Key player in $850M Ponzi scheme pleads guilty
CHARLOTTE, N.C. (AP) — A key player in a North Carolina online company that promised big returns on a small investment pleaded guilty Wednesday for her role in a massive Ponzi scheme.
Dawn Olivares, 45, of Clarksville, Ark., showed little emotion during a plea hearing before Judge David Cayer in U.S. District Court in Charlotte.
When the judge asked her questions, Olivares answered in a whisper — unlike the days when she'd tout ZeekRewards in public events and interviews. She was the company's chief operating officer.
After pleading guilty to securities fraud conspiracy and tax evasion stemming from the $850 million scam, Olivares ignored questions about her role and the scheme's impact on victims.
Her attorney, Brian Cromwell, said this wasn't the "right time" for Olivares to answer question because of the ongoing investigation.
"But there's a lot more to this story," he said, adding that his client was cooperating with authorities.
She faces a possible sentence of up to 10 years in prison and a $500,000 fine.
Her stepson, Daniel Olivares, 31, also of Clarksville, was the company's senior technology officer. He also pleaded guilty Wednesday to securities fraud conspiracy.
He faces a possible five years in prison and a $250,000 fine.
As part of their plea agreements, Dawn Olivares and her stepson will pay full restitution to their victims, the amount to be determined by the court at sentencing.
Both were released on $25,000 bond. A sentencing date is pending.
After the hearing, Daniel Olivares declined to comment. Prosecutors say he helped design the databases for Zeekler.com, a penny auction site, and ZeekRewards, a business designed to drive traffic to the penny auction.
But his attorney, S. Frederick Winiker III, said his client was sorry.
Dawn Olivares and her stepson are the first to plead guilty to criminal charges in the scam that promised investors a 125 percent return on their investment.
Victims say there are still questions that haven't been answered, including whether the company's founder, Paul Burks of Lexington, N.C., will face charges.
Authorities say Burks — a former nursing home magician and country music disc jockey — was the mastermind of the scam, which attracted 1 million investors, including nearly 50,000 in North Carolina.
The Securities and Exchange Commission, which closed Zeekler.com, and ZeekRewards on Aug. 17, 2012, accused Burks in a civil complaint of fraud. The SEC said the scheme used money from new investors to pay the earlier ones.
Investigators also say Burks, 66, siphoned millions for his personal use, but he has not been charged with a crime. He has agreed to pay a $4 million penalty and cooperate with a federal court-appointed receiver to recoup money.
Burks has told The Associated Press he couldn't discuss details, but said he never told people to invest more money than they could afford.
Victims are still waiting to see if they will get any money back.
Of the hundreds of millions that were paid out to investors, the receiver has recovered more than $320 million. Some 175,000 people have filed claims so far.
While Burks launched the online ventures, Dawn Olivares played a major role in the fraud, prosecutors said.
Olivares "was closely involved in the strategic operations of Zeekler.com and ZeekRewards," federal documents said. And she diverted at least $7.2 million for her personal use.
Olivares became good friends with Burks while they worked at a multilevel marketing company in the late 1990s. And when Burks began creating his own multilevel marketing companies, he would often turn to Olivares for help.
When Burks asked her to join Zeekler.com and ZeekRewards in early 2010, she jumped at the chance. She gave high-energy sales pitches and interviews about ZeekRewards' explosive growth.
Both had turned to the multilevel marketing industry — which sells products directly to consumers — to make money. Burks worked at Amway and other companies to help supplement his income as a magician who toured nursing homes in the 1980s and early 1990s with country singer David Houston. A high school graduate, Olivares said she used multilevel marketing to help make ends meet.
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