Hippie Diva pleading guilty to fraud in $850M Ponzi scheme

Feb. 01, 2014 @ 05:21 PM

CHARLOTTE — Dawn Wright Olivares was the high-profile face of a North Carolina online company that promised big returns on a small investment.

She'd tout ZeekRewards at public events, and promote the business in interviews, calling it a great way for "the "little guy" to make money.

"We're a real company," she said during an interview nearly two years ago, adding that her business took great pains to follow the law.

Now the 45-year-old Olivares, the company's former chief operating officer and self-professed "Hippie Diva," is pleading guilty to securities fraud conspiracy and tax evasion stemming from an $850 million Ponzi scheme.

She will appear in federal court Wednesday, along with her stepson, Daniel Olivares, 31, the company's senior technology officer, who is pleading guilty to securities fraud conspiracy.

U.S. District Court spokeswoman Lia Bantavani said prosecutors couldn't discuss details of the case because it's an ongoing investigation.

Olivares' attorney Brian Cromwell also said he couldn't discuss the case.

But Dawn Olivares and her stepson are the first to plead guilty to criminal charges in the massive scam. Each faces five years in prison and a $250,000 fine. As part of their plea agreements, they will pay full restitution to their victims, the amount to be determined by the court at sentencing.

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.

Burks created several online companies, including Zeekler.com, a penny auction site, and ZeekRewards, a business designed to drive traffic to the penny auction.

The Securities and Exchange Commission, which closed the operation 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.

While Burks launched the online ventures, it's clear that Dawn Olivares played a major role in the fraud, according to documents.

Olivares, who now lives in Clarksville, Ark., "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.

In her power suits, Olivares was often seen with Burks in Lexington restaurants. She gave high-energy sales pitches and interviews about ZeekRewards' explosive growth. Burks was a familiar face in Lexington — he had lived in the tight-knit community since the early 1990s — but not much was known about Olivares.

"She was a mystery," said Caron Myers, one of the hundreds of thousands of investors who lost money.

But documents, interviews and online materials reviewed by The Associated Press show that Olivares had known Burks for years. They met while they worked at a multilevel marketing company in the late 1990s. And when Burks asked her to join Zeekler.com and ZeekRewards in March 2010, she jumped at the chance.

They came from opposite worlds — she was the daughter of a cosmetic executive who grew up in Connecticut; Burks was a quiet, balding man with thick glasses who spent his childhood in Shreveport, La. But they did have one thing in common: Multilevel marketing.

Both had turned to the 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. But by the late 1990s, Burks started creating his own multilevel marketing companies.

As a young mother of three, Olivares said she used multilevel marketing to help make ends meet. And she quickly discovered she was good at it — selling everything from Mary Kay to weight loss programs.

"I loved the multilevel marketing reality because I could help other people build a business," she said on her Internet radio show in 2013, which she began hosting after the SEC shut down ZeekRewards.

And she said she thrived under pressure.

"It was always fast pace and move, move, move," she said. "I'm not a sit-on-your-duff-and-see-if-someone-else-is-going-to-make-you-a-nickel kind of person. I was always a hard worker," she said.

When Burks launched Zeekler.com, he called Olivares for help.

Things started off slowly at Zeekler.com, the penny auction site. In penny auctions, consumers compete to pay pennies on the dollar for name brand products such as iPads. Each bid costs as much as $1, so participating can become expensive and the sites can earn nice profits when multiple users bid against each other. But there were so many penny auction sites that Burks and Olivares had to find something different to separate themselves from the others.

So in January 2011, Burks launched ZeekRewards, a complicated online venture that would drive business to the penny auction site.

The program offered a share of the penny auction's profits to people who invested money, promoted the company on other websites and recruited other participants. Under a complicated formula, investors were issued "profit points" that grew every day. Investments were capped at $10,000, but people could invest on behalf of their spouses, children or other relatives. Some mortgaged homes to raise their investment.

At first, ZeekRewards complied when investors sought to cash out, and the word grew about the company.

Olivares was an important part of the success. She contacted her friends in the multilevel marketing world. She went to industry conferences and recruited family members to join the company, including her stepson. Soon, millions of dollars were flowing into ZeekRewards, and Olivares, a high school graduate, was diverting money into a limited liability company for her personal use, documents said.

Meanwhile, the 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.