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Sorting Out a Tangled Web of Companies
In 2002, the SEC appointed a Permanent Receiver to administer the largest stock swindle case in Washington State history. The case was this: Over a period of nearly seven years, executives of a Seattle company and its affiliates had defrauded more than 7,000 investors of an estimated $91 million in what John McKay, U.S. Attorney for the Western District of Washington, called one of the largest and most egregious frauds ever perpetrated on investors and creditors.
The convoluted case involved a tangled web of companies created to hide the company’s activities. In fact, company executives had used investor money to fund a lavish lifestyle that included million-dollar homes, boats, luxury cars, and expensive jewelry. Thousands of dollars were spent on sports sponsorships, hydroplane races, and a celebrity-rich Hollywood party.
In 2004, the receiver hired us to handle a series of communications projects for the company, including reports on this case, as well as company branding materials and Web content. The work culminated with a press conference to announce milestones in the resolution of the Seattle case. We helped the receiver create his presentation, coached him on delivery, created a press packet of materials to help make sense of the complex case, and worked closely with the U.S. Attorney’s office in Seattle on setting up the conference.
Representatives of all major Seattle media outlets and the Associated Press attended and followed up the presentation with interviews of the receiver. Those interviews and the press materials were used in stories distributed nationally. Materials from the press kit and an excerpt from the press release:
ZNETIX INVESTORS’ ESTATE RECOVERS ANOTHER $8.4 MILLION WITH SETTLEMENT OF DIRECTORS AND OFFICERS SUIT.
SEATTLE (January 19, 2005) — In late 2004, the largest stock fraud case in Washington state history reached several important milestones on the road to resolution.On December 7, Michael A. Grassmueck, the court-appointed Receiver in the case, and the directors of Znetix and its affiliates reached settlement of a lawsuit brought on behalf of the companies’ investors and creditors. The proposed $8.4 million settlement must now be approved by the U.S. District Court for the Western District of Washington, a step expected to take place in February.
“The people at Znetix were very efficient at burning through money,” Grassmueck said, noting that just under $40,000 in assets was left when he was appointed Receiver, with no assurance of any more. “We had to file a number of civil suits in an effort to recover funds, and we’re very pleased with the results to date. Still, the legal process takes time.”
CYRANO Communications