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Were Costa, Nehra No-Shows At TelexFree Confab In Spain? Plus — TelexFree In Haiti

TelexFree affiliates have a role in easing suffering in Haiti, Steve Labriola suggested in Spain. Source: Video on ConventionTelexFree.com.

UPDATED 12:23 P.M. ET (MARCH 4, U.S.A.) A 10-hour video of the TelexFree confab in Spain Saturday and Sunday has emerged, apparently a recording of a once-live feed.

After being billed as headliners, neither Brazil-based TelexFree executive Carlos Costa nor American MLM lawyer Gerald Nehra appeared on the stage to accept awards.

U.S.-based TelexFree marketing executive Steve Labriola walked onto the stage to accept Nehra’s award.

“This is for Jerry,” he said. “I was asked to come up and receive this for Jerry.”

Labriola did not say who asked him to accept the award on Nehra’s behalf.

Nehra does “most of our corporate law,” Labriola said. “He’s a great man. And he also works long hours, like all of you out there, and I [will] be honored to give this to him.”

Whether Nehra was in Spain was not immediately clear. He’d been billed by a website styled ConventionTelexFree.com as a “Special Guest” at the Madrid event.

Labriola then accepted an award for himself.

“Somebody said to me once — ‘Network marketing: it’s a get-rich-quick scheme,’” Labriola recalled in accepting the award. “But let me tell you, if you talk to any of the leaders or anybody that is working their business, there is no get-rich-quick. There is long hours.”

The claim was at odds with various claims online that TelexFree produces “passive” income. Labriola hinted that the firm was attempting to address inappropriate marketing. Whether he’ll clash horns with American MLMer Faith Sloan, with whom he’s been pictured, wasn’t immediately known.

Among Sloan’s claims in 2013 was that TelexFree produced “100% Passive Income.”

TelexFree says it’s in the VOIP business and is expanding into cell phones.

Labriola and other TelexFree “leaders” recently ventured to Haiti, Labriola said, suggesting it could be a warm market for TelexFree, which purportedly is changing people’s lives.

“We drove through some areas that could see . . .” he said, his voice trailing off.

“There’s places in this world that need help,” Labriola continued. “It’s up to all of you to keep working your business. Keep your products and services out there. Make sure that you’re helping people where they need help. And every person that you reach out and touch and help save their life and help move them forward will help your life get a little bit better.”

Haiti is perhaps the poorest country in the Western Hemisphere. Its neighbor — the Dominican Republic — may be emerging as a TelexFree stronghold.

“Don’t worry about the Bloggers online and the things that they’re saying, because we will keep doing the right things in moving forward,” Labriola said.

The PP Blog reported Friday — on the eve of the TelexFree confab in Spain — that the firm was under investigation in the United States. It’s also under investigation in Africa and South America. Brazilian investigators say TelexFree is a pyramid scheme.

Carlos Wanzeler, another TelexFree executive at the Madrid event, appears to have accepted awards on behalf of himself and fellow TelexFree executive Carlos Costa, perhaps the firm’s most well-known executive.

Whether Costa was in Spain was not immediately clear. Like Nehra, he’d been billed as a star attraction.

Among the other TelexFree honorees was Sann Rodrigues, a former defendant in a pyramid-scheme and affinity-fraud case filed by the SEC in 2006. Rodrigues was accused of targeting the Brazilian community in an affinity-fraud scheme that involved telephone cards.

TelexFree President James Merrill also appeared at the confab and received an award.

“Carlos Wanzeler was up here talking about Carlos Costa . . . two of the greatest leaders that I’ve met in my life,” Merrill said. “They’re very strong. They’re courageous, and they’re fighting for you. And I want you all to know that they didn’t join my team, I joined their team. OK. They’re great leaders.”

Merrill predicted that the excellent lawyering and marketing-consulting TelexFree has received will make TelexFree one of the great MLM companies of all time. Helping drive growth, he said, would be the former president of Excel Communications.

Excel, according to its Wikipedia entry, once used an MLM compensation structure, but suffered when margins on long-distance phone service dropped precipitously. A bankruptcy filing followed.

From the Wikipedia entry (italics added):

Excel sought to be released from its contracts with its independent representatives. This allowed it to continue to receive revenue from its large base of installed customers without paying eternal commissions to the franchisees. Excel continued to operate but ceased to be a multi-level marketing company. Although the change created much cash enabling it to pay creditors, it was seen as shortsighted by the franchisee association because it removed the primary source of sales and customer loyalty.

Mar 3, 2014
Scrutiny Of TelexFree Intensifies; 2 European Police Agencies Issue Warnings And Say Madeiran Community At Risk

Carlos Costa.

Updated 9:45 a.m. (Feb. 27, 2014, U.S.A.) Police who serve Portuguese-speaking residents in two British Crown dependencies — the States of Jersey and Guernsey — have issued warnings on the TelexFree scheme. News of the warnings was published on BehindMLM.com.

Brazil-based TelexFree executive Carlos Costa waved the flags of Portugal and Madeira in a curious TelexFree cheerleading promo last year about a bankruptcy filing. Jersey Police specifically referenced the Madeiran community in the agency’s warning. So did Guernsey.

After the bankruptcy claim involving a TelexFree arm in Brazil known as Ympactus Comercial Ltd., TelexFree became a sponsor of the Botafogo football club in Rio de Janeiro — apparently through one of its U.S. arms.

From a statement by Jersey Police (italics added):

The States of Jersey Police have been made aware of a potential fraud which is targeting Jersey’s Madeiran community.

Guernsey Police have issued a similar appeal.

The scheme is under a company name of TELEXFREE and would require initial investments with the promise of big returns.

The scheme originated from Brazil and is currently being investigated by the Brazilian authorities as it is believed to be fraudulent.

Jersey Police know that islanders have been approached to “invest” in the scheme, but as yet have not had any contact from victims of the scam.

If anyone in Jersey has invested money into a TELEXFREE scheme they should contact the Joint Financial Crimes Unit on Tel: 01534 612250 (during office hours) or Police headquarters on 01534 612612 (at other times).

Guernsey Police also referenced its Madeiran community in the agency’s Feb. 19 warning posted on Facebook (italics added):

Guernsey Police have been made aware of a potential fraud which was intended to specifically target Guernsey’s Madeiran community.

The scheme was under a company name of Telexfree and would require initial investments with the promise of big returns.

The scheme originated from Brazil and is currently being investigated by the Brazilian authorities as it is fraudulent.

If anyone in Guernsey has invested money into a Telexfree scheme they should contact Sgt Snowdon in the Financial Intelligence Service on 01481 755812.

TelexFree, which might represent a form of affinity fraud and is under investigation in Brazil amid pyramid-scheme allegations, appears first to have targeted Portuguese-speaking populations in Brazil and Europe. TelexFree is based in the Boston region, which has a considerable population of Brazilians.

Sann Rodrigues, a purported TelexFree millionaire, is one of the “program’s” top hucksters. He was successfully sued by the SEC in a 2006 case that alleged he presided over a pyramid scheme and engaged in affinity fraud.

At the time, Rodrigues, also known as Sanderley R. De Vasconcelos, advised the court that he was unable to pay a considerable portion of the sanctions against him.

TelexFree says Rodrigues is among the headliners at a rah-rah session in Spain March 1 and 2. As things stand, that event now will take place against the backdrop of the warnings in Jersey and Guernsey and the possibility of increased scrutiny in Portugal and the United States.

Some U.S. promoters have claimed that $15,125 sent to the firm triples or quadruples in a year. TelexFree says it is in the VOIP business and claims it is expanding into cellphones and credit repair. Why a purported communications business would get into credit repair is unclear.

Some members of the AdSurfDaily Ponzi scheme broken up by the U.S. Secret Service in 2008 were in purported credit-repair and debt-elimination businesses.

See March 3, 2009, PP Blog story on a bizarre “twenty-one dollars in silver coinage” claim that appeared in the context of ASD.

Feb 26, 2014
UPDATE: Promoters May Be Lobbying TelexFree To Keep Ponzi Scheme Intact

Some TelexFree members may be unhappy if the “program” changes its compensation plan. Source: Screen shot of Blog at Blogspot.com.

Updated 8:36 a.m. ET (Feb. 26, U.S.A.) Some TelexFree promoters may be lobbying the company and Brazil-based executive Carlos Costa to keep its original Ponzi scheme intact, according to a Blog post (in Portuguese) observed by the PP Blog this morning.

BehindMLM.com reported on Feb. 19 that TelexFree may be in the process of changing its compensation plan. Details remain murky. It is common for fraud schemes that either know they are under scrutiny or sense they soon will be to change rules or make cosmetic tweaks to keep money coming in.

After-the-fact changes, however, cannot unring bells of HYIP fraud that already have been rung. And the changes sometimes introduce new disguises designed to sustain a Ponzi deception.

TelexFree, alleged in Brazil to be a pyramid scheme, has been under investigation in that country since at least June 2013. In the AdSurfDaily and Zeek Rewards Ponzi/pyramid cases in the United States, prosecutors said that both firms made cosmetic tweaks in bids to stay under the radar.

Here is a Google translation from Portuguese to English of the Blog post that may signal that some TelexFree reps want the firm to cling to a Ponzi business model (italics added):

Campaign advisers on social networks asking an unchanged Marketing Plan International Telexfree.

And you, what do you think? Want to try the new plan Telexfree or would you change anything, because this plan is already excellent?

Share if you do not want changes in Telexfree.

Affiliates of online Ponzi schemes often claim their “program” is legal and excellent because it pays. But all successful Ponzi schemes pay. Bernard Madoff’s epic scheme “paid” — until it didn’t. And the Ponzi scheme of George Theodule aimed at Haitian immigrants also “paid” — until it didn’t.

Theodule, 52, was sentenced yesterday to 150 months in federal prison.

“George Louis Theodule defrauded his victims out of millions of their hard-earned dollars,” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.

“[Theodule] did so by taking advantage of people who trusted him because of their cultural affinity,” Ferrer said. “Such tactics are intolerable, especially given that some of his victims lost their entire life savings. This sentence should send a strong message to those who prey on the trust of others: you will get caught and justice will be served.”

Also on the Blog reporting potential dissatisfaction with TelexFree changes was a post on something called CicloFAST, possibly an emerging “opportunity” of some sort. The CicloFAST website prominently displays a photo of a MasterCard.

Like TelexFree, CicloFast styles the last four letters of its name in uppercase — i.e. FREE and FAST. It was not immediately clear if the firms had a business relationship.

Some U.S.-based promoters of TelexFree claim that $15,125 sent to the company effectively will triple or quadruple in a year. Among the firm’s key pitchman is Sann Rodrigues, a former SEC defendant in a pyramid-scheme and affinity-fraud case.

Rodrigues, a purported TelexFree millionaire, has been billed by the firm as a headliner at a planned TelexFree convention March 1 and 2 in Spain.

Any change in the TelexFree compensation plan could lead to questions about why Rodrigues was permitted to make large sums of money under a plan that now needs to be changed and whether less-successful affiliates now will be hamstrung even tighter.

Some TelexFree promoters have demonized the Brazilian prosecutors who brought the pyramid case in the state of Acre. It is common for HYIP scams to pander to the rank-and-file and to marry the processes of demonization and envy.

Feb 25, 2014
TELEXFREE LA-LA LAND: Promo For Alleged Pyramid Scheme’s International Convention Is Voiced By Former SEC Defendant (In Pyramid-Scheme Case) — And Uses Images Of Pyramids Of Giza And American MLM Lawyer

In a curious promo, Egyptian pyramids are being used as an art element by cheerleaders for TelexFree, an alleged pyramid scheme. Source: ConventionTelexFree.com. Red highlight by PP Blog.

U.S.-based TelexFree, alleged in Brazil to be a massive pyramid scheme, is serving up a heaping helping of strangeness.

For starters, a promo for TelexFree’s International Convention set for Spain next month is being voiced by Sann Rogrigues, whom the SEC successfully sued in 2006 amid allegations he was operating a pyramid scheme and engaging in affinity fraud aimed at the Brazilian community.

The promo curiously is playing against the backdrop of an image of the Pyramids of Giza. For good measure, images of other famous world landmarks are thrown in. These include St. Basil’s Cathedral (near the Kremlin) in Moscow; Big Ben in London; The Eiffel Tower in Paris; the Empire State Building and the Statue of Liberty in New York; the Leaning Tower of Pisa; and the Burj al Arab Hotel in Dubai.

TelexFree operates out of Marlborough, Mass., and Las Vegas in the United States. Its convention is scheduled for March 1 and 2 in Madrid.

The promo in which Rogrigues dispenses the TelexFree convention wisdom appears on a website styled ConventionTelexFree.com. Among the claims on the site is that American MLM lawyer Gerald P. Nehra will be among the “Special Guests” at the rah-rah fest in Spain.

American MLM lawyer Gerald Nehra will be a special guest at TelexFree’s International Convention in Madrid next month, according to ConventionTelexFree.com.

Serving as an expert witness for AdSurfDaily in 2008, Nehra opined that ASD was not a Ponzi scheme. ASD operator Andy Bowdoin, now serving 78 months in federal prison at the age of 79, later disagreed with his own expert. In 2012, Bowdoin admitted that ASD was a Ponzi scheme that had gathered $119 million and said the “program” never operated lawfully from its inception in 2006.

ASD promoted a return of 1 percent a day. Some TelexFree promoters say that “program” triples or quadruples money in a year. Some promos solicit sums of $15,125.

Nehra’s law firm also was touted by Zeek Rewards. In 2012, Zeek was accused by the SEC of operating a massive international Ponzi- and pyramid scheme that gathered hundreds of millions of dollars by planting the seed that returns would average 1.5 percent a day. At least two Zeek figures potentially now face prison sentences after pleading guilty for their roles in the scheme.

The court-appointed receiver in the Zeek case says he’s on the brink of filing lawsuits against thousands of Zeek promoters.

TelexFree appears recently to have begun operating under the name TelexFree International. Precisely where TelexFree International is based is unclear.

In the past, Nehra has described himself an an attorney for “TelexFREE in the USA,” according to BehindMLM.com. Whether he represents the TelexFree International derivative is unclear. Convention promoters, however, appear to believe he does.

Feb 18, 2014
UPDATE: 2 Key Figures In Zeek Case Will Be Under Supervision Of U.S. Probation Office While Out On Bond

In an update to victims of the $850 million Zeek Rewards Ponzi scheme, federal prosecutors said Dawn Wright-Olivares and Daniel Olivares will be under the supervision of the U.S. Probation Office while out on bond.

Wright-Olivares, 45, was Zeek’s former COO. She pleaded guilty last week to investment-fraud conspiracy and tax-fraud conspiracy.

Daniel Olivares, the 31-year-old stepson of Wright-Olivares, pleaded guilty to investment-fraud conspiracy.

Both Olivares and his stepmother were released on $25,000 unsecured bond. They are believed to be cooperating with the government.

The office of U.S. Attorney Anne M. Tompkins of the Western District of North Carolina is leading the criminal probe. The SEC is spearheading a civil probe that was announced in 2012.

Zeek operator Paul R. Burks was charged civilly in August 2012 with securities fraud and selling unregistered securities. Wright-Olivares and Olivares were charged civilly and criminally in December 2013.

Tompkins’ office has established a page for Zeek victims.

Kenneth D. Bell, the court-appointed receiver in the civil case, also has been appointed special master in the criminal case.

In terms of the number of victims, Zeek may be the largest Ponzi scheme in U.S. history. Zeek operated as an MLM “program.” In the end, losers could have filled California’s Rose Bowl to capacity approximately 10 times over.

Feb 9, 2014
MORE FROM MLM LA-LA LAND: Former SEC Defendant In Pyramid-Scheme And Affinity-Fraud Case To Headline TelexFree Event In Spain

Sann Rodrigues (right) will be a headliner at a TelexFree event scheduled next month in Spain. Source: TelexFree rolling promo on website.

Calling Sann Rodrigues its “TOP PROMOTER IN THE WORLD,” the alleged TelexFree pyramid scheme curiously has announced that Rodrigues will be a headliner at a TelexFree rah-rah session in Spain on March 1 and 2.

An image of Rodrigues now rolls across TelexFree’s website. But the promo does not mention that Rodrigues was successfully sued by the U.S. Securities and Exchange Commission in federal court in Massachusetts in 2006. The agency alleged that he was presiding over a pyramid scheme known as FoneClub and engaging in affinity fraud targeted at the Brazilian and Brazilian-American communities in Massachusetts.

A federal judge held Rodrigues, also known as Sanderley R. De Vasconcelos, “jointly and severally liable” with FoneClub for “$3,269,459 in disgorgement plus $151,928.49 in prejudgment interest,” the SEC said in 2007.

Prosecutors in Brazil have alleged that TelexFree is a massive pyramid scheme. The purported “opportunity” operates from Massachusetts, the same venue from which Rodrigues was sued by the SEC.

Massachusetts also was the venue from which the U.S. government brought a successful criminal prosecution against the infamous World Marketing Direct Selling (WMDS) and OneUniverseOnline (1UOL) pyramid- and affinity-fraud scheme targeted at Cambodian immigrants. The SEC also filed suit.

In the AdSurfDaily Ponzi-scheme case in 2008, the U.S. Secret Service alleged that neither ASD nor a business partner disclosed that the partner had been an SEC defendant in a successful 1997 prosecution that alleged the partner had pitched three prime-bank swindles, including one that advertised a return of 10,000 percent.

ASD was a $119 million Ponzi scheme targeted in part at the Christian community, federal prosecutors alleged.

In the $850 million Zeek Rewards’ Ponzi- and pyramid scheme in 2012, former SEC defendant Keith Laggos emerged as a key cheerleader. Laggos was sued by the SEC in 2004 in a case that alleged he didn’t disclose he was being paid to tout stock.

Feb 6, 2014
BULLETIN: California Calls WCM777 A ‘Scam,’ Issues Desist And Refrain Order That Names Executives And YouTube Pitchman

From the California order announced last week on the state’s website.

From a Consumer Alert issued by the California Department of Business Oversight. (Red highlight by PP Blog.)

BULLETIN: (Updated 10:36 a.m. ET U.S.A.) The state of California has called the WCM777 MLM “program” a “scam” and issued a Desist and Refrain Order that bans the enterprise in the state. The Department of Business Oversight (DBO) has issued a companion Consumer Alert and is “strongly” encouraging California investors to file a formal complaint.

Named in the Jan. 8 order announced late last week on the state’s website are WCM777 executives Ming Xu and Zhi Liu. Harold Zapata, an alleged WCM777 YouTube pitchman with an address in Hanford, Calif., also is named in the order. Corporate entities named in the order include World Capital Market Inc., WCM777 Inc. and WCM777 Limited, all of Pasadena.

Zapata, California alleged, identified himself as “CEO at WCM777 Global Stars,” something that suggests he was the leader of an upline group. On July 15, 2010, the PP Blog reported that FINRA warned the investing public about scams that spread on social-media sites such as YouTube, Facebook and Twitter.

WCM777 was targeted at people of faith and members of minority communities. California investors can file a complaint by dialing 866-275-2677, the state said.

In November, the state of Massachusetts accused WCM777 of selling unregistered securities.

California now has done the same thing.

“The WCM777 membership units offered and sold by Respondents constitute securities,” the state charged.

And, it alleged, “Respondents offered and sold securities by means of written and oral communications which included untrue statements of material fact and which omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.”

WCM777 now is operating as Kingdom777, and has been associated with a series of bizarre events. On Jan. 17 via Twitter, the “program” issued a declaration of love to the people of Peru after a police raid on a WCM777 outlet there. The announcement was attributed to “Dr. Phil Ming Xu” and claimed the enterprise now “has a promotion plan with a payout ratio of 130%.”

In issuing the announcement, WCM777 appeared to be ignoring the securities issues altogether. California publicly announced the order six days later, on Jan. 23. The California order is dated Jan. 8. A day earlier, on Jan. 7, WCM777 published an announcement of the name change to Kingdom777, claiming “Kingdom777 has acquired the assets of WCM777.”

As is typical in HYIP scams, the announcement blamed affiliates for WCM777’s woes.

“Some members failed to represent WCM777 correctly and distorted our vision and mission to be a social capital company whose goal is to build a global community of trust and love,” the new company said.

But California’s order, which in part echoes suggestions in Massachusetts that WCM777 was steering recruits to avoid lower levels of buy-in in favor of the highest level of $1,999, makes it clear that the state viewed WCM777 itself as a fraud.

From the California order (italics/bolding added):

9. The most expensive and, by far, the most popular WCM777 membership unit costs $1,999. The $1,999 membership unit provides the purchaser five years of access to WCM777’s alleged online cloud services. In addition, WCM777 claims that a purchaser of the $1,999 membership unit will receive up to $32 per day over a 100-day period in the form of profit-sharing payments, bonuses and commissions. Thus, over a 100-day period, a purchaser of the $1,999 membership unit would allegedly earn $1,200 more than the original cost of the unit—an alleged 60% return in only 100 days.

10. The vast majority of purchasers buy the five year unit, rather than the less expensive units that generate lesser returns. In fact, over 95% of purchasers in the United States bought the $1,999 membership unit.

11. There is no limit to how manyWCM777 membership units an individual may purchase at one time. In fact, a significant number of purchasers buy multiple WCM777 membership units at the same time.

12. After the purchaser’s 100-day daily returns cycle expires, the purchaser may “re-up” by purchasing another membership unit at a 50% discount, which then restarts the 100-day cycle. A purchaser can “re-up” indefinitely. Therefore, over a 300-day span, a purchaser of a single $1,999 WCM777 membership unit who “re-ups” at the end of each 100-day cycle would allegedly earn up to $5,600 more than the cost of buying the membership units—an alleged 140% return in about 10 months.

Precisely how California learned that 95 percent of U.S. purchasers allegedly bought in at the maximum level of $1,999 is unclear. What is clear is that the state has accused WCM777 of engaging in a rank deception and gathering at least $20 million between March 2013 and September 2013.

Among WCM777’s fraudulent claims was that the “Respondents’ activities were not subject to the jurisdiction of the United States Securities & Exchange Commission or the United States Federal Trade Commission,” California alleged.

Moreover, the state claimed that the respondents failed “to disclose that WCM777 had no other significant sources of income but for its sale of membership units.” Meanwhile, they failed to disclose “that WCM777 did not have an enforceable contract with Siemens under which Siemens would provide the alleged online cloud services that WCM777 advertised.” (See Oct. 30, 2013, PP Blog story, which reports on the issue with Siemens and notes that WCM777 was being targeted at a Latino church in Rialto, Calif.)

Siemens, the state said in its order, “has publicly disavowed any relationship or contract with WCM777. In a press release, Siemens stated that it disavowed a relationship with WCM777 “[i]n order to help . . . investors avoid making any investments based on false assumptions[.]”

And despite claims by the respondents that “WCM777’s alleged daily returns are backed by the global banking business of its parent company, WCM,” the state charged, “WCM777 and WCM had no significant income outside of sales of WCM777 membership units.

“From March 2013 to the end of September 2013, WCM777 and WCM generated over $20 million in sales of WCM777 membership units,” the state alleged. “During the same period, over 99% of the income of WCM777 and WCM came from sales of WCM777 membership units, while less than 1% of their income came from WCM’s alleged global ‘merchant banking’ or any other business.”

Some WCM777 promoters have claimed that the WCM enterprise had handed out more than $1 billion in loans. In a bizarre example of MLM hucksterism, the promoters identified several companies that allegedly had borrowed great sums from WCM — and even how much the firms purportedly had borrowed.

News of the California order first was reported today by BehindMLM.com.

Visit California’s website. Read the Desist and Refrain Order.

Jan 27, 2014
BULLETIN: U.S. Senator Calls For Investigation Of Herbalife; Says Constituent’s Family Lost $130,000, Including ‘Entire 401(K)’ Retirement Account, To MLM Program

Sen. Edward Markey

BULLETIN: Sen. Edward J. Markey, D.-Mass., has called for an investigation of Herbalife, an MLM program.

“There is nothing nutritional about possible pyramid schemes that promise financial benefit but result in economic ruin for vulnerable families,” Markey said in a statement. “Herbalife may be a purveyor of health and wellness products, but some of its distributors are suffering serious economic ill-health as a result of their involvement in the company. I have serious questions about the business practices of Herbalife and their impact on my constituents, and I look forward to receiving responses to my inquiries.”

Markey is a member of the Commerce, Science and Transportation Committee.

On Sept. 5, 2013, Tito Jackson, a Boston city councillor, asked FTC Chairwoman Edith Ramirez to open an investigation into Herbalife’s business practices.

In a letter to Ramirez, Jackson said he feared Herbalife is a pyramid scheme that “pr[e]ys on disadvantaged populations.”

Markey has asked both the FTC and the SEC to open Herbalife probes.

From a statement by Markey’s office today (italics added):

One family in Norton, Massachusetts reported that it lost $130,000, including the family’s entire 401(K), investing in Herbalife. Another Massachusetts resident claimed that she was encouraged to recruit new members by approaching her family and also received pressure to spend money to buy more Herbalife products so that she could qualify as a so-called “Supervisor” in the Herbalife system. She also stated that she was encouraged to stay in the program even after she said she wanted out.

Herbalife stock fell about 10.35 percent today, to $65.92, on the news of Markey’s call for probes.

The company denies it is a pyramid scheme.

Jan 23, 2014
URGENT >> BULLETIN >> MOVING: Justice Department Sues Four Oaks Bank, Says It Turned Blind Eye To Red Flags At Rex Venture Group, Operator Of Zeek Rewards

URGENT >> BULLETIN >> MOVING: (4th Update 5:14 p.m. ET U.S.A.) The U.S. Department of Justice has sued North Carolina-based Four Oaks Bank, alleging that it turned a blind eye to fraud markers at Rex Venture Group LLC and processed “close to $60 million in ACH transactions in furtherance of the illegal scheme.”

Rex Venture was the operator of Zeek Rewards, which the SEC has described as a Ponzi- and pyramid scheme that gathered at least $850 million.

In “Spring 2012,” the Justice Department alleged, Four Oaks granted ACH access to Rex Venture, a merchant client of a payment-processing entity known as TPPP-TX.

Four Oaks did this, the Justice Department alleged, “despite knowing that: (1) Rex Venture’s principals could not be identified through business database searches; (2) the Bank could not independently verify the type of legitimate business in which Rex Venture Group was engaged; (3) one of the two addresses reported by the company was a vacant lot, and the other was a different business; and (4) the Social Security Number of one of the company’s purported principals was associated with a different person. A Bank official even concluded that the purported owner of Rex Venture Group “keeps changing company names so his reputation will not catch up with him.”

And, the Justice Department alleged, “By August 17, 2012, the public learned what Four Oaks Bank already knew or should have Known — Rex Ventures Group allegedly was a massive Ponzi and pyramid scheme.”

The lawsuit against the bank was filed yesterday by the office of U.S. Attorney Thomas G. Walker of the Eastern District of North Carolina. The Zeek Ponzi case is filed in North Carolina’s Western District.

In a statement today, Four Oaks said it had cooperated with the Justice Department and agreed to a settlement in which “the Bank does not admit any facts alleged in the accompanying complaint nor does the Bank admit to any liability. ”

Four Oaks also is accused in the complaint of aiding the processing of illegal payday loans and gambling transactions for other TPPP-TX clients.

See story at WRAL.com, which lists the settlement amount at $1.2 million.

Four Oaks is referenced in Zeek-related court files, including a 2012 filing in which the bank said it held a commercial account in the name of “Nx Systems Inc.”

Nx Systems was a Zeek payment vendor. See Sept. 1, 2012, PP Blog story.

Jan 9, 2014
SPECIAL REPORT: Attorney Linked To Zeek’s Wright-Olivares Has Record Of Disbarment And Suspensions; Possible Co-Agent Spent Time In Federal Prison For Credit-Card Swindle And Was Charged In Arkansas With Theft And Making False Statements To Securities Commissioner; Corporate Registrations Of 2 Firms Linked To Zeek COO And Purported Marketing Maven Revoked

Zeek’s Dawn Wright-Olivares

SPECIAL REPORT: (Updated 5:48 a.m. Jan. 7, U.S.A.) N. Donald Jenkins Jr., an Arkansas attorney listed as a registered agent for Wandering Phoenix LLC, a firm federal prosecutors have linked to Zeek Rewards’ figure Dawn Wright-Olivares, was ordered disbarred on May 30, 2013, records show.

He thrice previously was ordered suspended from the practice of law and has a thick disciplinary history with the Arkansas Supreme Court Committee on Professional Conduct dating back to 2003. His full name is Newton Donald Jenkins Jr.

Jenkins Jr. once worked as the city attorney and prosecutor for Van Buren, Ark. He was paid an annual salary by the small town of more than $56,000 while maintaining a private law practice that repeatedly landed him in trouble.

A long string of corporate revocations accompanies the name of Jenkins Jr. as a registered agent in Arkansas, a state in which the most common reason for revocation is a corporation’s failure to pay franchise tax. The string includes at least 125 names of revoked business entities. One of the revocation casualties was Jenkins Law Firm PLLC, the lawyer’s own firm.

Another revocation casualty, according to Arkansas records, was Wandering Phoenix, the business entity linked to Wright-Olivares through which prosecutors say she received Zeek payments. Either Wright-Olivares or Wandering Phoenix received $7.2 million, according to a federal charging document. Franchise tax nevertheless remained unpaid.

One law-license suspension order against Jenkins Jr. was stamped and docketed on Aug. 17, 2012, the same date the SEC moved against Zeek and the U.S. Secret Service announced it, too, was investigating the North Carolina-based MLM entity. Neither Zeek nor Wright-Olivares is referenced in the disbarment and suspension orders.

Did Wright-Olivares Have Business Relationship With Felon?

Records suggest — but do not demonstrate conclusively — that Wright-Olivares also had a business relationship with the late father of Jenkins Jr.: tax accountant N. Donald Jenkins, apparently also known as Donald Jenkins Sr. and Newton Don Jenkins Sr. “N. Donald Jenkins” — with no designation as either Jr. or Sr. — is listed alongside Jenkins Jr. as a registered agent for Wandering Phoenix. Meanwhile, “N. Donald Jenkins” also is listed as an officer and “Incorporator/Organizer” of Wandering Phoenix.

Wright Olivares was a 95-percent owner of Wandering Phoenix, according to criminal charges filed against her in North Carolina on Dec. 20. She has agreed to plead guilty to tax-fraud conspiracy and investment-fraud conspiracy, federal prosecutors said last month.

In the mid-1990s, Jenkins Sr. hatched a scheme by which he duped a man who’d approached him for advice about opening a computer business, according to federal records. Jenkins Sr., who was convicted on federal charges in 1999, encouraged the man to open a bank account and give him limited Power of Attorney.

The man complied, according to court records. After that, Jenkins Sr. entered into a merchant agreement with an Arkansas bank and defrauded the bank by depositing “over $78,000 in credit card slips reflecting sales purportedly made” by the computer business.

The slips “were drawn on credit cards recently issued to Jenkins [Sr.], his relatives” and the man who’d approached Jenkins Sr. for advice, according to court records.

But the man who’d approached Jenkins Sr. testified that the firm “never sold a computer, and that he never applied for or knew of the credit cards issued in his name,” according to court records.

“After the sales amounts were credited to the account, Jenkins [Sr.] would withdraw money through checks and ATM transactions,” according to court records.

In 1988, Jenkins Sr. was implicated by the state of Arkansas in a securities swindle and was arrested on criminal charges of theft by deception and lying to the Arkansas Securities Commissioner. The final outcome of the case could not immediately be determined. On March 23, 2009, ArkansasBusiness had this (and plenty more) to say about Jenkins Sr. (italics added):

Jenkins came to our attention way back when investors across Arkansas began accusing him of defrauding them of hundreds of thousands of dollars in elaborate investment schemes. Those civil lawsuits by angry investors drew the attention of criminal investigators, which culminated in Jenkins receiving a 27-month prison sentence following his August 1999 conviction.

The identities of the person or persons who owned the remaining 5 percent of Wandering Phoenix are unclear. What is clear is that Arkansas has revoked its corporate registration.

Enter/Exit ‘Wandering Rex’

Arkansas records also link Wright-Olivares to an entity known as Wandering Rex LLC. The registration of Wandering Rex also has been revoked.

Zeek operated through a North Carolina-based entity known as Rex Venture Group LLC, controlled by Zeek operator Paul R. Burks of Lexington. Why Wright-Olivares also had a “Rex” entity in Arkansas is unclear.

Wright-Olivares, 45, also appears to have controlled another Zeek-related entity known as Zeeklers.com. The Ozark, Ark., street address for the Zeeklers.com web domain is the same address listed in corporate records for Wandering Phoenix, one of the two revoked entities linked to Wright-Olivares, Zeek’s former COO.

Both Jenkins Jr. and his father were active in Republican politics in Arkansas. Jenkins Jr., for example, has a listing on the website of the Republication National Lawyers Association (RNLA) that identifies him as “Asst. Legal Counsel Republican Party of Arkansas.” The listing includes a link to the website of his law firm, but the domain is generating a “timed out” error message.

Meanwhile, the obituary for Jenkins Sr. as published in October 2012 at swtimes.com notes that he “served in various positions with federal, state and local candidates and Republican groups, including as chairman over the first and fourth Congressional districts, and chairman for Ronald Reagan for President. He was a true American patriot who held very strong opinions about people who tailgated him on the road.”

Disciplinary History Of Jenkins Jr.

How Wright-Olivares came to use the registered-agent services of Jenkins Jr. is unclear. It’s also unclear if Jenkins Sr. ever did any accounting work for her or if she knew him personally.

What is clear is that Jenkins Jr. has a long history of disciplinary action in Arkansas and that at least one of his other clients (a married couple) contracted with Jenkins Jr. after meeting with Jenkins Sr. in Jonesboro, Ark. The couple later filed a complaint against Jenkins Jr. for alleged inaction after he’d been hired to address a wage-garnishment issue with the IRS. In 2007, the state issued a formal reprimand known as a “CAUTION” against Jenkins Jr., finding that he “failed to return the messages” of his garnishment clients. The state also ordered Jenkins Jr. to apologize to the clients and to return their $900 retainer.

The 2007 “CAUTION” was the second against Jenkins Jr. The first was issued in 2003, after a client accused him of never informing the client that a lawsuit he’d filed on behalf of the client had been dismissed. Records say the lawsuit had been filed in the wrong county. The state ordered Jenkins Jr. to pay a $500 fine and pay the client $250 in restitution.

In February 2010, the state ordered the law license of Jenkins suspended for three months, after allegations surfaced that he’d improperly served yet-another client, had maintained “a frivolous proceeding” on behalf of the client in a disability case and had falsified court records. Later in 2010, the state reprimanded Jenkins, amid allegations he’d butchered yet-another client’s bankruptcy case.

On Aug. 17, 2012 — the same date as the Zeek action — the Arkansas Supreme Court Committee on Professional Conduct docketed a two-year suspension of the law license of Jenkins Jr. He was accused in that proceeding of filing a bankruptcy case in the wrong state, using the wrong state when filing 2008 tax returns for two clients and not filing 2009 tax returns for the clients, another married couple who had hired him.

One of the suspensions of the law license of N. Donald Jenkins Jr. was docketed on Aug. 17, 2012, the same day the SEC moved against Zeek Rewards. (Red highlight by PP Blog.)

Jenkins’ overall disciplinary history shows at least six actions: three suspensions, two “CAUTIONS” and one “REPRIMAND.”

In May 2013, Jenkins Jr. was disbarred. A special judge “found that, in the disbarment proceedings alone, Respondent had committed at least eight violations for conduct involving dishonesty, deceit, fraud, or misrepresentation.” And the special judge also observed that Jenkins Jr. had a prior disciplinary history of numerous other violations for serious conduct involving dishonesty, deceit, fraud, or misrepresentation.”

View the disciplinary record here.

View the disbarment order at Leagle.com

Jan 5, 2014
From Zeek To ‘The Healthy Hog’

Hearty cuisine and the Internet are the things at The Healthy Hog. Source: 5News video.

EDITOR’S NOTE: A “razorback” is a wild (feral) hog present in certain U.S. states, including Arkansas. The University of Arkansas calls its sports teams the “Razorbacks.” Zeek Rewards Ponzi-scheme figure Dawn Wright-Olivares, an Arkansas resident, recently opened a Clarksville restaurant called “The Healthy Hog.” Though the words “healthy” and “hog” may appear to be in conflict, the marriage of such incongruous-sounding words might be perfectly at home, completely inoffensive and good for business in Arkansas, which is known as “The Razorback State.”

Until a TV report aired yesterday, Clarksville residents may not have known that Ponzi history has touched their town of fewer than 10,000 residents in a big way. The Johnson County community is known for its scenic beauty and annual Peach Festival.

5News (KFSM-TV in Fort Smith and KXNW-TV in Fayetteville) sent a crew to The Healthy Hog after Wright-Olivares was charged criminally and civilly in the Zeek Rewards Ponzi-scheme case in December 2013.

Zeek, the SEC says, gathered at least $850 million. Wright-Olivares appears to have parachuted into Lexington, N.C., from time to time as part of her role as Zeek’s onetime marketing maven.

Kenneth D. Bell, the court-appointed receiver in the civil case and the special master in the criminal case, has noted that Zeek operated from Lexington and drew in participants from at least 100 countries around the globe.

In terms of the number of victims and the creation of net losers (an estimated 800,000), the Internet-driven Zeek scheme may be the largest Ponzi scheme in U.S. history. By comparison, the 2008 AdSurfDaily Ponzi scheme — at the time considered the largest Internet-based Ponzi scheme in U.S. history — affected about 100,000 people and gathered about $120 million.

Wright-Olivares, 45, was Zeek’s former COO. She has settled the SEC civil case against her and agreed to plead guilty to Zeek-related criminal charges of investment-fraud conspiracy and tax-fraud conspiracy, federal investigators said. Her stepson, Daniel Olivares, 31, also has settled the SEC’s civil allegations and agreed to plead guilty to a criminal charge. In Daniel’s case, it’s a charge of investment-fraud conspiracy.

The criminal charges were the first in the long-running Zeek probe, which became public in August 2012 and also involves the U.S. Secret Service, the IRS and the office of U.S. Attorney Anne M. Tompkins of the Western District of North Carolina. The SEC filed its first Zeek-related civil case on Aug. 17, 2012, naming Zeek operator Paul R. Burks of Rex Venture Group LLC a defendant.

Bell has identified Alexandre “Alex” De Brantes, the husband of Wright-Olivares, as member of a group of alleged Zeek insiders. Images of De Brantes appear briefly in the 5News report. Bell is expected to file lawsuits against alleged Zeek insiders and “net winners” soon.

Jan 3, 2014