Investors in collapsed stock scam Znetix likely will receive around 20 cents on the dollar in restitution, the company's court-appointed...
Investors in collapsed stock scam Znetix likely will receive around 20 cents on the dollar in restitution, the company’s court-appointed receiver said yesterday.
That may not sound like much, Michael Grassmueck said at a news conference, but it’s actually on the higher end of what typically is recovered in similar cases.
“Given what we started with, I think we’ve made significant recovery,” he said.
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Znetix, based in Bainbridge Island, and a slew of related entities were the creation of Kevin Lawrence. Lawrence told investors Znetix was franchising a revolutionary medical/fitness center concept, and that a lucrative initial public stock offering was imminent.
In reality, there was no IPO, and Lawrence and other Znetix insiders spent much of the $91 million collected from investors on fancy cars, expensive jewelry and other accoutrements of a lavish lifestyle.
In November 2003 Lawrence was sentenced to 20 years in federal prison; seven other Znetix insiders have received lesser sentences, while four more are awaiting sentencing.
Most of the money available for investors comes from settlements with Znetix’s former law firm, business partners and, most recently, a group of 40 officers and directors.
Including that $8.4 million settlement with officers and directors — which was reached last month but which a judge still must approve — some $30 million has been recovered, Grassmueck said. However, total claims from investors are likely to be at least three times that figure.
In addition, he said, the receivership already has paid out millions of dollars to other parties. As of Nov. 30, according to court papers, those payments include:
Nearly $4 million in mortgages owed on Znetix properties. As secured debts, those mortgages took priority over investors’ claims;
$4.2 million in fees and expense reimbursements to the receiver, his attorneys and other professionals working on the case since February 2002;
$528,514 in commissions and other expenses related to auctioning off Znetix’s real estate and other tangible assets.
Those and other expenses left $12.84 million in the receivership’s accounts as of Nov. 30; it’s that money, plus the $8.4 million and whatever else Grassmueck can recover, that will be distributed to investors starting around midyear.
Drew DeSilver: 206-464-3145 or email@example.com