Paul Burks criminal trial postponed to July 2016
Burks, mastermind of the $850 million dollar Ponzi scheme Zeek Rewards, is facing multiple 20 and 5 year prison terms and potentially millions of dollars in fines.
Wright-Olivares was second in command for most of Zeek’s lifespan.
Whereas review of discovery is usually the reason for delays in MLM Ponzi cases, this one is a little different with scheduled discovery completed.
Rather it’s a Fourth Circuit Judicial Conference that’s behind the delay.
Burks’ trial was scheduled to kick off in May, however conflicting schedules with the judicial conference would see the case proceed on a non-contiguous timeline. In other words, there’d be one or more breaks during the trial.
Seeking to avoid that and run the trial contiguously, Judge Cogburn has set a new trial date of July 5th.
The new date has been assigned “peremptory setting” status, which within a legal context means “absolute, final and not entitled to delay or reconsideration” (TheFreeDictionary).
In related news. the DOJ has opposed Burks’ recent filing for a Bill Of Particulars and Brady Materials. In a nutshell, the DOJ claim Burks is wasting the court’s time.
From at least January 2011 to August 2012, Defendant Paul Burks and his co-conspirators operated one of the biggest internet-based Ponzi schemes in history known as ZeekRewards.
(Burks) is charged with, among other things, conspiracy to commit mail and wire fraud and conspiracy to commit tax fraud.
The Indictment sets out the fraud scheme in great deal over six single-spaced pages that include introductory language, a section on relevant entities and individuals, and numerous pages devoted to the details of the scheme.
Despite the detail set forth in the speaking indictment, the Defendant now asserts that he has insufficient notice of the allegations against him in order to prepare his defense.
In May 2015, this Court granted a continuance in this case until May 2016.
Two months before the peremptory trial setting and approximately seventeen months after the Indictment, Defendant Paul Burks filed a Motion for a Bill of Particulars, seeking among other things the definition of Ponzi scheme and a detailed forecast of the Government’s trial evidence.
Additionally, Defendant filed a Motion for Brady materials theoretically held by third parties.
These motions are both baseless and untimely and should be denied.
What’s really behind Burks’ eleventh-hour motion?
Defendant Burks is 69 years old. He is currently on pretrial release.
If he is convicted of an approximately $800 million fraud, any Guidelines sentence – even any significant departure of a sentence – could be in essence a “life sentence.”
Therefore, his strategy is clear: delay.
Whether or not Burks is permitted to further delay his case remains to be seen.
A second filing by the DOJ seeks to preemptively squash a potential “reliance defense”.
As defined by the DOJ in their filing, a reliance defense in Burks’ criminal case would be based on the spending of ‘innumerable hours and significant sums of money to ensure compliance with applicable laws and regulations‘.
The Government moves in limine to prevent the defense from raising a reliance defense, unless (Burks) can meet all of the elements of such a defense and unless (Burks) waives the privilege as to all communications with the individuals who were supposedly relied upon – including any such communications that also include his current defense team.
How accurate they are I can’t say, but the DOJ goes onto shed light on the defense they believe Burks might raise.
Apparently, Defendant plans to argue that various multi-level marketing attorneys and consultants “blessed” the ZeekRewards program.
By doing so and using a reliance defense, I suppose the idea is that Burks intends to wash his hands of any culpability.
Contend the DOJ however;
The evidence will show that though many advisors were utilized to essentially make sure that the website for ZeekRewards did not have any “problematic” language (like the word “investment” and other terms that would result in regulatory review), that these advisors were never privy to the facts that ZeekRewards maintained no books and records and that the shared “profit” was actually a number made up by Defendant Burks to comport to his original goal of giving affiliates a 125% return.
Further, all of these counsel were employed after ZeekRewards was up and running, and their advice resulted in mere cosmetic, rather than substantive, changes to the program.
Notable examples of counsel Burks’ engaged include Zeek COO Gregory “anybody who publishes criticism of Zeek Rewards is behaving unprofessionally by acting on false information” Caldwell, and attorney Richard Waak.
Based on an interview with Greg Caldwell, Caldwell conducted a compliance audit, not a financial audit, of ZeekRewards.
Caldwell told Defendant Burks that the only way to get the company under control was to shut it down; that advice was rejected.
Another attorney on whom Defendant Burks may try to say he relied, Richard Waak of Nehra & Waak, told co-defendant Dawn Wright Olivares via email, with a copy to Defendant Burks, in June 2012 that,
“If you want to be more than just defensible in the mlm business then you need to start by not using: the penny auction, the giving away of bid packs, the retail profit pool, the compounding (80-20 plan), the matrix, and the online store as a retail product…”
These two examples show that Defendant Burks actually received advice that put him on notice of his scheme’s fraudulent nature.
To evoke a reliance defense, Burks will also need to provide ‘testimony from an attorney or advisor who told him that he could lie to potential investors‘.
The Government has certainly not received any evidence suggesting this to be the case.
Instead, the evidence shows that Defendant repeatedly misled potential investors telling people that he was computing the “profit” of the company and sharing half of it with the affiliates when the “profit” of the company was a made up number created to maintain a 125% return.
Both the DOJ’s motions are now before the court, with decisions expected soon.
Footnote: Our thanks to Don@ASDUpdates for providing a copy of the DOJ’s response to Burks’ “Bill Of Particulars” and “Release Of Brady Materials” filings, and “First Motion in Limine Regarding Reliance Defense” (both filed March 25th, 2016).