zeekrewardsIn addition to the four counts Paul Burks was indicted on, the DOJ plan to introduce additional evidence at trial next month.

The first evidence pertains to Burks failing to pay tax returns, the second his ‘involvement in a pyramid scheme‘.

Paul Burks has a history of scamming prior to Zeek Rewards? Say it isn’t so!

Failure to file tax returns

Paul Burks’ indictment has already covered Rex Venture Group (RVG), Zeek Rewards and Zeekler’s failure to ‘file timely corporate tax returns or to make any corporate tax payments to the IRS‘ over 2010 and 2011.

Presented as new evidence by the DOJ is that RVG ‘had not filed corporate tax returns since at least 2003‘.

One or two years you might get away with as an oversight… but nine?

Moreover, income from RVG was not reported on Defendant Burks’s tax returns during that period, because he too failed to file timely tax returns for the years 2003 through 2011.

Seems like 2003 was the year Burks’ decided he was done with tax returns altogether.

Moreover, one of the lies used by Defendant Burks to perpetuate his scheme was to tout the 14-year history of his company and to claim that RVG was not “fly-by-night.”

Evidence that neither RVG nor Burks filed tax returns, as both were legally obligated to do, illustrates Defendant Burks’ efforts to mislead potential investors and the Internal Revenue Service.

The DOJ seek to use Burks’ non-timely filing of tax returns as evidence of criminal intent.

It is axiomatic that law-abiding citizens truthfully report their income to the IRS; defendants engaged in fraud report their criminal income less often.

Transparency is not the friend of those trying to commit fraud. A lack of transparency to the IRS, in particular, can help conceal criminal activity.

Thus, evidence of tax evasion, underreporting of criminal income, and filing taxes late is all probative evidence of fraudulent intent.

Whether Paul Burks ‘had the intent to defraud’ is described by the DOJ as ‘the only true issue at trial‘.

Thus, such evidence is “intrinsic” and “inextricably intertwined” with Defendant Burks’s fraud.

Operation of FollowMe 1×2 pyramid scheme

The name sounds typical of a matrix cycler, with FollowMe 1×2 purportedly a pyramid scheme set up Burks prior to Zeek Rewards taking off.

(Paul) Burks established numerous multi-level marketing companies between 1997 and 2010.

Each of these companies ultimately fizzled out.

In 2010, Defendant Burks launched two penny auction websites: Zeekler.com and MyBidShack.

The financial condition of RVG in 2010, the year the penny auctions launched, was dire.

(Paul) Burks was in a desperate financial condition. His co-defendants, Dawn WrightOlivares and Dan Olivares, were looking for other work.

RVG’s launch of the penny auctions (MyBidShack and Zeekler) with multi-level marketing compensation plans had not generated substantial income, and Defendant Burks needed cash.

In approximately September 2010, Defendant Burks and his co-conspirators launched yet another MLM website: FollowMe1x2.

From the sounds of it, FollowMe 1×2 was your typical ad-credit Ponzi cycler:

FollowMe1x2 was described as “a fast-paced network advertising program that was designed to maximize your ad budget, increase your businesses exposure and your bank account exponentially!!”

However, in reality FollowMe1x2 was a “chain letter company” that did not generate any product.

Generating the required cash flow Burks needed to press on, when FollowMe 1×2 eventually collapsed, victims were given positions in Zeek Rewards.

FollowMe1x2, though unrelated to the auctions, was designed to generate money for the penny auctions – that were flailing in 2010 – and was ultimately the precursor to the ZeekRewards pyramid scheme.

Participants in all of Defendant Burks’s prior businesses started in the ZeekReward’s compounder with $500 in compounding credits.

And so right from its conception, Zeek Rewards was established on the concept of paying out funds that didn’t actually exist.

(Paul) Burks managed to generate a stream of money into RVG with the ZeekRewards scheme.

Per information that he provided to an accountant in 2013, his total compensation from RVG in 2011, including both wages and income from the company, was more than $11,000,000 – quite a step up from the less than $50,000 average income he had received during the eight years prior.

Gee, do you think an annual income increase of 22,000% tied to a 125% ROI Ponzi scheme had anything to do with Burks’ continued non-filing of tax returns?

Paul Burks’ FollowMe 1×2 pyramid scheme isn’t pivotal to the DOJ’s case against him, however the regulator argues it ‘is necessary to tell the whole story of the fraud around Zeekler to the jury.‘

The Government does not intend to dwell on FollowMe1x2 in its presentation of evidence.

However, a description of this program – that served as a bridge between the penny auctions with compensation programs in 2010 and the subsequent launch of ZeekRewards – is necessary to put the allegations in context and is intrinsic to the conduct charged:

FollowMe1x2 was part of the supposed successful history of RVG touted by Defendant Burks and an essential part of the story of how RVG went from a flailing MLM penny auction company to the multi-million ZeekRewards fraud.

Whether the DOJ are permitted to submit evidence pertaining to Burks’ alleged tax fraud and FollowMe 1×2 pyramid scheme has yet to be decided.

Stay tuned…

 

Footnote: Our thanks to Don@ASDUpdates for providing a copy of the DOJ’s “Notice Of Intent To Introduce Evidence And Memorandum Of Law In Support Of Its Admissibility” June 10th filing.