Filed on the virtual eve of the Burks criminal trial which begins on July 5th, the Receiver has filed a Motion for Summary Judgment in Bell v Disner, et al, along with a supporting memorandum of Law and a group of Exhibits. The Motion lists the “Named Defendants” like this:
The named defendants in this action are among the largest net winners of the ZeekRewards scheme, with winnings for each reaching as high as $1,875,000. The Court already has entered Judgments against several of these named defendants – who either failed to answer or cooperate in the action. See supra at n.1 and Doc. Nos. 76, 93, 95 and 119. Two defendants, Lori Jean Webber and P.A.W.S. Capital Management LLC, have reached a settlement with the Receiver.
The remaining named defendants are: Jerry Napier (Owosso, Michigan; a “net winner” of more than $1,745,000); Durant Brockett (Las Vegas, Nevada; a “net winner” of more than $1,720,000); Darren Miller (Coeur d’Alene, Idaho; a “net winner” of more than $1,635,000); Rhonda Gates (Nashville, Tennessee; a “net winner” of more than $1,425,000); T. Le Mont Silver Sr. (Orlando, Florida / Dominican Republic; a “net winner” of more than $773,000; Mr. Silver also used Global Internet Formula, Inc., which is, upon information and belief, incorporated in Florida, as a shell company through which he was a ZeekRewards “net winner” of more than $943,000); Karen Silver (T. Le Mont Silver’s wife; a “net winner” of more than $600,000); Aaron and Shara Andrews (Lake Worth, Florida; the Andrews used Innovation Marketing LLC, a Florida shell company to win more than $1,000,000) and David and Mary Kettner (Peoria, Arizona; “net winners” of more than $930,000 using the shell companies named Desert Oasis International Marketing, LLC and Kettner & Associates, LLC as nominal payees). See Exhibit C (Expert Report of David S. Turner) (hereinafter “Turner Report”)at Ex. F.
Default judgments have already been ordered against:
- Michael Van Leeuwen – $1,617,444.99
- Todd Disner – $2,079,757.88
- David Sorrells – 1,197,241.12
- Trudy Gilmond – $2,129,522.27
Also listed are the “net Winner Class” which was already certified by the Court.
On September 14, 2015, the Court appointed Kevin Edmundson as class counsel and subsequently the Court authorized the defendant class to engage an expert witness,
Berkeley Research Group (“BRG”), at the primary expense of the Receivership. See
Doc. Nos. 117, 125.
Their own expert witness, BRG concluded the following:
In its initial report dated January 18, 2016, BRG agreed that it was able to “replicate the exhibits in the Turner Report, within a reasonable margin of difference.” Then, in its “Phase II” report, BRG reached two conclusions (bolded in the report):
a) [B]ased upon a preliminary analysis, it does not appear that the magnitude
of profit from the auction business would materially impact the assessment of
whether or not the business, taken as a whole, operated as a Ponzi scheme.
b) As a result of our testing in Phase II, we have not found evidence that
definitively disproves that the business as a whole operated as a Ponzi scheme.
Addressing the Burks and his not so successful endeavors, the receiver had this to say:
Beginning at least as far back as 2000, Paul Burks operated a number of generally
unsuccessful multi-level marketing businesses through Rex Venture Group, LLC (and
related entities) with names such as Go-Go Hub, Free Store Club, My Bid Shack, New
Net Mail and Signed and Numbered International. See, e.g., Bell Aff. at Ex. 2, 3;
Douglas Dep. at pp. 50, 54-55, 71, 78; Exhibit D (Excerpt of Durant Brockett Deposition)
(hereinafter “Brockett Dep.”) at pp.18-19, 30. In 2010, RVG launched Zeekler.com, a
so-called “penny auction” website where items ranging from personal electronics to cash
were auctioned to bidders. See id.
However, bids bought through ZeekRewards rather than as retail bids were more valuable because purchasing those bids gave the affiliates “points” that supposedly entitled Affiliates to a portion of the profits from the business. This was the real (and only) reason Affiliates would pay $1 for auction bids they could buy for $.65. See Brockett Dep. at 77-78. As one Affiliate told Burks, “I know how the system works mathematically and you know I know. Whether you call the bids bids or hamburgers makes no difference. People are not joining Zeek to get hamburgers, orauction bids; they are joining Zeek to make money….” Bell Aff. at Ex. 6.
Also mentioned are the Wright-Olivares and how they knew what they were doing:
From the beginning, RVG intended to use “bids” in ZeekRewards not as a product but as a proxy for money deposited into the program. Dawn Wright-Olivares was very clear about the plan, telling Danny Olivares on January 21, 2011: “We’re just going to use bids as currency.” Bell Aff. at Ex. 9(a). On another occasion, Dawn Wright-Olivares referred to the compounding bids as “Monopoly money.” Bell Aff. at Ex. 9(b). Quickly, RVG’s focus changed from Zeekler to ZeekRewards, which was the source of nearly all the company’s income. Relative to ZeekRewards, little or no money was made in the Zeekler “penny auction” business.
Burks and the other Insiders were aware that the payouts to Affiliates would be funded by new participants rather than retail profits from the penny auctions. Dawn Wright-Olivares excitedly told Burks early in the scheme, “I think we can blow this OUT together- we’ve already attracted a great many big fishes.” Bell Aff. at Ex. 4.
As you go farther down the Memorandum, it details the “Compensation Plan”, the “Compounder” and how the money magically multiplied. And it seems everyone at the top knew all along that it was not exactly above board and could not really explain the voodoo behind the ROI and how it was calculated:
Burks deliberately evaded affiliate questions asking how the RPP was calculated. In a Skype chat with an affiliate, he said: “[a] proprietary system is used to determine the amount of profit sharing that is done each day. We do not divulge the details of how those numbers are determined. Our stated target of minimum of 1% weekdays (Mon-Thur) and .5% weekends (Fri-Sun) has always been met and exceeded. It is clearly not directly tied to the number of auctions in a particular day. It is the overall average that counts.” Bell Aff. at Ex. 9(d).
Behind the scenes, the Insiders were not even subtle about the fake earnings numbers. Often, the company simply used the previous week’s daily RPP percentages. For example, on one occasion, Danny Olivares sent a text message to multiple insiders stating, “Need a % for rpp when you can.” Dawn Wright-Olivares responded, “Do whatever was last Monday.” Bell Aff. at Ex. 40. Or, from Paul Burks: “Hey Dan. Sorry about last night. What percent did you use?” Danny Olivares: “Same as last Friday. 0.009.” Bell Aff. at Ex. 23.
There are a ton more revelations in this filing, too many to detail here. You can click here to look at the 139 page filing, including all of the Exhibits.