Unpaid taxes & another pyramid in new evidence against Burks
In 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.
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.
why has the prosecution brought in the FollowMe 1×2 pyramid scheme, so late in the game, a few weeks before trial?
now burks will have to file his protest against the introduction of FollowMe 1×2 pyramid scheme as evidence, and this could delay the trial.
another zeek case doc uploaded by asdupdates a few hours ago is the ‘[Defendant’s Proposed] Jury Questionnaire ‘, the defendant being paul burks.
in this doc the criminal case against burks is described thus:
so, i guess burks defence is hinged around the ‘investment’ argument.
defence will probably say that zeek affiliates were not making ‘investments’, that they were buying and selling ‘bids’ and received ‘payments’ for their ‘work’ making ‘sales’.
i hope the trial is not delayed any further, it will be entirely too much fun to see a real trial play out!
Too bad what an “investment” is has been defined back in 1946… SEC vs. Howey (1946).
Zeek affiliates are “buying” bids with anticipation of getting “profit split” based on amount of bids purchased. That is an investment. Any attempt to deny such is pretty much an insta-fail.
but, SEC vs howey also established that the profits expected on investments should arise from the ‘efforts of others’ and not those of the investor.
i think i have exhausted my arguments about the interpretation of the howey test in earlier zeek threads, so i’ll just leave this here.
SEC vs. Turner (1973) established that “effort” of investor must be managerial or above to count for Howey test. Posting ads does not count. Indeed, I think that angle was busted in ASD as well, and 12DailyPro.
Can confirm, ASD case already busted the “posting Ponzi ads = personal effort” crap.
SEC vs turner said “those essential managerial efforts which affect the failure or success of the enterprise.”
the court further found that ‘sales efforts’ are the – “sine qua non of the scheme; those efforts are what keeps it going; those efforts are what produced the money which is to make him rich”.
the court found that in turner, the management rather than the investors, Controlled the ‘sales’ and hence the howey test was satisfied.
after this seminal decision, different circuit courts have interpreted a companies ‘control over sales efforts’ differently in MLM cases.
zeek is in the 4th circuit, and an important decision from the 4th circuit appeal courts, in U.S. v. Holtzclaw, found that the howey test was not satisfied in the MLM ‘sell america’, because participants did the recruitment work themselves, with the company only providing marketing material like brochures.
both ‘ponzi’ and ‘pyramid’ schemes involve ‘robbing peter to pay paul’ , but ponzi schemes are characterized by ‘investments for passive ROI’s’, whereas pyramid schemes are characterized by ‘endless chain recruitment’.
the criminal case against burks mentions ‘ponzi’ scheme, so it will be interesting to see.
c’mon boss, the asd case didn’t even go to trial.
nothing can be confirmed on the basis of the asd ‘settlement’.
So Andy Bowdoin is wrongfully imprisoned, then ??
UM, excuse me? Of course it went to trial. The entire criminal case is on my files website. wrong again…
He plead guilty. So he admitted it.
Did you and I read the same case?
Turner argued that individual members were recruiting and recruiting additional members is what determined their pay, therefore they are determining their own success, not “effort of others” and thus not an investment. This was what was struck down as bogus.
andy bowdoin is in prison because he made a plea deal with the prosecution. he pleaded guilty on one count [wire fraud] and in return got a ‘soft’ sentence of [IIRC] 5 years.
his offences were not tried by a court on merits, so no one can be sure if justice was served.
he may have been guilty of all the counts he was indicted for, but he got punished only for one.
he may have been innocent of all counts he was indicted for, but still got punished for one.
who can tell, without a court finding on merits?
all i can say, for sure, is that andy bowdoin made a plea deal and is serving a sentence.
So, we’re in for another round of Speak Asia, are we ???
i have not followed the asd case like you have.
i have read that the criminal case proceeded with defence and prosecution filing various motions, but before the trial commenced, bowdoin entered a plea deal with the prosecution.
your’e saying there was a criminal trial? what did the trial court conclude? was he ‘found’ guilty on all counts?
i thought bowdoin pleaded guilty on one count, and the court accepted his admission of guilt without a trial, and sentenced him.
bowdoin was indicted on 4 counts: wire fraud, securities fraud, conspiracy to defraud, and selling unregistered securities.
he made a plea deal with the prosecution, and pleaded guilty to the first count ie wire fraud.
does this mean that the prosecution ‘admitted’ that he was ‘innocent’ of securities fraud, conspiracy to defraud, and selling unregistered securities?
we don’t know what all bowdoin was ‘really’ guilty of, there was no trial on merits.
Oh, puh-lease. He obviously don’t LIKE the chances he had on the other charges, therefore he took the deal.
If he’s reasonably sure about his chances he’d have stuck it out like he promised while doing OneX. His actions spoke VOLUMES about his confidence of the case against him.
By your logic, Bernie Madoff isn’t *really* guilty since he plead guilty to 11 counts and never really went to trial.
The only difference is Madoff didn’t bother to plea bargain, when he could have dragged down all of his subordinates by naming his co-conspirators to reduce his own sentence, not that it helped them at all.
yes, but you are interpreting it differently, and in my view, incorrectly.
the court absolutely did not find the recruitment [sales] work bogus.
in fact the court found this recruitment [sales] work to be :
the court Did Not Agree with turners argument that affiliates were recruiting and so they were getting paid on ‘their own efforts’ and were not dependant on the ‘efforts of others’ to make a profit.
^^ this is because on studying how turner’s Dare To Be Great scheme worked, the court found that affiliates had a very small role to play in recruitment.
a DTBG affiliate was only supposed to bring a prospect to the companies meetings Without telling them anything about the scheme.
the meetings were conducted by company officials, and the sales were closed [ie recruitment] by company officials.
as the affiliates were only putting in a ‘modicum of effort’ in realising sales[ via recruitment], and the company was putting in the lions share of the sales work, the court found that the DTBG scheme satisfied the howey test.
at least madoff pleaded guilty on ALL 11 counts he was indicted with, and this leaves no place for ‘doubt’ about his culpability.
bowdoin at the most, can be considered guilty of ‘wire fraud’, because he admitted this much.
he cannot be considered guilty for the other 3 counts ie securities fraud, conspiracy to defraud, and selling unregistered securities, because neither did he admit them, nor did the court make any ‘finding’ about them.
so, we cannot say asd was selling ‘securities’ [in accordance with the howey test], as this was neither admitted nor found.
and we cant extend the asd argument to zeek, since we dont know if asd was selling securities.