Key figure in Znetix fraud case gets four-year prison term
By JOHN COOK
SEATTLE POST-INTELLIGENCER REPORTER
Kevin McCarthy, who fleeced Znetix shareholders with promises of IPO riches, will no longer be able to pass the collection plate to potential investors.
Yesterday, U.S. District Judge Marsha Pechman sentenced the 41-year-old Kirkland resident to four years in prison for his role in the $91 million stock scam. In addition to the prison sentence, Pechman ordered three years of probation that includes restrictions on McCarthy's employment, ability to own firearms and, in an unusual move, his financial dealings with church members.
Because McCarthy touted the Znetix stock scam through religious organizations, including McCarthy Ministries, Pechman barred him from giving any financial advice to fellow parishioners.
"You can't even pass the collection tray on Sunday mornings," Pechman said.
McCarthy faced a maximum of 10 years in prison for conspiracy and mail fraud, though attorneys for the defense and prosecution asked for a reduced sentence of 40 months because of his cooperation and testimony.
The first of nine men to plead guilty in the case, McCarthy joined Znetix affiliate Health Maintenance Centers as director of investor relations in September 2000.
He later worked closely with Znetix ringleader Kevin Lawrence to secretly control Cascade Pointe, a limited liability company that bilked investors out of more than $12 million.
McCarthy's two days of testimony earlier this year at the trial of former Znetix stock salesmen Larry Beaman, Michael Culp and Harvey Kuiken helped seal their convictions. They are scheduled to be sentenced Sept. 17.
"He was one of the most exemplary cooperators I've ever seen," said Assistant U.S. Attorney Jeff Coopersmith in his recommendation to the judge. "From Day One he was right away telling us completely candid, thorough responses to the questions we had."
Defense attorney Carol Koller described McCarthy as a "pawn in the system" who did not set out to defraud anyone.
"In his heart, he wants to make this right," Koller said.
During brief remarks, McCarthy choked back tears as he thanked the court and his attorney.
"Everybody has been fair," he said.
But Pechman, who has presided over the complex financial fraud for two years, was not swayed by McCarthy's emotional statement or the recommendations of the attorneys.
Pechman said McCarthy was the centerpiece of the government's case, unearthing complicated facts, providing forthcoming testimony and meeting with federal agents at any time. But Pechman said she was struck by how closely that enthusiasm mirrored his devotion to Znetix.
"There is something lacking in you and your moral center," Pechman said. "I am not so sure you know who you are. You are a little bit like a proverbial pingpong ball going back and forth."
While Pechman said defense attorney Koller put a good gloss on McCarthy's activities, she said the fact remains that he cheated people "who lost more than they could afford."
"You were not just an unwitting pawn," she said. "It is obvious you were in up to your eyeballs."
McCarthy declined to comment after the sentencing. His wife, who sat in the front row of the fifth-floor courtroom in downtown Seattle, said she was perplexed by the decision.
"I am just stunned," she said.
In other developments in the case, former Znetix stock salesman Alex Lacson yesterday dropped plans to try to reverse his guilty plea. Sentencing is scheduled for Aug. 6.
Donavon Claflin, the 33-year- old former treasurer of Health Maintenance Centers, is scheduled to be sentenced next week.
If you don't have the time to do something right, where are you going to find the time to fix it?
-Stephen King
AI
