Zeek Rewards: US Attorney Files Opposition to Motion to Dismiss Count Four

zeeklerThis government Opposition comes a little sooner than I had thought; apparently, they thought the Motion to Dismiss was specious, here’s their opening salvo: (emphasis added)

Count Four charges Defendant Burks with conspiracy to impede the Internal Revenue Service (IRS) in part by providing affiliates with false Forms 1099 for tax year 2011. Defendant Burks argues that count four should be dismissed because: (1) the doctrine of constructive receipt of income – upon which these Forms 1099 were based – is valid and that (2) Zeek affiliates believed that they had a right to receive the payment of the funds appearing as their earnings, whether they had actually took out those earnings as cash or not. The United States agrees with both of these propositions; however, rather than support Defendant’s argument for dismissal they actually buttress the Government’s position that the Defendant and his co-conspirators engaged in a conspiracy to defraud the IRS.

 

Defendant Burks and Rex Venture Group issued Forms 1099 reporting miscellaneous income, mostly to affiliates, for the 2011 tax year totaling $96 million. 1 Burks led affiliates to believe this was their actual earnings (whether they had taken them out in cash or not). In truth and in fact, the total revenue of Defendant Burks’s businesses for 2011 was only $37 million. Therefore, it is impossible that the affiliates received, actually or constructively 2, the income reported to the IRS on their Forms 1099. The affiliates certainly did not have control over the receipt of the money not subject to substantial limitations or restrictions as required for constructive receipt of income; their ability to receive the funds was limited and restricted by the facts that the funds did not exist.

 

 

This difference goes to the very heart of the case: Defendant Burks told affiliates that they were making substantial income from their participation in ZeekRewards. In order to keep the flow of monies going, and to keep the scheme alive, he encouraged the affiliates to not take out their earnings as cash so that they could allow their theoretical balances to grow and to compound. He represented to the affiliates that they were earning huge amounts of money and that his penny auction business was incredibly successful. The affiliates believed that their account balances represented their actual earnings. However, their account balances were “Monopoly money” (a term used by one of Defendant’s co-conspirators during the conspiracy) not tied to any real value.

The Opposition filed mentions that the Defendant’s own expert and tax attorney Howard Kaplan, reviewed Zeek’s promotional materials so they could provide advice.

“Because these tax experts relied on the Defendant’s advertising pieces, and did not actually conduct any sort of financial audits, they believed that the earnings reflected in each affiliates account, whether taken out in cash or left to grow, represented real income. This is the same lie Defendant Burks wanted the affiliates to believe.

I have uploaded the entire document onto the Files website (Doc 76, 14-cr-208)

Zeek Rewards: Judge Denies Burks’ Motion for Juror Questionnaire

This was highly predictable, based on the Motion Burks put through his attorney, wanting to screen the jurors that will hear the criminal case against him. In the initial motion, this sort of sticks out,

A written questionnaire would aid the parties by more efficiently identifying jurors who would not be fair or impartial jurors for this high-profile case marked by extensive and largely inflammatory media coverage and would enable the Court and the parties to more quickly identify individuals who must be struck for cause.

Judge Cogburn had this response:

THIS MATTER is before the court on defendant’s Motion for a Juror Questionnaire. Defendant seeks publication of a 26-page questionnaire to the jury venire, which is likely to be longer as blanks have been inserted for lists of witnesses and attorneys. The court does not find the proposed questionnaire helpful as the undersigned will ask initial questions and counsel will have an opportunity to ask their own questions, subject to oversight by the court. Having considered defendant’s motion and reviewed the pleadings, the court enters the following Order.

ORDER
IT IS, THEREFORE, ORDERED that defendant’s Motion for a Juror Questionnaire (#71) is DENIED.