Tag Archives: Burks

Zeek Rewards: Paul Burks Will Spend His Sentence in Lexington

This comes from the Winston-Salem Journal, an article stating Paul Burks will be housed in Lexington to serve his prison term.

Paul Burks, the founder of ZeekRewards.com, will serve his federal prison term in Lexington, Ky., beginning no later than May 1.

Burks, 70, was sentenced March 8 to three concurrent prison sentences of 14 years and eight months for his lead role in the Lexington, N.C., Ponzi scheme.There is no parole in the federal system for defendants sentenced in the past few decades. Burks could have been sentenced to up to 59 years.

Here is a link to the full article.

 

 

Zeek Rewards: Paul Burks Sentenced to Over 14 Years

Department of Justice
U.S. Attorney’s Office
Western District of North Carolina

FOR IMMEDIATE RELEASE
Monday, February 13, 2017

Former ZeekRewards CEO Sentenced To More Than 14 Years For Operating $900 Million Internet Ponzi Scheme

CHARLOTTE, N.C. – U.S. Attorney Jill Westmoreland Rose announced today that U.S. District Court Judge Max O. Cogburn, Jr. sentenced the former CEO of ZeekRewards to 176 months in prison for operating a $900 million Internet Ponzi scheme. Paul Burks, 70, of Lexington, N.C. was also ordered to serve three years of supervised release and to pay $244,000,000 as restitution. A federal jury convicted Burks in July 2016 of wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy following a three-week trial.

Michael Rolin, Special Agent in Charge of the United States Secret Service, Charlotte Field Division and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI) join U.S. Attorney Rose in making today’s announcement.

According to filed court documents, evidence introduced at Burks’ trial and today’s sentencing hearing:

From January 2010 through August 2012, Paul Burks was the owner of Rex Venture Group, LLC (RVG), through which he owned and operated Zeekler, a sham Internet-based penny auction company, and its purported advertising division, ZeekRewards (collectively “Zeek”). Burks and his conspirators induced more than 900,000 victims – including over 1,500 victims in the Charlotte area – to invest in their fraudulent scheme, by falsely representing that Zeekler was generating massive retail profits from its penny auctions, and that the public could share in such profits through investment in ZeekRewards. Burks and his conspirators, including Zeek’s former Chief Operating Officer Dawn Wright Olivares and her step-son and Zeek’s Senior Technology Officer Daniel C. Olivares, claimed at one point that investors would be guaranteed a 125% return on their investment.

Burks and his conspirators represented that victim-investors in ZeekRewards could participate in the Retail Profit Pool (RPP), which supposedly allowed victims collectively to share 50% of Zeek’s daily net profits. Burks and his conspirators did not keep books and records needed to calculate such daily figures. Instead, Burks simply made up the daily “profit” numbers. Contrary to the conspirators’ claims, the true revenue from the scheme did not come from the penny auction’s “massive profits.” Instead, approximately 98% of all incoming funds came from victim-investors, which were then used to make Ponzi-style payments to earlier victim investors.

In addition to promising massive returns on investments, Burks and his conspirators used a number of ways to promote Zeek to current and potential investors. For example, the conspirators hosted weekly conference calls and leadership calls, where participants could call in listen to Burks and others make false representations intended to encourage victim-investors to continue to invest money and to recruit others to invest in Zeek. Burks also organized and attended “Red Carpet Events,” where victim investors came to hear details of the scheme in person. During these events, Burks and his conspirators made false representations about the massive retail profits generated by Zeek. They also used electronic and print media, including websites, emails and journals, to make false and misleading statements about the success of Zeekler to recruit victim investors.

As the Ponzi scheme grew in size and scope it became unsustainable and it eventually began to unravel as the outstanding liability resulting from the bogus 125% return on investment continued to rise beyond control. By August 2012, Burks and his conspirators fraudulently represented to the collective victims that their investments were worth nearly $3 billion, but had no accurate books and records to even determine how much cash on hand was available to pay such liability. Contrary to representations made to victim investors, at that time, Burks and his conspirators had only $340 million available to pay out investors. Over the course of the scheme, Burks diverted approximately $10.1 million to himself.

Burks also failed to file corporate tax returns or to make corporate tax payments for his companies, among other things. In addition, for tax year 2011, Burks issued fraudulent IRS Forms 1099s, causing victim-investors to file inaccurate tax returns for phantom income they never actually received.

At sentencing, Judge Cogburn stated that for the defendant’s scheme to work would have required a miracle on the order of the “loaves and fishes.” Judge Cogburn stated that a significant sentence was necessary to promote respect for the law, provide just punishment, and also deter others considering committing fraud. Judge Cogburn further noted that the scheme was “almost breathtaking” and emphasized that the defendant had time to stop it.

Burks will be ordered to report to the Federal Bureau of Prisons to begin serving his sentence upon designation of a federal facility. All federal sentences are served without the possibility of parole.

Burks’ co-conspirators, Dawn Wright Olivares, Zeek’s Chief Operating Officer, and her step-son and Zeek’s Senior Technology Officer, Daniel C. Olivares, were previously sentenced to 90 and 24 months in prison and three years of supervised release, respectively, for their involvement in the scheme.

In making today’s announcement, U.S. Attorney Rose thanked the U.S. Secret Service and IRS-CI for investigating the case, and the U.S. Securities & Exchange Commission, Division of Enforcement for its assistance with the investigation.

The prosecution is handled by Assistant United States Attorneys Jenny Grus Sugar and Corey Ellis of the U.S. Attorney’s Office in Charlotte.

Additional information and updated court filings about this and related cases filings can be accessed at the district’s website: http://www.justice.gov/usao/ncw/ncwvwa.html.

Updated February 13, 2017

Zeek Rewards: Receiver Asks For Victims to Write Sentencing Hearing Letters

 


ANNOUNCEMENT FROM THE RECEIVER – January 19, 2017

On February 13, 2013, Paul Burks will be sentenced in United States District Court for the Western District of North Carolina for his role in the ZeekRewards Ponzi and pyramid scheme. The sentencing hearing is open to the public and will be held at the Federal Courthouse at 401 W. Trade Street, Charlotte, NC.

Victims of these offenses are entitled to be heard at sentencing. If a victim would like to have a letter describing the impact that ZeekRewards had on them submitted to the Court please send an email to HearingLetter@zeekrewardsreceivership.com. In particular, the Court would like to hear about any of the below circumstances:

  • Becoming insolvent;
  • Filing for bankruptcy under the Bankruptcy Code;
  • Suffering substantial loss of a retirement, education, or other savings or investment fund;
  • Making substantial changes to his or her employment, such as postponing his or her retirement plans;
  • Making substantial changes to his or her living arrangements, such as relocating to a less expensive home; and
  • Suffering substantial harm to his or her ability to obtain credit.

I will be attending the hearings on behalf of all ZeekRewards victims and will present your letters to the Court.

Zeek Rewards: Paul Burks Sentencing Set For Mid-February

Judge Cogburn has issued the following Order:

THIS MATTER is before the court on the parties’ Joint Motion to Continue Sentencing (#119). Having considered the motion and reviewed the pleadings, the court enters the following Order. The court notes that the parties have requested that the court continue the sentencing hearing to or after January 30, 2017 and have reported that February 9th, 2017 is a known conflict for the counsels’ schedules.

ORDER
IT IS, THEREFORE, ORDERED that the parties’ Joint Motion to Continue Sentencing (#119) is GRANTED, and the Clerk of Court is instructed to place this matter on the next appropriate sentencing calendar.

The case docket sets a tentative date:

Sentencing set for 2/13/2017 09:30 AM in Courtroom, 401 W Trade St, Charlotte, NC 28202 before District Judge Max O. Cogburn Jr.

Zeek Rewards: Verdict Sheet, Burks Criminal Trial

Clipboard04

 

Tax Crimes Handbook, SECTION 4 CONSPIRACY TO COMMIT OFFENSE OR TO
DEFRAUD THE UNITED STATES – 18 U.S.C. § 371

Overt Act:
[b] In furtherance of the conspiracy. The government must prove that the commission of
the overt act was in furtherance of the conspiracy. Grunewald v. United States, 353 U.S. 391,
396-397 (1957); Braverman v. United States, 317 U.S. 49, 53 (1942); United States v.
Provenzano, 615 F.2d 37, 45-46 (2d Cir.), cert. denied, 446 U.S. 953 (1980); Castro v. United
States, 296 F.2d 540, 542-543 (5th Cir. 1961). The overt act must have been calculated to
achieve some goal or objective of the conspiracy. Grunewald, 353 U.S. at 414-15.

 

Zeek Rewards: Paul Burks Found Guilty on All 4 Counts!!

zeekrewards

Department of Justice
U.S. Attorney’s Office
Western District of North Carolina

FOR IMMEDIATE RELEASE
Thursday, July 21, 2016

Former ZeekRewards CEO Is Convicted Of Federal Charges For Operating $900 Million Internet Ponzi Scheme

CHARLOTTE, N.C. – U.S. Attorney Jill Westmoreland Rose announced that a federal jury sitting in Charlotte retuned a guilty verdict today against the former CEO of ZeekRewards for operating a $900 million Internet Ponzi scheme.  Following a three-week trial, the jury convicted Burks, 69, of Lexington, N.C., of wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy.

Michael Rolin, Special Agent in Charge of the United States Secret Service, Charlotte Field Division and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI) join U.S. Attorney Rose in making today’s announcement.

“For nearly two years, Burks used deceit and dishonesty to engineer an extensive Ponzi scheme that amassed millions of dollars from thousands of victims, many in the Western District of North Carolina. This massive scam is one of the largest in breadth and scope ever prosecuted by this office.  I commend the United States Secret Service and the IRS agents who worked closely with our prosecutors to unravel Burk’s fraud and to obtain a conviction against the mastermind of a scheme that has left so many victims with substantial losses.  I want to remind the public to steer clear of ‘get rich’ schemes and to follow the old adage that if it looks too good to be true, it likely is,” said U.S. Attorney Rose.

“Today’s verdict is the result of a joint investigative effort and it is representative of the commitment the U.S. Secret Service and our partners have towards ensuring those intent on defrauding the citizens of North Carolina and the United States are held accountable,” said Special Agent in Charge Rolin.

According to filed court documents, court proceedings, evidence introduced at trial and witness testimony:

From January 2010 through August 2012, Paul Burks was the owner of Rex Venture Group, LLC (RVG), through which he owned and operated Zeekler, a sham Internet-based penny auction company, and its purported advertising division, ZeekRewards (collectively “Zeek”).   Burks and his conspirators induced more than 900,000 victims – including over 1,500 victims in the Charlotte area – to invest in their fraudulent scheme, by falsely representing that Zeekler was generating massive retail profits from its penny auctions, and that the public could share in such profits through investment in ZeekRewards. Burks and his conspirators, including Zeek’s former Chief Operating Officer Dawn Wright Olivares and her step-son and Zeek’s Senior Technology Officer Daniel C. Olivares, claimed at one point that investors would be guaranteed a 125% return on their investment.

Burks and his conspirators represented that victim-investors in ZeekRewards could participate in the Retail Profit Pool (RPP), which supposedly allowed victims collectively to share 50% of Zeek’s daily net profits.  Burks and his conspirators did not keep books and records needed to calculate such daily figures.  Instead, Burks simply made up the daily “profit” numbers.  Contrary to the conspirators’ claims, the true revenue from the scheme did not come from the penny auction’s “massive profits.”  Instead, approximately 98% of all incoming funds came from victim-investors, which were then used to make Ponzi-style payments to earlier victim investors.

In addition to promising massive returns on investments, Burks and his conspirators used a number of ways to promote Zeek to current and potential investors.  For example, the conspirators hosted weekly conference calls and leadership calls, where participants could call in listen to Burks and others make false representations intended to encourage victim-investors to continue to invest money and to recruit others to invest in Zeek.  Burks also organized and attended “Red Carpet Events,” where victim investors came to hear details of the scheme in person.  During these events, Burks and his conspirators made false representations about the massive retail profits generated by Zeek.  They also used electronic and print media, including websites, emails and journals, to make false and misleading statements about the success of Zeekler to recruit victim investors.

As the Ponzi scheme grew in size and scope it became unsustainable and it eventually began to unravel as the outstanding liability resulting from the bogus 125% return on investment continued to rise beyond control.  By August 2012, Burks and his conspirators fraudulently represented to the collective victims that their investments were worth nearly $3 billion, but had no accurate books and records to even determine how much cash on hand was available to pay such liability.  Contrary to representations made to victim investors, at that time, Burks and his conspirators had only $340 million available to pay out investors.  Over the course of the scheme, Burks diverted approximately $10.1 million to himself.

Burks also failed to file corporate tax returns or to make corporate tax payments for his companies, among other things.  In addition, for tax year 2011, Burks issued fraudulent IRS Forms 1099s, causing victim-investors to file inaccurate tax returns for phantom income they never actually received.

Burks will remain free on bond.  A sentencing date for the defendant has not been set yet.  The wire and mail fraud conspiracy charge, the mail fraud charge and wire fraud charge each carry a maximum prison term of 20 years and a $250,000 fine.  The tax fraud conspiracy charge carries a maximum prison term of five years and a $250,000 fine.

Burks’ co-conspirators, Dawn Wright Olivares, Zeek’s Chief Operating Officer, and her step-son and Zeek’s Senior Technology Officer, Daniel C. Olivares, pleaded guilty in December 2013 to investment fraud conspiracy.  Dawn Wright Olivares also pleaded guilty to tax fraud conspiracy.  Both defendants currently await sentencing.

In making today’s announcement, U.S. Attorney Rose thanked the U.S. Secret Service and IRS-CI for investigating the case, and the U.S. Securities & Exchange Commission, Division of Enforcement for its assistance with the investigation.

The prosecution is handled by Assistant United States Attorneys Jenny Grus Sugar and Corey Ellis of the U.S. Attorney’s Office in Charlotte.

Additional information and updated court filings about this and related cases filings can be accessed at the district’s website: http://www.justice.gov/usao/ncw/ncwvwa.html.

 

Zeek Rewards: Latest Docket Entries in Burks’ Trial

This is all that was on the docket today:  zeekrewards

Full docket text:  (July 15)
Minute Entry: JURY TRIAL as to Paul Burks held before District Judge Max O. Cogburn, Jr.. Evidence continued. Jury Trial set for 7/18/2016 09:30 AM in Courtroom 2-1, 401 W Trade St, Charlotte, NC 28202 before District Judge Max O. Cogburn Jr.Government attorney: Jenny Sugar, Corey Ellis. Defendant attorney: Noell Tin, Jacob Sussman, Melissa Owen. Court Reporter: Cheryl Nuccio. (chh)

Full docket text: (July 14)
Minute Entry: JURY TRIAL as to Paul Burks held before District Judge Max O. Cogburn, Jr.. Evidence continued. Jury Trial set for 7/15/2016 09:00 AM in Courtroom 2-1, 401 W Trade St, Charlotte, NC 28202 before District Judge Max O. Cogburn Jr.Government attorney: Jenny Sugar, Corey Ellis. Defendant attorney: Noell Tin, Jacob Sussman, Melissa Owen, Isham Reavis. Court Reporter: Cheryl Nuccio/Laura Andersen. (chh)

No new motions have been added to the docket file in the past few days, and Judge Cogburn has not made a ruling on the prosecution’s motion to preclude the testimony of the defendants “expert witnesses”.

Zeek Rewards: Government Rests Its Case

zeekrewardsI checked the docket a little while ago and saw this entry for July 13th:

Full docket text: (emphasis added)
Minute Entry: JURY TRIAL as to Paul Burks held before District Judge Max O. Cogburn, Jr.. Evidence continued. Government rested. Oral Rule 29 Motion by defendant is denied by court. Jury Trial set for 7/14/2016 09:00 AM in Courtroom 2-1, 401 W Trade St, Charlotte, NC 28202 before District Judge Max O. Cogburn Jr.Government attorney: Jenny Sugar, Corey Ellis. Defendant attorney: Jacob Sussman, Isham Reavis, Melissa Owen, Noell Tin. Court Reporter: Cheryl Nuccio/Laura Andersen. (chh)

Here is the definition of Rule 29 from the Cornell Law website:

Rule 29. Motion for a Judgment of Acquittal

(a) Before Submission to the Jury. After the government closes its evidence or after the close of all the evidence, the court on the defendant’s motion must enter a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction. The court may on its own consider whether the evidence is insufficient to sustain a conviction. If the court denies a motion for a judgment of acquittal at the close of the government’s evidence, the defendant may offer evidence without having reserved the right to do so.

Judge Cogburn didn’t find that there was insufficient evidence to sustain a conviction; I like this guy.

So far, Judge Cogburn has not ruled on a few defense motions and there is no entry for the government’s motion to preclude Burks’ expert witnesses.

I wish we had someone in the courtroom for all of this. The docket entries are minimal at best.

Zeek Rewards: Prosecution Seeks to Limit or Preclude Reliance Witnesses

Jill Westmoreland Rose, United States Attorney, has filed a motion in limine to preclude Paul Burks from zeeklerintroducing “irrelevant testimony” through Nehra & Waak, Keith Laggos, Kevin Grimes, Howard Kaplan, Gregory Caldwell, and Greer & Walker.

A motion in limine is a motion made at the start of a trial requesting that the judge rule that certain evidence may not be introduced in trial.

The Motion goes on to say:

On or about April 11, 2016, Defendant notified the United States that he may assert a reliance defense in his response (Doc. 52) to the Government’s Motion in Limine regarding the reliance defense (Doc. 47), though no specific individuals upon whose advice the Defendant relied were named. On or about June 26, 2016, the defense again repeated that he may assert a reliance defense in its trial brief. (Doc. 86, page 6.) Again, no specific individuals were named. Moreover, Defendant’s trial brief asserts that his purported reliance defense is based upon the assertion that he made changes to the (already existing and implemented) program in good faith based on the advice of experts. That is, by his own admission Defendant did not seek advice about potential future conduct, but instead about his ongoing conduct.

Burks also appears to net be able to keep his dates straight:

In particular, Defendant has asserted that he first sought advice from the following individuals during the following months:
• Nehra & Waak – April 2011 (though this appears to be an error and should be June 2011)
• Keith Laggos – June 2011
• Kevin Grimes – December 2011
• Howard Kaplan – January 2012
• Gregory Caldwell – January 2012
• Greer & Walker – March 2012

The prosecution contends that at trial, they will establish that Zeek Rewards launched in January 2011 and promised a 125% return. Additional evidence will show that Burks and his co-conspirators “were aware that compounding bids purchased by affiliates in Zeek rewards were ‘debt bids’ creating exponential debt to the company well beyond 125% and driving away retail customers.”

Though cosmetic changes were later made to the program, it continued to essentially function in the exact same manner as it had before any consultants or attorneys were employed: money came in largely from affiliates (who were supposed to be the “advertising” force for Zeekler.com the penny auction); those affiliates received a purported “profit-share” equivalent to approximately a 125% return on their bid purchases in a 90 day period (later as a Retail Profit Pool percent averaging 1.43% per day); and Defendant Burks promoted the program as sharing the profits from the penny auctions.

Next, they establish how the testimony would be irrelevant:

Even if Defendant can establish “that he disclosed all material facts to [the counsel or expert] and that he acted strictly in accordance with [the counsel or expert’s] advice,” to establish a reliance defense, he must establish that he obtained that advice prior to and with regard to future conduct.

 

 

Simply, “a defendant who takes ‘significant steps’ toward the completion of his criminal action cannot avail himself of later-received advice of counsel respecting the lawfulness of that action.” Id.

 

 

Put another way, “[t]he party must also consult the attorney as to the lawfulness of his possible future conduct and may not consult an attorney after he has already manifested an intent to act unlawfully in an attempt to retroactively protect himself from the consequences of his illegal conduct.”

 

 

Defendant Burks had formed intent and taken significant steps in the scheme prior to the time he sought counsel.

The Conclusion says it all:

Without evidence presented that Defendant (1) obtained the advice of counsel or expert (1) prior to engaging in the conduct and then (2) relied upon the instructions or advice of a particular “expert,” there can be no reliance defense. See Pearrell, 1996 WL 10284 at *2; Polytarides, 584 F.2d at 1352. Here the evidence already establishes that Defendant did not seek advice until after he had manifested the intent to commit his crimes and taken significant steps in furtherance of his scheme. Thus, there can be no reliance defense, and the testimony of Defendant’s “Advice of Counsel/Expert” witnesses should be precluded as irrelevant, as their testimony would not make any fact of consequence more or less probable.

 

The prosecution believes that is these “expert witnesses” are allowed to testify, the “minimal relevance will be outweighed by the risk of confusing the issues and misleading the jury.”

Zeek Rewards: Latest Docket Entries

ZeekIt seems no reporters from the Charlotte area are covering the Burks Criminal trial every day, so we will have to rely on what appears on the PACER docket.

On Sunday, this was filed; the document is on the Files website:

07/10/2016 105 REPLY TO RESPONSE to Motion by USA as to Paul Burks re 90 MOTION to Exclude Expert testimony of John White and to exclude and/or limit expert testimony of Morris Aaron (Sugar, Jenny) (Entered: 07/10/2016)

 

Here’s what we have for today:

Full docket text:
Minute Entry: JURY TRIAL as to Paul Burks held before District Judge Max O. Cogburn, Jr.. Evidence continued. Jury Trial set for 7/12/2016 09:00 AM in Courtroom 2-1, 401 W Trade St, Charlotte, NC 28202 before District Judge Max O. Cogburn Jr.Government attorney: Jenny Sugar, Corey Ellis. Defendant attorney: Melissa Owen, Noell Tin, Jacob Sussman, Isham Reavis. Court Reporter: Cheryl Nucio/Laura Andersen. (chh)
Full docket text:
TEXT-ONLY ORDER denying [92] Motion to Continue Docket Call/Trial as to Paul Burks (1) Text of Order: denied for reasons discussed in court So Ordered. Entered by District Judge Max O. Cogburn, Jr on 7/11/2016. (Davis, David)

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