John McKay, United States Attorney for the
Western District of Washington; Scott Crabtree,
Assistant Special Agent in Charge, Federal
Bureau of Investigation; Randall Lee, Regional
Director, Securities and Exchange Commission
Pacific Regional Office; Steve Pasholk, Special
Agent in Charge, Internal Revenue Service,
Criminal Investigation Division; and Helen
Howell, Director, State of Washington Department
of Financial Institutions, announced today
that on September 30, 2003, STEVEN J. REIMER,
age 46, of Sammamish, Washington, pleaded
guilty before United States Magistrate Judge
Monica J. Benton in Seattle, Washington, to
two felony criminal offenses: (1) 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,
as charged in Count 1 of the Second Superseding
Indictment returned by the grand jury on June
17, 2003; and (2) Filing a False Income Tax
Return, as charged in a felony
Information filed by the United States
Attorney on September 25, 2003. As part of
his plea
agreement with the United States Attorney's
Office, REIMER has agreed to cooperate fully
with the government and the Receiver appointed
as part of a parallel civil case brought by
the United States Securities and Exchange
Commission.
STEVEN J. REIMER is scheduled to be sentenced
before United States District Judge Marsha
J. Pechman at the United States Courthouse
in Seattle at 10:00 a.m. on January 9, 2004,
on the charge 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. The sentencing
hearing for the charge of Filing a False Income
Tax Return has not yet been scheduled. REIMER
faces a maximum prison term of eight years
imprisonment, a $500,000 fine, and three years
of supervision by a probation officer after
release from prison.
According to Court records:
1. REIMER intentionally, knowingly, and willfully
participated in defrauding, and conspired
with others to defraud, investors through
a 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. ("HMC"),
Cascade Pointe, LLC, and affiliated entities.
The conspiracy and scheme to defraud resulted
in losses to investors of up to $100 million.
2. REIMER began working for the "investor
relations department" of Health Maintenance
Centers, Inc. ("HMC-IR") in or about
September, 2000. While at HMC-IR, REIMER made
false representations to existing and potential
investors with regard to the purported business
of HMC and Znetix, the supposed imminence
of a public offering of Znetix stock, the
supposed imminence of a rescission offer to
be made to investors by HMC, and other material
matters.
3. On or about April 9, 2001, the State of
Washington's Department of Financial Institutions,
Securities Division ("DFI"), issued
a Summary Order to Cease and Desist against
Kevin L. Lawrence, the founder and principal
officer of HMC and Znetix, and against HMC,
including HMC's officers, employees, and agents.
REIMER was an employee or agent of HMC and
he knew that the Summary Order to Cease and
Desist applied to him. The Summary Order to
Cease and Desist barred Lawrence and HMC (including
REIMER) from selling securities through fraudulent
means and in violation of securities registration
requirements. The stock of HMC and Znetix
was never registered with the United States
Securities and Exchange Commission, the DFI,
or the securities regulatory authorities in
any other state. REIMER and his co-conspirators
ignored the Summary Order to Cease and Desist
and continued to sell securities issued by
HMC and affiliated entities through fraudulent
representations and without complying with
securities registration requirements.
4. In or about April, 2001, after the DFI
issued the Summary Order to Cease and Desist,
REIMER assisted Kevin McCarthy (the director
of HMC-IR) and Kevin Lawrence in setting up
a company that was ultimately named Cascade
Pointe when it was formally established as
a Washington state limited liability company
on or about May 2, 2001. The stated primary
purpose of Cascade Pointe was to fund a rescission
offer to be made by HMC to its thousands of
investors. Cascade Pointe was touted as a
private investment firm independent from HMC;
this was false because, as REIMER knew, Lawrence
and McCarthy secretly controlled Cascade Pointe.
Thereafter, REIMER sold the securities of
Cascade Pointe through fraudulent representations
and without complying with securities registration
requirements.
5. REIMER also controlled a company in Nevada
called TNT Dynamics, Inc. ("TNT")
through nominees. REIMER caused the deposit
and withdrawal of HMC/Znetix/Cascade Pointe
investor funds to and from accounts he controlled
in the name of TNT. REIMER knowingly and willfully
deposited to TNT accounts funds that he and
his co-conspirators raised by defrauding investors,
and distributed the funds for the personal
benefit of himself and his co-conspirators
and contrary to what investors had been told
about the use of the funds, which was to purchase
HMC, Znetix, or Cascade Pointe securities.
REIMER's purpose in using TNT accounts was
to conceal the ownership, control, and source
of the funds. REIMER also caused TNT and Gibralter
Capital Partners to issue letters and other
documents to make it appear falsely that TNT
and Gibralter would provide millions of dollars
to Cascade Pointe so that Cascade Pointe would
be able to fund HMC's rescission offer. In
truth and fact, at no time was Cascade Pointe
anywhere close to having sufficient funds
or having access to sufficient funds for such
a rescission offer, which would have been
at least $55 million. Rather, Cascade Pointe
took approximately $12 million from investors
and used the bulk of that money to fund HMC's
ongoing "operations" and for the
personal benefit of REIMER and his co-conspirators.
REIMER also lied to Special Agents of the
FBI with regard to the ownership of TNT, but
later admitted in a second interview several
months later that he controlled TNT and that
he had been "deliberately deceptive"
with the FBI.
6. Court records further show, with regard
to the charge of Filing a False Tax Return,
that REIMER willfully filed a false federal
joint income tax return (Form 1040) with the
Internal Revenue Service for the tax year
2001. REIMER signed this tax return under
penalty of perjury on or about October 14,
2002. REIMER's 2001 tax return was false as
to a material matter in that REIMER knowingly
and willfully responded falsely to the following
question on Schedule B that he filed as part
of the return: "At any time during 2001,
did you have an interest in or signature or
other authority over a financial account in
a foreign country, such as a bank account,
securities account, or other financial account?"
REIMER answered this question in the negative
by checking a box marked "No" on
his 2001 tax return, but as REIMER knew at
the time he signed his 2001 tax return under
penalty of perjury and filed it with the Internal
Revenue Service, REIMER had, during the tax
year 2001, established, maintained and had
complete control and authority over at least
two foreign bank accounts in the Carribean
nation of Nevis, in the names of Gibralter
Capital Partners and Holland Capital Partners.
Further, on or about August 9, 2001, REIMER
received $50,000 from Cascade Pointe and caused
the deposit of these funds to his Nevis bank
account in the name of Gibralter Capital Partners.
On or about September 5, 2001, REIMER received
$10,000 from Cascade Pointe and caused the
deposit of these funds to his Nevis bank account
in the name of Gibralter Capital Partners.
Six other defendants, KEVIN L. LAWRENCE,
DONAVON CLAFLIN, KEVIN McCARTHY, CLIFFORD
BAIRD, JAMES N. WUENSCHE, and TIMOTHY T. MOODY
have previously entered guilty pleas in connection
with the Znetix case. Five other defendants,
MICHAEL J. CULP, LARRY L. BEAMAN, HARVEY W.
KUIKEN, ALEX LACSON, and ALFONSO LACSON, JR.,
are awaiting trial on the 114-count Second
Superseding Indictment, which charges conspiracy,
securities fraud, wire fraud, mail fraud,
and money laundering. The investigation of
Znetix, HMC, Cascade Point, and affiliated
entities and individuals is ongoing.
This case was investigated jointly by the
Federal Bureau of Investigation, the Securities
and Exchange Commission, the Internal Revenue
Service, the State of Washington Department
of Financial Institutions, Securities Division,
and the securities enforcement authorities
in several other states, including the states
of Illinois, Wisconsin, and Oregon. Assistant
United States Attorneys Jeffrey B. Coopersmith,
Ye-Ting Woo, and Richard E. Cohen, and Special
Assistant United States Attorney Todd Brilliant
are prosecuting the case.
Additional information about this case, including
the plea agreement for REIMER and other court
documents and press releases, will be made
available through the "Victim-Witness"
and "Znetix" links on this web site.
Information also will be available on the
Receiver's
web site.
For further information please contact Assistant
United States Attorneys Jeffrey B. Coopersmith,
Ye-Ting Woo, or Richard E. Cohen at (206)
553-7970, or Press Spokesperson Lawrence Lincoln
at (206) 553-4127.
