Howard Kaplan, a tax attorney, faces a trial date for his role in the $850 million Zeek Rewards Ponzi scheme. Kaplan is one of the few insiders who has not settled with the court-appointed Receiver, Kenneth Bell, and is instead fighting the allegations that he provided damaging legal advice to the fraudulent operation.
Bell sued Kaplan in 2014, alleging the attorney's counsel aided Zeek Rewards' illegal activities. Kaplan sought to depose Bell as part of his defense. He argued that Bell, in his capacity as Receiver for Rex Venture Group, Zeek's parent company, possessed information crucial to the case. Kaplan’s legal team aimed to question Bell about his understanding of the claims and his actions as Receiver.
The Receiver, however, objected to the deposition request. Bell stated he lacked personal knowledge of the specific facts underlying the claims against Kaplan. He further pointed out that he became Receiver after Zeek’s collapse and had no prior involvement with Rex Venture Group. Bell also noted his active role as counsel in the case, suggesting Kaplan’s request aimed to probe privileged legal strategy. Bell’s legal team asserted that alternative, less burdensome discovery methods were available to obtain the information Kaplan sought.
Judge Mullen agreed with the Receiver in a September 8th decision. The judge found that Bell possessed no independent personal knowledge of the factual basis for the claims against Kaplan. Bell’s understanding of the case, the court noted, derived solely from documents provided during discovery and information exchanged through interrogatories. Judge Mullen inferred that Kaplan had overlooked evidence pointing to his liability, attempting instead to depose the Receiver.
The court emphasized that Bell serves not only as Receiver but also as active counsel in the litigation. This dual role requires Kaplan to meet a higher legal standard to depose opposing counsel. Kaplan’s stated goal was to uncover Bell’s case strategy and reasoning, information the court deemed privileged and therefore not subject to discovery. Consequently, the judge ruled Kaplan failed to meet the necessary threshold for deposing Bell.
Kaplan’s defense then attempted to depose Rex Venture Group directly, seemingly to bypass the restrictions on deposing Bell. However, the Receiver is the sole representative for Rex Venture Group. Judge Mullen quashed this deposition notice, stating that no suitable former officers or agents of the company could be designated as a witness. The court concluded that forcing Bell to act as a witness for Rex Venture Group would circumvent the impropriety of deposing him as an individual.
The court has now set a trial date for Kaplan's case. Kaplan is accused of professional negligence and contributing to the massive financial losses suffered by Zeek Rewards participants. The Securities and Exchange Commission brought charges against Zeek Rewards in 2012, accusing it of operating a fraudulent investment scheme that promised high returns on advertising packages.
The Zeek Rewards scheme collapsed when the SEC obtained an asset freeze. The Receiver, Kenneth Bell, has since worked to recover funds for victims. Many individuals who profited from the scheme have settled with the Receiver. Kaplan’s trial is expected to clarify the extent of his alleged involvement and liability. The court has scheduled a status conference for October 18th.