On May 27, 2015, the Western District Court of North Carolina formally approved Berkeley Research Group as the defense expert for certain defendants in the $850 million Zeek Rewards Ponzi scheme litigation. This decision carries a significant cost: a portion of the expert's fees will be drawn from funds recovered for victims of the sprawling fraud.
The appointment followed a March 4 court filing from Judge Graham C. Mullen, which noted the court’s review of proposals from three potential defense experts. The Receiver’s comments on these proposals were also submitted in letter form. Judge Mullen determined that the scope of work outlined by Berkeley Research Group (BRG) was the most appropriate for the case. Defendants were initially directed to obtain a rough estimate of fees from each proposed expert based on BRG's scope, then submit new proposals.
Zeek Rewards, operated by Rex Venture Group LLC, enticed over one million participants with promises of daily returns from a penny auction site. The scheme, which primarily paid early investors with money from new recruits, collapsed in August 2012. A court-appointed Receiver has since worked to recover funds, particularly from "net-winners" – individuals who withdrew more money from the scheme than they invested. These net-winners are the defendants in question, facing clawback lawsuits to return their illicit gains to the victim pool.
Berkeley Research Group, based in Emeryville, California, and chaired by David Teece, describes itself as a firm that "thrives in the midst of tough, high-stakes challenges." Their website claims companies trust their independent thinking to find effective and creative approaches to complex problems. This self-description contrasts sharply with outside criticism.
Author Charles H. Ferguson, in his 2012 book "Predator Nation: Corporate Criminals, Political Corruption, and the Hijacking of America," criticized Berkeley Research Group. Ferguson alleged the firm primarily focuses on "helping companies avoid or influence legislation, public debate, regulation, prosecution, class-action lawsuits, antitrust judgments, and taxes." The firm's role in the Zeek Rewards case now involves assisting individuals accused of profiting from a massive Ponzi scheme.
The court's decision means BRG is directed to proceed with Phase I of their work plan. The Receivership will bear the expenses for this phase. BRG is also required to report to Judge Mullen throughout their engagement on behalf of the defendant class. The specific schedule for their work has not yet been publicly disclosed.