Tag Archives: pyramid

Zeek Rewards: Receiver Asks for Summary Judgment Against Class of “Net Winners”

Filed on the virtual eve of the Burks criminal trial which begins on July 5th, the Receiver has filed a ZeekMotion 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.

Zeek Rewards: Paul Burks Files Jury Instructions and Trial Brief

zeeklerOn the 24th, Burks filed his Proposed Jury Instructions which has such topics listed as:

  • Sympathy
  • Jury to consider only this defendant
  • Witness credibility
  • Bias and hostility
  • Interest in outcome
  • Government Witness – Not proper to consider guilty plea
  • Indifference or lack of concern
  • Mismanagement not the issue
  • Using motive for intent
  • The indictment is not the evidence
  • Good faith reliance upon advice of counsel and/or experts

Each of the topics, and others, has a page listing the instructions proposed to give the jury. I have uploaded a copy onto the Files website, (14-cr-208, Doc 84) as it is a bit lengthy to go into here.

 


And today, Burks filed his Trial Brief, the beginning of which states:

II. STATEMENT OF ANTICIPATED FACTS
A. Paying What He Promised
B. Bid Sales Were Final
C. Mr. Burks Made Changes to the Program in Good Faith Based on the Advice of Experts
D. Dealing with the Challenges of Explosive Growth
E. The Issuance of Forms 1099 Was Based on Sound Legal Advice—and Was Anything But Evidence of “Lulling”

Next, we have a list of the proposed “Experts” expected to be called by Burks:

  • Jose L. Valasquez, Jr. – explaining the contents of the RVG SQL database and flow of money in and out, Director of Forensic Accounting at Thatcher and Assoc.
  • John White – expert in accounting and fraud investigation
  • Morris Aaron – will testify that RVG maintained a sufficient accounting system to calculate daily profits
  • Curtis Elliot- expert in tax law and litigating federal tax controversies.

Included in the brief is a paragraph stating that “Evidence Regarding “Follow Me 1×2” Should Be Excluded”, as “Mr. Burks was not in favor of it and thought the concept was a “straight pyramid”. OK, so he knows what a pyramid scam looks like.

Additionally, they want to exclude any evidence related to ASD, and want any reference to be barred. In essence they want virtually anything that shows the Burks knew all along what he was doing barred from the case.

Good luck with that.

I have uploaded this filing onto the Files website, Doc 86.


Zeek Rewards: USA Gets Ready for Criminal Trial

ZeekYesterday, United States Attorney Jill Westmoreland Rose filed a Motion in Limine regarding the authenticity of certain records.

The parties executed an exhibit exchange agreement, subject to which the Government provided the defense with their draft exhibit list and exhibits four weeks before trial on June 6, 2016; in exchange, the defense agreed to provide “written notice of any objection to the admission of any exhibit, and a detailed statement of any and all bases for any such objection” by June 17, 2016. Further, per the agreement, “Absent such specific written notice by Defendant, the exhibits may be admitted, without objection, at the start of trial.” Defendant subsequently notified the Government of its specific objections to the exhibits on the draft exhibit list.

A large volume of emails were obtained by subpoena issued to Rex Venture Group with Burks as the custodian of records and was prepared with Burks’ current counsel and Burks appeared before the Grand Jury as custodian of records and authenticated the documents.

However, the Defendant strangely makes a Rule 901 objection to numerous other exhibits that were obtained from the exact same source: the Defendant, as custodian of records for Rex Venture Group. Defendant makes this objection despite the fact that all of these exhibits – just like those to which he interposes no authenticity objection – were authenticated by the Defendant and his current counsel who assisted with the subpoena production.

 

 

“In the interest of judicial economy and to save time for all the parties involved, the government will move to admit all of these exhibits at the beginning of the trial”

Sounds like Burks has sour grapes and some of this stuff will come back to bite him.


And filed today, we have a 49 page document entitled Government’s Trail Brief, “to aid the Court in presiding over the upcoming trial of United States v. Paul Burks.”  The first 3 pages contain the Table of Contents, wherein they lay out most of their case against Burks.

The foregoing is a summary of some of the points that the Government anticipates are likely to arise at trial. Should any legal issues arise that are not covered in this trial brief, the Government respectfully requests leave to submit further memoranda as necessary to assist the Court.

You can find all filings in the USA v Burks criminal case on the Files Website, click here.

Profitable Sunrise: Judge Grants Default Judgment

ProSunJudge Thomas Thrash issued an Order on February 26th, that is short and sweet:

ORDER
This is an SEC enforcement action. It is before the Court on the Plaintiff’s Motion for Default Judgment [Doc. 37] which is GRANTED. Counsel for the Plaintiff are directed to present a proposed Order and Final Judgment to the Court in chambers.

This case has dragged on for almost 3 years, and it looks like it might just be winding down. What this means for those victimized by this scam is somewhat nebulous. While monies have been repatriated from the scheme, there is more to be gathered.

 

Zeek Rewards Updates

zeekrewardsHere are the latest activities in the Zeek Rewards federal lawsuits:

12-cv-519 (SEC Case)  On February 1st, Kenneth Bell filed is Status Report for the Fourth Quarter of 2015.  I have uploaded it onto the Files Website, click here for that document.

12-cv-519 (SEC Case) Kenneth Bell continues to go after Zeek receivership assets by getting an Order directing Sooper Credit Union to turn over the sum of $2,200.00 that represents proceeds of Cashier’s Checks within 30 days.

14-cv-91 (Bell v Disner) The attorney representing the “Defendant Class of Net Winners”, Kevin Edmundson,  has filed his first application for reimbursement of professional fees and expenses, which are: (a) Berkeley Research Group $ 70,775.78, (b) Edmundson PLLC $ 2,800.00, and (c) Kelly Hart & Hallman LLP $ 6,976.70

14-cv-91 (Bell v Disner)  William R. Terpening and Jefferson A. Moors filed a Motion to allow
them to withdraw as counsel for any and all parties in this case, including Rhonda Gates;
Innovation Marketing LLC; Aaron Andrews; Shara Andrews, who are part of the Defendant Class.

 

 

 

TelexFree: Bankruptcy Claims Disqualified?

In addition to finding that TelexFree was a Ponzi/Pyramid, Judge Melvin S. Hoffman also issued this decision; allowing the Motion to find TelexFree a Ponzi Pyramid causes “all prior claims files by any person against the debtors or governmental authorities to be disqualified.”

The Trustee must serve a Notice of this by December 7, 2015.


 

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TelexFree: Affidavit From Bank Manager, Rodrigues Speaks English!!

newtelexfreelogoNot a total surprise, we have yet another party contradicting the assertion from Sanderley Rodrigues that he does not speak English. Now, we have an affidavit in support filed by Jason Carpenter, the Bank Manager of the BMO Harris Bank in Orlando, Florida.

In this affidavit Carpenter repeats the SEC’s claims that Rodrigues speaks and reads English sufficiently well to open Commercial bank accounts at the bank, beginning in August of 2013. All of the 8 commercial accounts opened by Rodrigues were closed on May 6, 2015.

Carpenter states that over an approximately 10 month period, he spoke in person with Rodrigues at least every two weeks and the conversations were all in English. These conversations covered topics including transferring money by wire, moving money between internal accounts, and filling out and signing forms.

Moreover, all of these forms that were filled out and signed by Rodrigues were in English and he had no problems negotiating them.

So much for the “No English” arguments, eh?

 

Zeek Rewards: Judge Orders Darryle Douglas to Return Receivership Property

ZeekThe Order below originates from a posting on Facebook. I have no idea why people post things on the internet without realizing that one day, it may come back to haunt you, and never goes away even if you delete it. Sometimes, braggadocio doesn’t work out so well. And, it’s a bit silly to think the Feds are not watching the serial promoters. Here’s what the receiver had to say:

“It has come to the attention of the Receiver that Mr. Douglas has begun promoting a new investment scheme known as “Auction Attics” and intends to use a copy the ZeekRewards affiliate database to solicit investors into this new scheme.”

In addition, the Facebook page contains a long statement from Mr. Douglas which reports he will use his “business database” which contains “over 2 million plus contacts,” of which “[o]ver 90% . . . have already bought bids before!”

 

Judge Mullen agreed with the Receiver and issued the Order:

THIS MATTER is before the Court on the Receiver’s Motion for Order Requiring Return of Receivership Property, Deposition, and Production of Records. The Court has considered the Receiver’s Motion and finds in its equitable discretion that the measures requested are appropriate.
It is, therefore, ORDERED, that Darryle Douglas shall:

1. return the ZeekRewards affiliate database along with all copies of such database to the Receiver  and cease using it;
2. submit to a deposition by the Receiver at a mutually convenient time and location no later than September 24, 2015; and
3. produce to the Receiver all financial records from November 1, 2011 to the present for his personal and business-related accounts prior to such deposition.

TelexFree: Trial Date Set For James Merrill

telexfree-logoAlmost as an aside on the docket for the TelexFree criminal case, there was a brief mention that a Jury trial date has been set for April 4, 2016, at 9 AM, in Courtroom 2, Worcester. Mass.

His co-defendant, Carlos Wanzeler, fled to Brazil like a frightened school girl.

carlos-wanzeler-and-james-merrill-telexfree-management-criminals

Pictured here are Wanzeler (l) and Merrill (r), the two alleged Ponzi/Pyramid operators of the estimated 1.8 Billion dollar scam known as TelexFree.

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