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Efforts to reopen gym stymied, building owner says

Asking for his rent money or the freedom to lease the property, the co-owner of the former HMC building on Madison Avenue wants to evict the court-appointed receiver now managing the defunct gym’s affairs.

And until the court takes action, Dick Bowen hints, the gym will not reopen.

Bowen, a Whidbey Island resident and president of the Landing on Bainbridge Island, has filed a motion asking Seattle federal judge Marsha Pechman to modify her order appointing a receiver for HMC/Znetix. The petition seeks to end a situation in which receiver Michael Grassmueck has possession of the building, but is not paying rent.

“Several viable entities have approached me and have expressed a desire and ability to rent the premises,” Bowen said in his affidavit.

Meanwhile, Brian Lewis, one of the last gym employees, told the Review this week that his attempts to reopen the facility under Grassmueck’s oversight have failed.

“I have the support of the community behind me,” he said, “but the receiver has cut me out altogether.”

After Judge Pechman appointed Grassmueck as receiver on Feb. 14, he promptly closed the gym and installed new locks.

The property is one of a number formerly leased or owned by HMC/Znetix, which was placed under receivership amid charges that principals sold $90 million in unregistered stock and spent the money on cars, boats and homes for themselves.

Lewis, who was working at the gym when it was closed, said he volunteered to reopen it.

“I called a number of the 1,936 members asking if they would contribute $20 per month towards operating capital,” he said. “Most of them said, ‘Is that all you need?’”

But Lewis said Grassmueck could not find a source of operating capital, so the plan for a quick reopening faltered.

Grassmueck was en route to the island from Portland Tuesday morning, and could not be reached for comment. Bowen did not return repeated calls seeking comment.

One apparent obstacle is the monthly rent on the property, which Bowen’s court filing said has not been paid since the gym closed in February.

The total amount of rent and other charges due as of March 1 is $20,346.05 plus interest and attorney fees, Bowen’s affidavit said. The gym was paying $18,000 per month in rent, he said.

Additionally, Bowen said, HMC allowed two construction liens to be filed on the property for almost $77,000 for work that benefitted the property.

If those amounts are unpaid, the lien-holder may be able to force a judicial sale of the property, and satisfy the lien amounts out of the sale proceeds.

Bowen’s affidavit said that immediately after his appointment, Grassmueck planned to reopen the gym – the proposal that apparently involved Lewis – but would not agree to pay rent until April.

Bowen said he did not accept the proposal, but was discussing it with his attorney. Grassmueck then rescinded the proposal, saying the gym’s financial condition was worse than originally believed, the affidavit said.

“He did not reopen the business on the weekend of Feb. 23 and told me that he would come back with another proposal asking for even more concessions from Landing,” Bowen told the court. “The clear message was that the Receivership estate cannot pay the rent now and may not be able to pay the rent in the future,” Bowen’s affidavit said.

Bowen’s affidavit went on to say that his company – a corporation owned by nine individuals – “is not interested in accepting any proposal that will allow the Receiver or anyone else to retain possession of the property without paying rent.”

In his motion, Bowen asks Judge Pechman to modify her February order that prevents anyone from suing any of the entities for which a receiver was appointed pending further order of the court.

Grassmueck has said that after he has determined the assets and liabilities of the corporations, he will announce a date by which creditors must present their claims. Once claims are presented, the court will work out a scheme of distribution.

According to information Grassmueck has posted on the Znetix web site, which he now controls, there are more than 3,500 creditors of Znetix, HMC and other companies founded by Kevin Lawrence of Bainbridge Island.

The federal Securities and Exchange Commission has filed a civil suit against the companies, Lawrence and other individuals, claiming that they sold some $90 million in unregistered stock to 5,000 individuals through false and misleading statements.

At the behest of the SEC, Judge Pechman appointed Grassmueck as receiver of the companies, directing him to locate assets as part of a court-supervised dismantling of the companies.

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