Tuesday, June 18, 2013

In Utah, a Local Hero Accused

Mr. Johnson, 34 at the time, had never traveled to Haiti before. But his decision to stage a private airlift, using his own aircraft, did not surprise his friends and family. They were used to his impulsive acts of magnanimity.

Six feet tall, with unruly red hair and a toothy grin, Mr. Johnson was well-known around St. George for deploying his own helicopter to rescue hikers stranded in nearby canyons and for housing families fleeing from polygamous communities. One local resident who befriended Mr. Johnson when they were both Boy Scouts described him as “one of the most Christ-like people I have ever come to know.”

In Haiti, Mr. Johnson piloted his own helicopter, flying infant formula to remote orphanages, evacuating injured children and delivering 110-pound bags of beans and rice to outskirts of Port-au-Prince, said another friend, Daniel Gardner, who joined him on the mission. On the last day of the 12-day trip, Mr. Johnson gave away personal possessions — a baseball cap, his iPod — down to the hiking boots he had been wearing, Mr. Gardner recalled. Mr. Johnson flew home with his feet clad only in striped Paul Smith socks.

“When I think of Jeremy Johnson, I think of the most generous person I ever met,” said Mr. Gardner, an assistant loan officer in Provo, Utah. “Whatever he had, he would give and give and give.”

But what Mr. Johnson had to give — and it was quite a bit — may have come from consumers who got taken. The Federal Trade Commission says Mr. Johnson was “the mastermind” behind one of the largest and most intricate online marketing frauds ever perpetrated in the United States.

Mr. Johnson founded and ran a company called I Works, which, the agency says, marketed programs to help people get government grants for personal needs and earn easy money. According to a civil complaint filed by the F.T.C., the company lured consumers with online pitches for free or “risk-free” CD-ROMs that required only a nominal shipping fee and then charged their credit cards for recurring online memberships they were unaware of and had not consented to.

Over five years, Mr. Johnson, along with I Works, company executives and related corporations, supposedly swindled “unwitting consumers” out of more than $275 million, the complaint said. The company also discouraged dissatisfied customers from seeking refunds from their credit card companies, the complaint said, by threatening to report those customers to a company-operated consumer blacklist called BadCustomer.com.

All the while, proceeds from the enterprise were used to finance Mr. Johnson’s “lavish lifestyles” of helicopters and houseboats, classic cars and poker at a Las Vegas casino, according to a receiver’s report to the court on Mr. Johnson’s assets. Some details in the case file read as if they came from an Old West novel: according to testimony from a witness, Mr. Johnson supposedly amassed bundles of cash and buried caches of gold.

“This is the anatomy of a really interesting fraud done by a clever guy at the expense of the most vulnerable people,” asserted David C. Vladeck, a professor at the Georgetown University Law Center who worked on the case in his previous job as director of the F.T.C.’s Bureau of Consumer Protection.

Mr. Johnson has repeatedly and vehemently denied any wrongdoing; a court filing by his defense team describes the F.T.C.’s argument as “filled with half-truths, distortions and inflammatory rhetoric that is not supported by the evidence.” The purpose of BadCustomer.com, for instance, was simply to steer people to his customer service centers, he said in a court filing.

In addition to the F.T.C.’s civil case, taking place in the United States District Court of Nevada, he is now facing 86 related criminal charges — including conspiracy, money laundering and bank fraud — brought by the United States attorney in Utah. Mr. Johnson has denied those charges, too.

“We did not commit any fraud whatsoever,” he wrote in an e-mail to an F.T.C. lawyer in 2011.

Over the last 19 months, in an attempt to clear his name, Mr. Johnson has mounted a campaign that accuses federal agents of misdeeds, including interfering with his right to a fair and speedy trial. Because of his jeremiads, federal prosecutors asked a judge in federal court in Salt Lake to prohibit him from further public commentary. In May, the judge imposed the order on Mr. Johnson, along with others in the criminal case including defendants, defense lawyers and prosecutors, prohibiting them from making public statements about the case.

Melodie Rydalch, a spokeswoman for the United States attorney in Utah, said federal prosecutors could not comment on the criminal case because of the order. Peter Kaplan, a spokesman for the F.T.C., declined to comment on its case “given the posture of the litigation.” But in hundreds of court filings, federal regulators paint a portrait of I Works as an enterprise that went to great lengths to lure online users even as consumer dissatisfaction mounted. Rather than modify their business practices, an F.T.C. court filing says, “defendants adopted strategies that allowed their fraud machine to continue reaping millions of dollars from unsuspecting customers.”

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