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USA Jury Finds ZeekRewards Founder Paul Burks Guilty Of Fraud

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A federal jury found Paul Burks, the founder of ZeekRewards, guilty Thursday on all four charges in a $939 million Ponzi scheme.

It was one of the largest Ponzi schemes in U.S. history, according to federal regulatory officials and prosecutors. The companies, which debuted in January 2011, were shut down and their assets frozen in August 2012.

The jury needed less than three hours to come back with its verdicts, according to Lia Bantavani, a spokeswoman for the U.S. Attorney’s Office for the Western District of North Carolina. Burks, 67, of Lexington was found guilty of wire and mail-fraud conspiracy, wire fraud, mail fraud, and tax-fraud conspiracy.

“For nearly two years, Burks used deceit and dishonesty to engineer an extensive Ponzi scheme that amassed millions of dollars from thousands of victims, many in the Western District,” U.S. Attorney Jill Westmoreland Rose said in a statement.

“This massive scam is one of the largest in breadth and scope ever prosecuted by this office. I want to remind the public to steer clear of ‘get rich’ schemes,” Rose said. Burks’ attorneys could not be reached for immediate comment.

The U.S. attorney’s office said Burks will remain free on bond while a sentencing date is set. It is possible Burks could spend the rest of his life in prison.

The wire and mail-fraud conspiracy charge, the mail-fraud charge and the wire-fraud charge each carry a maximum prison term of 20 years and a $250,000 fine. The tax-fraud conspiracy charge carries a maximum prison term of five years and a $250,000 fine.

Penny auctions

In August 2012, the U.S. Securities and Exchange Commission accused Rex Venture Group LLC, Zeekler, ZeekRewards and Burks of raising more than $800 million through unregistered securities, also known as penny auctions, and another $96 million in subscription fees.

The companies raised the money from at least 2.2 million customers, including more than 230,000 in the United States, with 47,000 of those in North Carolina.

Prosecutors claimed that Burks received at least $10.1 million from the scheme. Burks reached a consent settlement with the SEC in August 2012 in which he did not admit wrongdoing or that his companies operated as a Ponzi scheme. However, he agreed to pay a $4 million penalty.

Burks was indicted on Oct. 24, 2014. U.S. attorneys said Burks and company officials “falsely represented that Zeek was generating massive retail profits” in which participants were supposedly qualified to gain half of the profits of each day.

“Contrary to the conspirators’ claims, the true revenue from the scheme did not come from the penny auction’s ‘massive profits,’ ” the attorneys said.

“Instead, approximately 98 percent of all incoming funds came from victim-investors, which were then used to make Ponzi-style payments to earlier victim investors,” they said.

The court-appointed receiver for ZeekRewards, Kenneth Bell, said he has recovered $351.1 million and disbursed $263.4 million to victims. He is pursuing civil cases against domestic and foreign “net winners” — those people who won more money than they spent on the securities.

“The jury’s verdict gives a measure of justice to the hundreds of thousands of victims of Mr. Burks and ZeekRewards,” Bell said. “It will greatly help our ongoing litigation against more than 9,000 people who still hold more than $200 million that rightly belongs to the victims.”

Prosecutors said ZeekRewards officials conducted weekly conference and leadership calls to “make false representations about the profit and income of Zeek.”

Burks’ attorneys presented what they said was evidence that ZeekRewards was not a Ponzi scheme, and that Burks did not “ever intend to mislead ZeekRewards affiliates.” They claimed the companies “paid what he promised” to participants, saying they paid $499.5 million to participants before the shutdown.

Prosecutors accused Burks of not keeping accurate or timely records of the securities and said he just made up daily winning totals. Shortly before the trial began, Burks provided handwritten records that U.S. attorneys said were not valid.

Burks’ attorneys claimed he received bad advice from experts, such as how to provide Internal Revenue Service 1099 forms to participants. That form shows interest-income payments. Prosecutors claimed Burks failed to file corporate tax returns or to make corporate tax payments for his companies.

They said Burks issued fraudulent IRS Forms 1099s for the 2011 tax season, causing participants to file inaccurate tax returns containing phantom income. Two former ZeekRewards executives, Dawn de Brantes and her stepson Dan Olivares, testified about Burks’ state of mind when he operated the companies.

In February 2014, U.S. attorneys reached plea agreements with de Brantes and Olivares. De Brantes pleaded guilty to investment-fraud conspiracy and to tax-fraud conspiracy. She faces up to 10 years in prison and up to a $500,000 fine.

Daniel Olivares pleaded guilty to an investment-fraud conspiracy charge. He faces up to five years in prison and up to a $250,000 fine. Their sentencing was delayed until the conclusion of Burks’ trial.

Scheme crumbles

The ZeekRewards scheme began to crumble in the summer of 2012 when banks, including BB&T Corp. and NewBridge Bancorp, began questioning company officials about concerns with its operations. BB&T requested ZeekRewards pull its money from the bank.

Soon after, the companies’ income began to fall short of the money needed to pay participants.

Still, by March 2012, Rex Venture Group, or RVG, had become NewBridge’s largest depositor.

In April 2012, NewBridge began “a formal investigation into whether Burks was using RVG to operate an illegal business” and asked Burks to remove his accounts on April 17, 2012. Yet, NewBridge continued to process RVG’s incoming deposits and outgoing “commission” checks until June 2012.

Bell, the receiver, accused NewBridge of “allowing RVG to conduct its fraudulent acts past the time when NewBridge knew or should have known that RVG and its insiders were using RVG to perpetuate a fraud.” NewBridge denied the allegations and any liability related to Bell’s claims.

However, in one of its last actions as a publicly traded company, NewBridge agreed in March to pay $5 million toward a $10 million settlement. The other $5 million came from Zurich American Insurance Co. on behalf of NewBridge.

Source: www.journalnow.com

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Tupperware Reports Q2 2016 Results – Down 4% To $564.7 Million

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Tupperware Brands Corporation recently announced second quarter 2016 operating results. Rick Goings, Chairman and CEO, commented, “Though down 4% with a 7 point hit from exchange rates, we grew sales by 3% in local currency – the high end of our range, with significant contributions from Brazil, China, Malaysia/Singapore and Tupperware Mexico.”

Goings continued, “When we look at the success of our large businesses in Brazil, up 22% in dollars and 41% in local currency, and Tupperware Mexico, down 2% in dollars but up 16% in local currency, it is proof of concept that the fundamentals of our business can generate significant returns from our 3.1 million global sales force.

This is most significantly the case in the opportunity rich emerging markets, including through leverage from our Vision 20/20 core execution initiatives.

At the same time, we’re innovating the Tupperware experience with digital tools, right now most visibly in China where we were up 19% in dollars in the quarter and 25% in local currency, to leverage our strength in social selling to further penetrate the end consumer base versus our historical approaches.”

Second Quarter Executive Summary

   —  Second quarter 2016 net sales were $564.7 million, down 4% in dollars and up 3% in local currency. Emerging markets**, accounting for 66% of sales, were down 4% in dollars and up 7% in local currency. The most significant contributions to the second quarter growth in local currency were in Argentina, Brazil, China, Malaysia/Singapore and Tupperware Mexico, partially offset by Egypt and Turkey. Indonesia, the Company’s largest business unit in 2015, grew sales by 3% in dollars (4% in local currency) after having been down 13% in dollars (8% in local currency) in the first quarter. Established markets were down 3% in dollars and 4% in local currency, primarily from BeautiControl, France and Germany.

— GAAP net income and diluted earnings per share were $52.4 million and $1.03 versus $62.0 million and $1.23 in the prior year, respectively. In 2015, net income included pre-tax gains of $10.5 million from land transactions around the Company’s Orlando headquarters versus less than $1 million in 2016. Adjusted, diluted earnings per share of $1.16 was 4 cents above the April outlook range, net of a 1 cent drag from changes in foreign exchange rates versus 2015 compared with the guidance, and reflecting higher sales and operating margins in Asia and South America. Versus 2015, there was a negative 14 cent impact from changes in exchange rates on the diluted earnings per share comparisons.

— Total sales force of 3.1 million was up 5%, with active sellers down 2% versus prior year.

Second Quarter Business Highlights

— Second quarter 2016 net sales were $564.7 million, down 4% in dollars and up 3% in local currency. Emerging markets**, accounting for 66% of sales, were down 4% in dollars and up 7% in local currency. The most significant contributions to the second quarter growth in local currency were in Argentina, Brazil, China, Malaysia/Singapore and Tupperware Mexico, partially offset by Egypt and Turkey. Indonesia, the Company’s largest business unit in 2015, grew sales by 3% in dollars (4% in local currency) after having been down 13% in dollars (8% in local currency) in the first quarter. Established markets were down 3% in dollars and 4% in local currency, primarily from BeautiControl, France and Germany.

— GAAP net income and diluted earnings per share were $52.4 million and $1.03 versus $62.0 million and $1.23 in the prior year, respectively. In 2015, net income included pre-tax gains of $10.5 million from land transactions around the Company’s Orlando headquarters versus less than $1 million in 2016. Adjusted, diluted earnings per share of $1.16 was 4 cents above the April outlook range, net of a 1 cent drag from changes in foreign exchange rates versus 2015 compared with the guidance, and reflecting higher sales and operating margins in Asia and South America. Versus 2015, there was a negative 14 cent impact from changes in exchange rates on the diluted earnings per share comparisons.

— Total sales force of 3.1 million was up 5%, with active sellers down 2% versus prior year.

Europe: Egypt and Turkey drag segment sales down 13% in dollars and 9% in local currency

    —  Emerging markets were down 25% in dollars and 14% in local currency, mainly from currency convertibility and product certification issues in Egypt, as well as volatile externals and a change in promotional approach and curtailment of bulk sales and timing in Turkey. In South Africa, Tupperware was up 1% in dollars (up 24% in local currency) and Avroy Shlain was down 8% in dollars (up 14% in local currency). CIS was down 11% in dollars (up 21% in local currency).

    —  Established markets were down 4% in dollars and 6% in local currency. France was down 8% in dollars (10% in local currency) and Germany was down 1% in dollars (4% in local currency).

Asia Pacific: China and Malaysia/Singapore up significantly along with Indonesia up mid-single digits, partially offset by results in India and Philippines

    —  Sales for the segment were up 1% in dollars and 5% in local currency.

    —  Emerging Markets were up 2% in dollars and 7% in local currency. China was up 19% in dollars (25% in local currency), Malaysia/Singapore was up 9% in dollars (20% in local currency) and Indonesia was up mid-single digits, partially offset by Philippines, down in the mid-teens, in connection with the 2015 decision to exit the fashion category, and India, down 12% in dollars (7% in local currency).

Tupperware North America: Tupperware Mexico continues to leverage strong fundamentals, U.S./Canada compensation plan transition on track

    —  Segment sales down 1% in dollars and up 6% in local currency. Tupperware Mexico sales down 2% in dollars (up 16% in local currency) on 13% larger sales force versus prior year.

    —  Tupperware United States and Canada sales even with 2015 in dollars (up 1% in local currency). Sales force size closed 6% above prior year.

Beauty North America: Segment sales were down 19% in dollars and 8% in local currency

    —  BeautiControl sales down 14%, mainly in connection with lower productivity among the career seller base.

    —  Fuller Mexico sales were down 20% in dollars (6% in local currency) reflecting lower sales force additions and activity, though it was a sequential improvement from the first quarter. Total sales force size was down 11%.

South America: Segment sales up 8% in dollars and 32% in local currency driven by Brazil

    —  Brazil was up 22% in dollars (41% in local currency), reflecting higher volume from a 19% advantage in total sellers and 40% more active seller in connection with the pace of sales force addition initiatives and robust marketing.

    —  Argentina was down 19% in dollars (up 27% in local currency) from inflation related higher prices.

    —  Segment’s active sales force was up 13%.

About Tupperware Brands Corporation

Through an independent sales force of 3.1 million, is the leading global marketer of innovative, premium products across multiple brands utilizing a relationship based selling method. Product brands and categories include design-centric preparation, storage and serving solutions for the kitchen and home through the Tupperware brand and beauty and personal care products through the Avroy Shlain, BeautiControl, Fuller Cosmetics, NaturCare, Nutrimetics, and Nuvo brands.

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Mary Kay’s “Suits For Shelters” Helps Women In Need With New Outfit And Fresh Start

DALLAS, July 19, 2016 /PRNewswire/ — Mary Kay Inc. hopes a clean starched blouse or professional skirt can be the first step to a fresh start for Dallas-area domestic violence survivors. Through Suits for Shelters, now in its eighth year, the company coordinates the collection of women’s professional attire, shoes and accessories to benefit Dallas-Fort Worth area organizations supporting women in need.

Through Aug. 6, Tootsies, located in the Plaza at Preston Center, will accept community donations. In return, those who donate items will receive a $25 Tootsies gift card. WFAA News Ch. 8 is airing a series of public service announcements to encourage community support and more donations for the annual clothing drive.

“Over the years Mary Kay has proved to be a dedicated supporter of our work to bring an end to domestic violence,” said Jan Langbein, Chief Executive Officer for Genesis Women’s Shelter & Support. “By providing these women with professional clothing,Mary Kay in turn gives them the confidence they need to pursue their dreams and start a life free from abuse.”

A partnership between Mary Kay Inc. and The Mary Kay FoundationSM, Suits for Shelters supports domestic violence survivors with professional attire to help boost confidence and aid in job interviews as they start their lives free from abuse. Since 2009, Suits for Shelters has collected more than 15,000 pieces of professional clothing, shoes and accessories for women in need.

“Clothing is very personal and every dress, suit jacket or pair of shoes that is donated comes with a story,” said Ryan Rogers, Vice President of The Mary Kay FoundationSM and grandson of company founder Mary Kay Ash.  “A dress that gave someone confidence for a job interview can become the means for someone else to have the same experience. Suits for Shelters is a way for the story to continue and help women in need.”

Mary Kay has a long-standing commitment to prevent and end domestic violence. Over the past 15 years, Mary Kay Inc. and The Mary Kay FoundationSM have donated more than $50 million to domestic violence prevention and awareness programs to women’s shelters across the country in an effort to end the cycle of abuse.

“While domestic abuse continues to dominate national media headlines the effects are still far too prevalent across the Dallas Metroplex,” said Crayton Webb, Vice President of Corporate Communications and Corporate Social Responsibility for Mary Kay Inc. “With a mission of enriching women’s lives, we hope the donations from Mary Kay’s Suits for Shelters will help these women find a fresh start by providing them with the means to secure employment, a key step in their recovery process.”

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Prunes for Osteoporosis

Former ZeekRewards CEO Is Convicted Of Federal Charges For Operating $900 Million Internet Ponzi Scheme

CHARLOTTE, N.C. – U.S. Attorney Jill Westmoreland Rose announced that a federal jury sitting in Charlotte retuned a guilty verdict today against the former CEO of ZeekRewards for operating a $900 million Internet Ponzi scheme.  Following a three-week trial, the jury convicted Burks, 69, of Lexington, N.C., of wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy.

Michael Rolin, Special Agent in Charge of the United States Secret Service, Charlotte Field Division and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI) join U.S. Attorney Rose in making today’s announcement.

“For nearly two years, Burks used deceit and dishonesty to engineer an extensive Ponzi scheme that amassed millions of dollars from thousands of victims, many in the Western District of North Carolina. This massive scam is one of the largest in breadth and scope ever prosecuted by this office.  I commend the United States Secret Service and the IRS agents who worked closely with our prosecutors to unravel Burk’s fraud and to obtain a conviction against the mastermind of a scheme that has left so many victims with substantial losses.  I want to remind the public to steer clear of ‘get rich’ schemes and to follow the old adage that if it looks too good to be true, it likely is,” said U.S. Attorney Rose.

“Today’s verdict is the result of a joint investigative effort and it is representative of the commitment the U.S. Secret Service and our partners have towards ensuring those intent on defrauding the citizens of North Carolina and the United States are held accountable,” said Special Agent in Charge Rolin.

According to filed court documents, court proceedings, evidence introduced at trial and witness testimony:

From January 2010 through August 2012, Paul Burks was the owner of Rex Venture Group, LLC (RVG), through which he owned and operated Zeekler, a sham Internet-based penny auction company, and its purported advertising division, ZeekRewards (collectively “Zeek”).   Burks and his conspirators induced more than 900,000 victims – including over 1,500 victims in the Charlotte area – to invest in their fraudulent scheme, by falsely representing that Zeekler was generating massive retail profits from its penny auctions, and that the public could share in such profits through investment in ZeekRewards. Burks and his conspirators, including Zeek’s former Chief Operating Officer Dawn Wright Olivares and her step-son and Zeek’s Senior Technology Officer Daniel C. Olivares, claimed at one point that investors would be guaranteed a 125% return on their investment.

Burks and his conspirators represented that victim-investors in ZeekRewards could participate in the Retail Profit Pool (RPP), which supposedly allowed victims collectively to share 50% of Zeek’s daily net profits.  Burks and his conspirators did not keep books and records needed to calculate such daily figures.  Instead, Burks simply made up the daily “profit” numbers.  Contrary to the conspirators’ claims, the true revenue from the scheme did not come from the penny auction’s “massive profits.”  Instead, approximately 98% of all incoming funds came from victim-investors, which were then used to make Ponzi-style payments to earlier victim investors.

In addition to promising massive returns on investments, Burks and his conspirators used a number of ways to promote Zeek to current and potential investors.  For example, the conspirators hosted weekly conference calls and leadership calls, where participants could call in listen to Burks and others make false representations intended to encourage victim-investors to continue to invest money and to recruit others to invest in Zeek.  Burks also organized and attended “Red Carpet Events,” where victim investors came to hear details of the scheme in person.  During these events, Burks and his conspirators made false representations about the massive retail profits generated by Zeek.  They also used electronic and print media, including websites, emails and journals, to make false and misleading statements about the success of Zeekler to recruit victim investors.

As the Ponzi scheme grew in size and scope it became unsustainable and it eventually began to unravel as the outstanding liability resulting from the bogus 125% return on investment continued to rise beyond control.  By August 2012, Burks and his conspirators fraudulently represented to the collective victims that their investments were worth nearly $3 billion, but had no accurate books and records to even determine how much cash on hand was available to pay such liability.  Contrary to representations made to victim investors, at that time, Burks and his conspirators had only $340 million available to pay out investors.  Over the course of the scheme, Burks diverted approximately $10.1 million to himself.

Burks also failed to file corporate tax returns or to make corporate tax payments for his companies, among other things.  In addition, for tax year 2011, Burks issued fraudulent IRS Forms 1099s, causing victim-investors to file inaccurate tax returns for phantom income they never actually received.

Burks will remain free on bond.  A sentencing date for the defendant has not been set yet.  The wire and mail fraud conspiracy charge, the mail fraud charge and wire fraud charge each carry a maximum prison term of 20 years and a $250,000 fine.  The tax fraud conspiracy charge carries a maximum prison term of five years and a $250,000 fine.

Burks’ co-conspirators, Dawn Wright Olivares, Zeek’s Chief Operating Officer, and her step-son and Zeek’s Senior Technology Officer, Daniel C. Olivares, pleaded guilty in December 2013 to investment fraud conspiracy.  Dawn Wright Olivares also pleaded guilty to tax fraud conspiracy.  Both defendants currently await sentencing.

In making today’s announcement, U.S. Attorney Rose thanked the U.S. Secret Service and IRS-CI for investigating the case, and the U.S. Securities & Exchange Commission, Division of Enforcement for its assistance with the investigation.

The prosecution is handled by Assistant United States Attorneys Jenny Grus Sugar and Corey Ellis of the U.S. Attorney’s Office in Charlotte.

Additional information and updated court filings about this and related cases filings can be accessed at the district’s website: http://www.justice.gov/usao/ncw/ncwvwa.html .

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Q&A: CEO Jeff Bell on LegalShield’s Latest Offerings

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