Kenneth Bell, the Zeek Rewards Receiver, is encountering strong resistance from top earners as he seeks to recover funds for victims. These individuals are using legal maneuvers to delay repayments, nearly two years after the SEC shut down the $600 million Ponzi scheme.
Bell must navigate complex financial records from Paul Burks and his associates. The Receiver is now working to claw back funds from serial offenders within the MLM community. Zeek Rewards' top earners refuse to comply easily. They continue efforts to delay returning the money.
In some instances, these top Zeek Rewards winners are working together, retaining the same attorney to challenge the inevitable return of funds. Trudy Gilmond, Jerry Napier, Darren Miller, Rhonda Gates, and Aaron and Shara Andrews all pay North Carolina attorney William R. Terpening of Nexsen Pruet for representation. Durant Brockett and David and Mary Kettner use Rodney E. Alexander of Alexander Ricks. Defendants Todd Disner, David Sorrells, T. Le Mont Silver (with his wife Karen), Michael Van Leeuwen, and Lori Jean Weber are listed without legal representation.
Clawback litigation began last month, moving the case against the Zeek earners into the discovery phase. A conference took place between the Zeek Receivership and defendants on April 4th. The Receiver then sent the defendants a proposed discovery plan for their agreement.
The proposal aimed to provide the Court with a single document outlining the parties' positions, allowing arguments to be made by both sides at the hearing. Receiver's counsel also suggested that if defendants believed written arguments were necessary, they could file a separate document, to which the Receiver would respond. Usually, a party disagreeing with a discovery plan responds with specific objections and reasons. Zeek's top earners, however, included arguments that "Zeek is not a Ponzi scheme" in their response. They claimed they sold "penny auction bids" and denied it was an investment because they "didn't call it that." This was not the appropriate platform for such arguments.
While the Receiver awaited a response to the amended proposal, which excluded the Ponzi scheme arguments, the defendants filed their own response with the court. They did this without notifying the Receiver or reaching an agreement on discovery terms. The court had ordered a discovery plan proposal by April 9th. Since the Receivership still awaited a reply to its amended proposal, it filed a report explaining the situation to the court.
Another major disagreement between the Receivership and the defendants centers on the scheduling of their respective cases, currently grouped as a class-action. The defendants argue that any decision on their individual cases should be suspended until the court rules on a motion to dismiss and the question of class certification against them collectively.
Each defendant intends to file a motion to dismiss under Rule 12. While defendants have not fully advised the Court of all their arguments, the motions will seek dismissal for reasons including a lack of subject matter jurisdiction, as explained in their Motion to Intervene (Dkt. No. 84 in the SEC Matter). They will also claim the complaint fails to meet pleading requirements set by the Supreme Court in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal.
At least one motion to dismiss has already been denied. The defendants' intent to burden the Receivership by forcing responses to similarly worded but separately filed motions is clear. This also delays the schedule for Zeek Rewards' victim payouts.
The defendants' proposed discovery parameters also indicate an intent to prolong the process. The Receiver proposed a maximum of 20 interrogatories to each named defendant, up to 50 collective interrogatories, and up to 5 additional individual interrogatories from defendants to the Receiver. The Receiver also suggested up to 15 depositions by the Receiver, with an additional deposition by each named defendant, and up to 20 depositions by the defendants collectively.
The top earners disagree. They want up to 200 interrogatories for each named defendant, up to 15 depositions by the Receiver, and between 20 and 50 depositions by the defendants. The demand for hundreds of interrogatories seems excessive, especially given that many defendants share legal representation. This strategy appears designed to overwhelm the Receivership with paperwork and extend proceedings for as long as possible. Responding to these extensive demands will incur significant legal costs for the Receivership. A common claim among Ponzi scheme participants is that receiverships or the government retain victim funds. These same individuals are now responsible for extending the recovery process and incurring substantial legal fees.