Burks wants tax fraud indictment count dismissed
Back in late 2014, Paul Burks was indicted for running the Zeek Rewards Ponzi scheme.
Burks’ indictment has him facing four criminal counts:
- conspiracy to commit wire and mail fraud
- mail fraud
- wire fraud and
- tax fraud conspiracy
Just shy of two years from his indictment and a criminal trial just around the corner, Burks has objected to the fourth count of tax fraud.
For those that need a refresher, one of the pillars Zeek Rewards based its feigned legitimacy on was the issuing of 1099 tax forms to affiliates.
An example of this in action can be seen in Keith Laggos’ response to the NC Credit Union warning about Zeek:
I had one of my downline call me yesterday and tell me that the (NC) State Credit Union called his wife and told her (since she got her money order there) that they were giving her a call because it had come to their attention that Rex Venture Group, LLC was fraudulent.
His wife went on to tell the bank employee why Zeekrewards is not fraudulent! Yearly 1099, Compliance Testing, can not be a pyramid in the way it works. And the bank employee said she had no idea how Zeekrewards truly worked.
The problem with Zeek’s 1099 forms is that they were for the Ponzi balances in affiliate backoffices. In otherwords, Zeek Rewards was issuing 1099 tax forms on money they knew didn’t exist.
Despite the issue seemingly being a clear-cut case of tax fraud, Burks claims
the explanation for the apparent discrepancy is that the Forms 1099 issued to ZeekRewards’ affiliates were based on “all constructive income received.”
Under this doctrine, affiliates were subject to tax for all income they were entitled to claim, whether or not they actually claimed and received it.
Further, affiliates were also subject to tax for the value of bids they chose to repurchase in lieu of a cash payment.
Burks and his attorney seem to be of the opinion that claiming income that literally doesn’t exist is legal.
And they’re pulling out something called “constructive receipt” to prove so.
The doctrine of constructive receipt is codified in IRS and Treasury regulations, various administrative rulings, and a body of case law from the federal courts.
In simplest terms, it means that income is recognized at the point that a taxpayer has a vested right to receive immediate payment in money or property, even if the taxpayer’s actual receipt of the payment comes at a later date.
As the indictment acknowledges, ZeekRewards affiliates who deferred receipt of cash awards were issued Forms 1099 based on this doctrine.
Yep. And once again, the income declared on the forms didn’t exist. It’s not a matter of affiliates receiving the income “at a later date”, it’s that the Ponzi funds Burks was issuing in the 1099 forms didn’t exist, period.
I mean Burks isn’t seriously going to get up in court and argue that, had Zeek Rewards been able to continue, the income reported on the 1099 forms would have materialized (from new investment).
That’s a joke. And furthermore it’s well-documented that Zeek Rewards was on the brink of collapse prior to the SEC shutdown anyway.
The money on the 1099 forms didn’t exist, nor was it about to be generated any time soon via perpetuation of the Zeek Rewards Ponzi scheme.
The legal premise underlying Count Four—that constructive receipt should be equated to or treated as synonymous with tax fraud—is highly debatable or simply wrong.
Where the law is vague or highly debatable, a defendant actually or imputedly lacks the requisite intent to violate it as a matter of law.
Accordingly, Mr. Burks moves to dismiss Count Four on the grounds that it is a legal impossibility to willfully violate the law in this area.
Riiiiiiight. Because there’s nothing willful about issuing fake 1099 forms based on fake income for the sole purpose of perpetuating fake legitimacy for your very real $850 million dollar Ponzi scheme.
The issuing of the 1099 forms with fake income just “happened”. There was obviously no no willful attempt to violate the law, this was just an honest mistake by a Ponzi scammer.
Who ever heard of a Ponzi scammer breaking the law? Preposterous!
As Mr. Burks can demonstrate to this Court, the applicable laws are vague and the government’s position is highly debatable.
The defense position is at least as, if not more, plausible than the government’s interpretation. Pretrial dismissal of Count Four is therefore appropriate.
All jokes aside, it was only last month the DOJ accused Burks of wasting time in an attempt to delay his criminal proceedings.
That attempt was denied.
Burks’ defense knows the DOJ are obviously going to object to this latest play and his trial is literally just over three weeks away.
What’s the bet this is simply a second attempt at delaying pending proceedings?
Burks’ latest motion was filed on the 8th of June. A reply from the DOJ and ruling have yet to be made.
Footnote: Our thanks to Don@ASDUpdates for providing a copy of Paul Burks’ “Motion to Dismiss Count Four of the Indictment” and supporting Memorandum of Law (both filed on June 8th).
