CORRECTION: This version corrects the dollar amount of Lawrence’s unemployment, incorrectly reported in an earlier version.
Kevin Lawrence’s guilt or innocence was not at issue Tuesday afternoon in
Seattle federal court.
But his credibility was. And it lost badly.
As a result, Lawrence will remain in federal custody pending his October trial date on a 64-count fraud indictment.
“We’re not going to determine Mr. Lawrence’s guilt or innocence today,” said
Magistrate Judge Ricardo Martinez. “One thing I am sure of is that this
court cannot rely on anything Mr. Lawrence said. Mr. Lawrence will be
detained until trial.”
Judge Martinez conducted the hour-long hearing in the Seattle federal
courthouse on the government’s motion to detain Lawrence without bail until
trial.
Federal prosecutors maintained that Lawrence is a flight risk, and might attempt new stock sales similar to those for which he now faces fraud charges.
Not so, said Russell Aoki, Lawrence’s court-appointed attorney.
“Lawrence was aware of this investigation, aware that close friends of his
have been charged and pleaded guilty, yet he is still here,” argued Aoki,
who asked Judge Martinez to set bail at $200,000 and impose other
conditions, such as requiring Lawrence to surrender his passport.
Aoki argued that the 37-year-old Lawrence has lived on Bainbridge Island
most of his life, that his parents and fiance live here, and that his son is
also in the area.
“Mr. Lawrence’s parenting plan in his divorce settlement includes provisions
for visitation in the event he is incarcerated,” Aoki argued. “He is not
going to give that up easily.”
Aoki said any perceived threat to the public could be overcome by imposing
conditions that would prevent him from trying to raise additional money from
investors. And he argued that Lawrence needs to be able to review documents
in his attorney’s office to help prepare an effective defense.
Assistant U.S. Attorney Jeff Coopersmith, the government’s lead prosecutor,
countered that Lawrence may have been preparing to flee, and that he cannot be
trusted.
He noted that when Lawrence was arrested, he had $1,800 in $100 bills in his
possession, yet was ostensibly living on $496 weekly unemployment
benefits.
“He has taken trips to Salt Lake City and Canada, and has substantial cash
in his possession,” Coopersmith said. “Millions of dollars in cash
withdrawals have been unaccounted for, and his lifestyle is inconsistent
with unemployment compensation.”
In addition to the cash, arresting agents also found promotional literature
for another company with a health-care business concept similar
to that for Znetix or Health Maintenance Centers, Coopersmith said,
suggesting that Lawrence may have tried to persuade additional investors to
part with their cash.
He was also not forthcoming about his addresses, the prosecutor said.
“He told pretrial services that he was living in Poulsbo, but he was
arrested at (fiancee) Stacy Gray’s house on Bainbridge Island,”
Coopersmith said.
The prosecutor also made a point of Lawrence’s previous attempts to evade court
orders.
“His response to the state’s cease-and-desist order was to form new entities
called Cascade Pointe, which he said were independent of HMC, for the
purpose of raising additional money,” Coopersmith said. “And after his
assets were frozen by the federal court, he contacted a real estate agent in
Hawaii and listed property there for sale.”
Answering the question of why Lawrence hadn’t fled, Coopersmith said that
may have been a simple miscalculation.
“When we asked the court to stay the civil proceedings against Mr. Lawrence
until completion of the criminal proceedings, we said we expected
indictments by the end of the year,” Coopersmith said. “We finished four
months early. He may have been preparing to leave but thought he had a
little more time.”
In his ruling denying bail, Martinez honed in on Lawrence’s unexplained assets and
the prior pattern of failing to heed the will of the court.
“He has had his own assets frozen by the government, yet he still carries
substantial cash,” Judge Martinez said. “He may have secreted substantial
assets out of money obtained by fraudulent means. And he has a history of
ignoring court orders.”
Lawrence, dressed in prison garb of a collared blue shirt, blue trousers
with an elastic waist and slip-on blue sneakers, was led into and out of the
courtroom in handcuffs. He was returned to the federal detention facility in
SeaTac, where he will be held until his Oct. 7 trial date before Judge Marsha
Pechman.
Lawrence is accused of selling some $60 million worth of unregistered stock
on Bainbridge-based HMC and Znetix. Then, after the state issued a
cease-and-desist order in April of 2001, he is accused of organizing Cascade
Pointe, which sold another $12 million in stock.
A 64-count indictment handed up last week accuses the 37-year-old Lawrence
of promising investors that the companies had developed a new method of
integrating physical fitness and medical care. The Madison Avenue health
club formerly operated by HMC was supposedly the prototype facility.
Instead of using the money to develop the business concept, prosecutors say,
Lawrence used it to finance an extravagant lifestyle for himself, his
employees and colleagues, including the purchase of hundreds of exotic
automobiles and watercraft, as well as expensive jewelry.
The 64 counts with which Lawrence is charged, which involve securities
fraud, wire fraud, mail fraud, money laundering and conspiracy, carry
theoretical maximum prison terms of 560 years. Prosecutors say a realistic
sentence, should Lawrence be found guilty, is as much as 35 years in prison.
Three of Lawrence’s colleagues earlier pleaded guilty to
various fraud charges, and face prison terms of up to 10 years. As part of their plea bargains, they have agreed to cooperate with prosecutors, Coopersmith said.
Neither Lawrence, Aoki or Lawrence’s family would comment after the hearing.
