IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA CHARLOTTE DIVISION
SECURITIES AND EXCHANGE COMMISSION, Plaintiff, vs. Civil Action No. 3:12 cv 519
REX VENTURES GROUP, LLC d/b/a ZEEKREWARDS.COM, and PAUL BURKS, Defendants.
DEFENDANT PAUL BURKS’ RESPONSE TO RECEIVER’S MOTION SEEKING AMENDMENT OF AGREED ORDER APPOINTING TEMPORARY RECEIVER AND FREEZING ASSETS OF DEFENDANT NOW COMES
defendant Paul Burks, and responds in opposition to the motion filed by Kenneth D. Bell (“Receiver”) seeking amendment of the Agreed Order Appointing Temporary Receiver and Freezing Assets of Defendant Rex Ventures Group, LLC (Doc. No. 4) (“Agreed Order”). Mr. Burks opposes the Receiver’s request to expand the definition of “Recoverable Assets,” as it specifically pertains to Paul Burks, beyond the scope of the consent order entered by this Court on August 17, 2012.
In support of this motion, the defendant shows the following:
1. The instant action stems from an investigation by the Securities & Exchange Commission (“SEC”) into Rex Ventures Group, LLC and its sole shareholder Paul Burks. Prior to entering into a consent agreement with the SEC, Rex Ventures Group, LLC operated.
Because it clearly fits within the text and spirit of the Agreed Order, Mr. Burks does not oppose modifying the Agreed Order to enable the Receiver to more clearly define—and better receive—funds identified as “cashier’s checks, certified checks, money orders, and other forms of payment that are being held by the Receivership Defendant that have not been deposited with a bank.” (Doc. 14 ¶ 6) Case 3:12-cv-00519-GCM Document 20 Filed 08/29/12
Zeekler.com, a penny auction website, and ZeekRewards.com, an internet-based affiliate program used to promote the Zeekler.com website. [private_platinum]
2. On August 17, 2012, following a period of cooperation between Mr. Burks and Rex Ventures Group, LLC, and the SEC—cooperation that included the production of hundreds of thousands of documents, including financial records, e-mails, and all manner of electronic files—the defendants entered into a consent agreement with the SEC. Immediately after these filings took place, the Court, inter alia, entered the Agreed Order.
3. The language of the Agreed Order is clear. This Court appointed the Receiver to marshal the assets of the Receivership Defendant, Rex Ventures Group, LLC, and its order defined the scope of his authority consistent with that mandate. Rex Ventures Group, LLC is the sole Receivership Defendant, and “Receivership Assets” are defined as assets of the business, namely, “those assets: (a) held or possessed by Receivership Defendant; (b) held in constructive trust for the Receivership Defendant; and (c) fraudulently transferred by the Receivership Defendant.” (Doc. 4 at 2)
4. Without sufficient justification or cause, the Receiver now seeks to expand his powers and previously defined scope of authority in order to include Mr. Burks’ personal accounts.
5. While asserting that the Agreed Order “does not specifically address the freezing of assets” in Mr. Burks’ possession, (Doc. 14 ¶ 5) the Receiver ignores the fact that the Agreed Order clearly designates the specific assets that are to go into receivership. Pursuant to the Agreed Order, the Court appointed a temporary receiver “for the purpose of marshaling and preserving all assets of the Receivership Defendant,” and accordingly froze certain assets of Rex Ventures Group. Case 3:12-cv-00519-GCM Document 20 Filed 08/29/12 Page 2 of 6
6. The Receiver’s argument in support of expanding his reach into Mr. Burks’ personal assets is unsupported. Indeed, there is no factual basis for the Receiver’s motion other than references to the SEC’s Complaint, assertions which Mr. Burks neither admits nor denies. The Receiver has not referenced any facts, affidavits, or other evidence in support of his assertion that freezing Mr. Burks’ personal assets is necessary. Thus, there is no record to support the Receiver’s motion.
7. Relying solely on the SEC’s assertions in its Complaint, the Receiver’s motion accuses Mr. Burks of having “misappropriated and secreted approximately $11 million.” Continuing to quote from the SEC’s Complaint, the Receiver asserts that “approximately $4 million [of the $11 million] … remain[ed] in the possession, custody or control of Burks as of August 17, 2012.” (Doc. 14 ¶ 3)
8. As the SEC and federal government are well aware, more than half of this approximately $11 million was paid to the Internal Revenue Service for 2011 and 2012 estimated taxes. Moreover, as the filings in this matter make clear, Mr. Burks was also assessed a $4 million fine by the government.
9. Lacking a factual basis to support his motion, the Receiver lacks a legal basis, as well. Ordinarily, a party seeking an asset freeze must demonstrate that the party is “likely to succeed on the merits.” Securities and Exchange Commission v. Cavanagh, 155 F.3d 129, 132 (2nd Cir. 1998). Here, however, Mr. Burks has settled the SEC’s claim against him. There is, therefore, nothing upon which to base a determination of likelihood of success on the merits. The Receiver has not met his burden.
Mr. Burks wired $3,615,254.27 to the government today and made arrangements for the balance- – $384,745.73– to be wired tomorrow morning. Case 3:12-cv-00519-GCM Document 20 Filed 08/29/12 Page 3 of 6
10. Not only has the Receiver failed to assert a factual basis for his motion to expand his reach, no such factual basis exists. Rex Ventures Group, LLC generated revenue from three sources: (1) retail bid sales; (2) Zeekler.com penny auction sales; and (3) membership in the ZeekRewards.com affiliate program. Upon information and belief, revenues from retail bids alone were substantially greater than moneys retained by Mr. Burks. These sales were made absent any connection to the allegedly improper business conduct that resulted in the Agreed Order. Indeed, the only revenue stream that is traceable to any allegedly improper conduct is revenue earned from the ZeekRewards.com affiliate program.
11. There is no basis and no need to freeze Mr. Burks’ personal funds. Mr. Burks has never expatriated the assets of Rex Ventures Group, LLC or his personal money. He has fully cooperated in the SEC investigation, which included examination of relevant financial records.
He is 65 years old, married, a two time cancer survivor, and has lived in Lexington, North Carolina for 23 years. He has never been a defendant in any action, civil or criminal, until this matter. Mr. Burks is aware of the importance of this proceeding and will abide by any orders this Court imposes.
WHEREFORE, the Defendant requests that the Court deny the Receiver’s motion. Case 3:12-cv-00519-GCM Document 20 Filed 08/29/12
This the 30th day of August, 2012
s/ Noell P. Tin
Noell P. Tin
Tin Fulton Walker & Owen, PLLC
301 East Park Ave.
Charlotte, NC 28203
Phone: (704) 338-1220
Fax: (704) 338-1312
COUNSEL FOR MR. BURKS
Case 3:12-cv-00519-GCM Document 20 Filed 08/29/12 Page 5 of 6
CERTIFICATE OF SERVICE
I certify that I have served the foregoing DEFENDANT PAUL BURKS’ RESPONSE TO RECEIVER’S MOTION SEEKING AMENDMENT OF AGREED ORDER APPOINTING TEMPORARY RECEIVER AND FREEZING ASSETS OF DEFENDANT on opposing counsel
by submitting a copy thereof through Electronic Case Filing, to be sent to:
John J. Bowers Kenneth D. Bell
Securities & Exchange Commission McGuireWoods LLP
100 F Street, NE 201 North Tryon Street
Washington, DC 20815 P.O. Box 31247
Email: [email protected] Charlotte, NC 28231
Email: [email protected]
This the 30th day of August, 2012.
Noell P. Tin
Case 3:12-cv-00519-GCM Document 20 Filed 08/29/12 Page 6 of 6