC.

18.	On November 20, 2001, funds in the amount of $140,000 were withdrawn from a bank account controlled by Cascade Pointe for the purchase of cashier's check number 8590335507 payable to HMC.

19.	On November 26, 2001, funds in the amount of $125,000 were withdrawn from a bank account controlled by Cascade Pointe for the purchase of cashier's check number 8590336083 payable to HMC.

20.	On November 26, 2001, funds in the amount of $100,000 were withdrawn from a bank account controlled by Cascade Pointe for the purchase of cashier's check number 8590335912 payable to HMC.

21.	On December 7, 2001, a wire transfer of funds in the amount of $50,000, was sent from a Bank of America account in the name of Cascade Pointe LLC to ABN Amro Bank, for the benefit of Lemur Capital, Ltd., an entity established in the Carribean nation of Nevis and controlled by defendant CLIFFORD G. BAIRD..

22.	On January 16, 2002, funds in the amount of $50,000 were withdrawn from a bank account controlled by Cascade Pointe for the purchase of a cashier's check payable to HMC.

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23.	On January 18, 2002, funds in the amount of $85,000 were withdrawn from a bank account controlled by Cascade Pointe for the purchase of a cashier's check payable to HMC.

All in violation of Title 18, United States Code, Section 371.

DATED this ___ day of July, 2002.

MARK BARTLETT

Acting United States Attorney

FLOYD SHORT

Assistant United States Attorney

JEFFREY B. COOPERSMITH

Assistant United States Attorney

YE-TING WOO

Assistant United States Attorney

RICHARD E. COHEN

Assistant United States Attorney