Oz over at BehindMLM.com did an editorial last week titled Did Zeek Rewards management know about the SEC? After reading it a few times I started going through some notes and reaching out to some folks to verify some of what I had in my notes.
Also, before I get into the answers to some of Oz’s questions I need to let folks know. I did talk with Robert Craddock a few days ago, and he informed me that SNR Denton would NOT be representing Fun Club USA, but that he had hired a new law firm. He would not answer all of my questions, but did say that “hopefully by Friday” a lawsuit or press release would go out. It is still early so we will see what happens by days end.
Ok, to Oz’s editorial. I am only covering the few things I have information on, so to read the full editorial you will be to visit the links above to read all of it.
[quote] With many of Zeek Reward’s executive management holding affiliate accounts to participate in the company’s Ponzi scheme, one of the most pressing queries has been the question of how aware of the SEC investigation were Zeek Rewards corporate executives, if at all.[/quote]
June or July, I received a call from an MLM Attorney who had shared with me the SEC was investigating some companies which had appeared on a specific blog. Many of the penny auctions were listed on the site along with some other companies with similar pay plan. I know from reviewing my notes I had asked Dawn and Greg about any investigations around May or June and at that time they did not know of any that were directed specifically at Zeek from any regulator. There were some issues with the Montana filing, but I was told the paperwork had been turned in.
From what I have been told, is that when Dawn anf Greg had asked Paul of any investigations Paul was very clear, the SEC was asking questions about each of the companies listed on the site and that Noell Tin had it handled and the SEC “was satisfied”. In the June or July Red carpet Day I also heard Paul make it clear the regulators (I assumed the NC AG) was asking questions but everything was under control.
[quote]Knowing full-well that Zeek Rewards was a Ponzi scheme and being aware of the SEC investigation and a resulting shutdown is vastly important, as such knowledge (and the suppression of it) put Zeek’s management in a conflictingly advantageous position as investors.[/quote]
The above was not a question but the more I read it I did think it deserved some kind of response. If Oz’s statement was true, I’d agree. But as-yet it is an unproven supposition that (1) this was a Ponzi scheme and (2) everyone knew about it. I know that in talking with several of the legal team, Chief Compliance Office (a former AG investigator), Greg Caldwell, Keith Laggos, and the CFO, did not believe it was a ponzi.
It was my understanding that when the SEC did ask questions they were focused on the RPP which based on the complaint they considered to be an unregistered security. This was a fixable issue, and one that was being looked at and reviewed by many over the last few months by many of the top executives and outside consultants.
[quote]Whilst regular affiliates continued to re-invest the bulk of their daily ROIs and encourage new investors to come on board, continuing on unawares right until the precise moment Zeek Rewards was shut down, Zeek’s executive management, aware of the SEC situation and what was occurring, could have easily been quietly cashing out as much as possible from their personal affiliate accounts.[/quote]
Could have, yes. But did they? ONLY a few long term executives (and perhaps system admin in Florida) could manipulate the system like that. I was told by one insider that several top executives who were inside the compensation plan did receive what was called large payouts in the form of checks. And had their point ratio set lower than 80/20, which would lead one to believe they were drawing down larger than normal funds. But, I do not know when this started or if it would be called a normal business practice, for these three or four executives.
I have did confirm that after Greg Caldwell was instructed by the attorneys from the SEC not to inform anyone of the pending shut down just a few days before it became public because the SEC did not want anything that would tip the field off because it might cause a run on funds.
[quote]Former COO Dawn Wright-Olivares all but vanished from the public eye after informing affiliates Zeek Rewards would not be able to pay them unless they “deposited more money” into Zeek’s e-wallet accounts (June 26th). [/quote]
Again this is not a question, but clarity might be good. A statement was issued on Dawn’s comments that were due to the fact affiliates were buying bids through one eWallet and asking for commissions through another eWallet. And at the time the new bank accounts had just been set up and funds were still being deposited. A bad phrasing of the words by Dawn I agree.
Dawn, was out of the country in the first two weeks of July on vacation, but during that time she continued to hold her training calls. In August she and the marketing team were doing calls the first week and were in Nashville the weekend before the closure finalizing the convention plans for November. The week before the closure, all calls were stopped, then the Red Farpet Day was cancelled, then the company was closed. That was the last two weeks of August. her “vanishing” in August (when she was in Nashville).
[quote]A week later Zeek Rewards Sales Director Darryle Douglas disappeared off the face of the planet for “personal matters” on July 30th. Such “personal matters” were never elaborated on by the company and following the official announcement, Douglas was never publicly heard from again.[/quote]
Daryl Daniels on the other hand did disappear from Mid-July and has not publicly been heard form since. Dawn, did not drop off the map until the week of the closure.
[quote]In it, Caldwell claims he ‘was not allowed to participate in meetings with the SEC or the attorneys‘. What attorneys Caldwell is referring to is unclear (Paul Burks personal attorneys or Zeek Rewards’ own?), however the key piece of information Caldwell reveals is that he was aware of a dialogue existing between the SEC and Zeek Rewards.[/quote]
It was not under August 6th 2012 that Greg Caldwell became aware of the current SEC situation. Before that the only mention of the SEC was to ask Paul Burks if the SEC were asking questions based on the above mentioned website. As I mention above Paul made it clear the SEC had asked questions and were “satisfied”. And from the information I have gathered, Caldwell requested that Paul Burks personal attorney Noell Tim allow the corporate legal team to help out since that is what they are paid for. This request was not accepted.
[quote]Largely fuelled by nonsensical lawsuits filed by Zeek Rewards affiliates claiming the SEC had no idea about Zeek Rewards when they filed their complaint and Troy Dooly’s updates on MLM Helpdesk, it’s being heavily pushed that Paul Burks acted alone in his dealings with the SEC – with this ultimately resulting in a closed-door deal involving a $4 million fine and surrendering of Rex Venture Group (Zeek Rewards’ parent company) to the SEC.[/quote]
Sadly this is apparently is true! What I do know is that Paul had Danny Wright establish a VPN (Virual Private Network) connecting him to the corporate computers so he could work from home while taking care of his wife. The only reason I know a little about this is because the whole VPN Australia scene is pretty intense and when I was there I had to wrap my head around a lot of stuff I didn’t know.
I have also found out through insiders that Paul Burks was meeting Noell Tin outside the office and would not allow Greg Caldwell or anyone else to join them. This happened once or twice per month.
Sure if folks had been carrying out “hundreds of thousands” of documents with no one seeing them, then it would seem strange that no one knew what was happening with the SEC. But with Paul Burks having access to the system though his VPN, it was easy to transfer the aforesaid documents without anyone knowing that the SEC was actively investigating RVG and not just the NC DOJ. And for that matter since no one was around the office at night or on the weekend, there is also the possibility that folks could have carried out documents duing those hours.
Since RVG has always been an internet based eCommerce company, it was easy to remove these documents without anyone realizing it because not a single ream of paper needed to be printed. From info gathered so far, I would say Paul used his VPN. And, for the record based on the info I have gathered, Greg Caldwell was never given administrative access to anything.
And since the LLC is a pass-through, single-member LLC only one person takes the risks, gets the rewards and pays the taxes on those rewards… Paul Burks! So for 15 plus years Paul burks is the only one with full access. He had a gal that cut the checks when he told her to cut checks, but he as the one who signed them and as on the bank account. Until 2012 RVG never had a long-term CFO and/or CPA firm watching over the business. Like most small businesses there were no checks-and-balances or Board of Directors.
From info I gathered, it was right around the time Caldwell accepted the “Acting COO” position that the audited 2011 financials had been completed and presented to the CFO. Which, based on the professionals who have reviewed them, don’t suggest a Ponzi was being run.
By the way, it is also my understanding that only three people in-house had total access to the websites and compensation structure. But… There is now evidence that up to five top level Zeek Rewards Affiliates “leadership Liaison” also had full access to the compensation structure and could see total point values and who requested what checks and when those checks were issued.
[quote]Why would they do that unless they’d sniffed something was up? The finer details might have been kept from them but “Ponzi scheme + SEC investigation + requests for hundreds of thousands of Zeek Rewards documents” is an equation anyone even remotely familiar with Zeek should be able to work out. Let alone those running and who were directly involved in the day to day running and management of the scheme.[/quote]
One very important point here. When Greg Caldwell and other executives knew the shutdown was coming they were specifically instructed NOT to change anything and not to tell anyone because the SEC didn’t want a “run on the accounts”. And during the first two weeks of August when I was talking to these executives they never let on of any pending closure.
And remember Dawn flew the marketing team which included several 3rd party consultants to Nashville the weekend before to finalize the convention plans. During this weekend trip, I was called and asked to use my connections in the Biking world to find the cost of having a custom bike (chopper) build by Jessie James for the convention.
In talking to the 3rd party consultants who were present on that trip, they have all stated they knew nothing and were totally taken be surprise with the closure.
[quote]Whether it’s post Ponzi-scheme damage control or sheer ignorance on the behalf of someone who claims to have ‘30 years’ experience as a licensed private investigator‘ and founder of a company that ‘provides assistance in corporate investigations, security, risk management and compliance assessment‘, I have no idea how Caldwell can claim to be “stunned” that the SEC, upon examination of hundreds of thousands of Zeek Rewards documents, came to the conclusion Zeek Rewards was a Ponzi scheme.[/quote]
Oz’s conclusion would be correct if hundreds of thousands of documents had walked out the front door. Without a doubt the staff in Lexington would know something was going on; but that didn’t happen.
And in talking to Greg Caldwell many times I can say he was stunned because Paul Burks and his personal attorneys, up to August 6th lie to Greg Caldwell stating all is good with the SEC.
From doing some due diligence I have found Greg Caldwell was still dealing with the people (bankers, attorneys, IT people) that he was working with trying to fix the company’s infrastructure.
It seems Noell Tin never once told anyone anything about a problem. And maybe that is part of the problem. I wonder what would have happened if Greg Caldwell had not been used as a pawn in all of this also? If he had been told by Paul Burks or Noell Tin NOT to hire the CFO, CTO, Communication Director etc., because of a closure, I doubt he would have taken the job.
Just my thoughts, but it does look like maybe Paul Burks or his attorneys decided it would be a great cover to hire Greg Caldwell as “acting CEO” and allow it to look as if he was being allowed to clean up the company so the affiliates would not get wise and start pulling out their money.
I know that if I would have known about any investigation I would have reported it. I am sure others realized I would also report on the hiring of Caldwell and the new executives. And with the NC AG CID becoming public (although it was not published until after the SEC closure) causes one to ponder if that was leaked to also throw off the fact a more serious issue was taking place?
And, again my thoughts… But why was Noel Tin ONLY representing Paul Burks but no one was allowed to represent the company? Although that might be a legal issue since the LLC is a single-member LLC, but, Kevin Grimes is on retainer as were other very reputable attorneys who have dealt with regulatory agencies for many years and they are completely shut out by Noell Tin and Paul Burks.
I know based on personal conversations that Greg Caldwell was flat out told at the end, when he tried to insist Tin and company to talk to these other attorneys, “We don’t care about the employees; we don’t care about the Affiliates, we only care about keeping Paul out of jail.”
[quote]In an utterly bizarre and completely destructive reflection of the MLM industry’s open willingness to embrace the absurdity of believing that the mere renaming of banning of terminology is what constitutes legal compliance, to deliberate on whether or not Caldwell was indeed Zeek Rewards’ COO is to be sidetracked.[/quote]
I think it might be good to explain what Greg Caldwell’s agreement was when he accepted the “Acting COO” role. This was to be a very temporary and very specific role which would run until Dec 31, 2012 from my understanding. He was there to hire the internal staff and turn RVG into a functioning business. After hiring the CTO and his team, those issues were getting addressed. He specific objectives were (1) Get the Affiliates Paid; (2) Hire Management Staff (3) Establish Solid Banking Relationships; (4) set up Functional Debit Cards for the field and (5) begin unwinding all the ewallet systems like Payza, STP, etc. And I should also include that he was also looking for a competent and experienced CEO to take over so Paul could be the Director.
[quote]Greg Caldwell has accepted the role of acting COO for RVG where we are confident he brings all of the skills, experience and strengths required to take the RVG operation to the next level.[/quote]
Well since Caldwell was only on the job for around 16 days, he could not accomplish much, even if he had been IronMan! It would have been nice to see if he could have turned this ship around by hiring the right people and working with the SEC and AG to eliminate any issues.
[quote]“How much of the money we take in daily is from affiliates, and how much of this money is then paid out each day to affiliates?”[/quote]
From info I have gathered, this was a query Caldwell tried to get run for the Noell Tin and his firm to give to the SEC but they refused. It does seem like a basic question and a good one. But that information was NEVER provided to anyone, Caldwell or it seems the SEC based on the fact their numbers were low in the complaint.
[quote]As per Greg Caldwell, the SEC didn’t shut Zeek Rewards down because Paul Burks sat in his office inventing the daily ROI percentage paid out to affiliates, or that mechanically Zeek Rewards operated like an investment scheme with 90% of the money coming into Zeek Rewards being invested affiliate money, and 98% being paid out in daily ROIs also being invested affiliate money.[/quote]
I have found that the SEC had a very specific concern about the RPP being an unregistered security. Executives had very specific talks about doing away with it completely to appease them.
And although I can’t put words in Caldwell’s mouth, I do know that when a company gets on the radar screens of any regulatory body, the very first thing they do is begin to search the web for supporting information to their suspicions (remember the above mentioned website.) And as we all know many of the affiliated were promoting Zeek as an investment ponzi.
I know that the RVG compliance director was a former AG investigator and worked daily yo find anyone who was promoting Zeek Rewards illegally. But with plenty with websites out there for the SEC to find in spite of very specific efforts by compliance to find them and terminate the persons behind them.
[quote]No, Zeek Rewards was shut down because “idiots” and “morons” were running around the internet referring to the investment opportunity as well, an investment.
And Caldwell wasn’t an employee of Zeek Rewards because, you see, he “accepted” the position of COO as opposed to having been promoted as an existing employee of the company.
This is the idiotic linguistic psuedo- [sic] compliance battle that has raged between Zeek Rewards affiliates and its critics on BehindMLM over tens of articles and now thousands of comments.
Fuelled by ringleaders like Caldwell enforcing the “a Ponzi scheme is not a Ponzi scheme if nobody refers to it as such” angle, ultimately and as repeatedly predicted what you call your Ponzi scheme doesn’t matter. What matters is whether or not you are indeed running a Ponzi scheme.[/quote]
Caldwell might not have been an employee because his Agreement to accept the “Acting COO” role was done as an independent contractor and was just standard C-level title was used that folks would recognize. Not a huge deal, but important when it comes to court issues.
In talking with Caldwell his point above was more focused on the fact an unregistered security does not make a Ponzi scheme. But more importantly months before Noell Tin was dealing with the possibility of an unregistered security concern but “everything was okay”. A week before shutdown, Caldwell was still being told this.
Now, in reading through all of Oz’s editorial and through my notes and gathering more information I have come up with an interesting scenario.
There is a possibility that Noell Tin was told by the SEC several months before RVG to eliminate the RPP, and this was never relayed to any of the other executives. Or that those executives who were told to change it decided to drag their feet since they were part of the compensation structure.
Had the customer qualifiers, and other changes taken place, and the RPP was eliminated and the commissions inside the compensation plan were just raised, then maybe the SC would not have closed down Zeek Rewards… But then again its to little to late.