Donations, actions raise more questions about Swallow's judgment

Published: Tuesday, Oct. 6 2015 7:40 p.m. MDT

Attorney General candidate John Swallow in Salt Lake City  Thursday, June 14, 2012.  (Jeffrey D. Allred, Deseret News) Attorney General candidate John Swallow in Salt Lake City Thursday, June 14, 2012. (Jeffrey D. Allred, Deseret News)

SALT LAKE CITY — It remains to be seen whether embattled Utah Attorney General John Swallow will face criminal charges as a result of his dealings with indicted businessman Jeremy Johnson.

But his ethics and judgment have been called into question since Johnson accused him last month of helping broker a deal to bribe a U.S. senator in an effort to derail a federal investigation into Johnson's Internet marketing company.

The U.S. Attorney's Office for Utah acknowledged last month that it, along with the FBI, is investigating the allegations.

Regardless of the outcome, having the state's top law enforcement officer under investigation creates a cloud of suspicion that could diminish his effectiveness. It also opens his recent decisions and statements to more scrutiny and has members of his own party questioning whether he can survive in office.

Utah Attorney General John Swallow speaks out Monday, Jan. 14, 2013 in his office at the State Capitol about allegations that he was involved in improper deals. (Scott G Winterton, Deseret News) Utah Attorney General John Swallow speaks out Monday, Jan. 14, 2013 in his office at the State Capitol about allegations that he was involved in improper deals. (Scott G Winterton, Deseret News)

Campaign finance reports, two secret recordings, court documents and interviews with associates and others provide insight into how Swallow has moved through political circles, shows his willingness to advise characters whose dealings are in question, and puts in focus the role money plays in gaining access to decision makers.

Swallow's dealings include: 

• Accepting a campaign donation from a St. George financial adviser who sued the state  and who might refile a complaint that could end up before him.

• Meeting Johnson in an Orem doughnut shop where the arrangement to head off the Federal Trade Commission investigation into Johnson's iWorks enterprise was discussed.

• Accepting a campaign donation from a company the FTC later charged with consumer fraud.

• Using Johnson's luxury houseboat on Lake Powell in 2010 and then wondering if it could hurt him politically, or worse.

Utah Attorney General John Swallow speaks out Monday, Jan. 14, 2013 in his office at the State Capitol about allegations that he was involved in improper deals. (Scott G Winterton, Deseret News) Utah Attorney General John Swallow speaks out Monday, Jan. 14, 2013 in his office at the State Capitol about allegations that he was involved in improper deals. (Scott G Winterton, Deseret News)

• Quietly telling a telemarketer during his election campaign that the attorney general's office should take over the state Division of Consumer Protection, an agency that has butted heads with the office regarding whom or whom not to investigate.

In addition, some of Swallow's largest campaign donations — some as high as $25,000 — came from Internet companies offering programs to get rich or coaching services for online businesses, sites that frequently draw attention from state and federal regulators.

Others such as the Provo-based home security firm Vivint, which was recently sold for $2 billion, have run into problems over their sales practices with attorneys general in other states.

Swallow did not make himself available for an interview to discuss these specific dealings. But other than Swallow's own previous denials of wrongdoing, few have stood up to defend the Republican attorney general against Johnson's claims. State GOP Chairman Thomas Wright said Swallow made mistakes and called for ethics reform to prevent such a situation from happening again.

Utah Attorney General John Swallow listens as Utah Gov. Gary Herbert delivers the State of the State speech to the Utah Legislature on Capitol Hill, Wednesday, January 30, 2013, in Salt Lake City. (Tom Smart, Deseret News) Utah Attorney General John Swallow listens as Utah Gov. Gary Herbert delivers the State of the State speech to the Utah Legislature on Capitol Hill, Wednesday, January 30, 2013, in Salt Lake City. (Tom Smart, Deseret News)

Swallow's longtime friend Brad Pelo describes him as guileless person prone to giving others the benefit of the doubt.

"John is by nature someone who trusts people," he said. But it is that trust that is now being questioned as poor judgment.

Political ambitions

Holding public office has been a dream of Swallow's since he was a teenager working on his family farm in eastern Nevada. He won three terms in the Utah Legislature before seeking higher office. He twice challenged Democratic Rep. Jim Matheson for Congress, losing in 2002 and 2004.

Swallow had his own law practice involving business, real estate, financial, government and corporate matters before getting into politics. He and Pelo once launched a company called On Technology aimed at making a more efficient light bulb.

"I just never, ever saw an ounce of poor judgment on his part in that setting," said Pelo, who founded companies such as Ancestry.com and Nextpage and who has produced several movies and the annual Stadium of Fire celebration.

Swallow took a break from politics after the second loss to Matheson. He worked as a lawyer and lobbyist for the payday loan firm Check City and did legal work for a dietary supplement company — industries that were among his predecessor's most prolific campaign donors.

Former Attorney General Mark Shurtleff brought Swallow on as lead fundraiser for his 2008 re-election campaign. He then named Swallow chief deputy attorney general for civil cases in October 2009. After Shurtleff decided to not seek a fourth term, Swallow ran and won the office last November.

'Curious' contribution

Swallow's financial disclosure reports from his 2012 campaign — in which he raised nearly $1.3 million — show contributions that could create ethical dilemmas as the state's chief law enforcer.

Swallow received $5,000 from a company called Mutual Benefits International Group based in Mesquite, Nev. According to the report, the donation came in on Nov. 27, 2012 — three weeks after Swallow was elected attorney general.

Hank Brock, a former St. George financial adviser, is listed as the firm's CEO. Brock once served on the Utah Thrift Panel established by the Legislature in 1989 to arbitrate claims against failed thrift institutions.

Brock and former business partner Jay Rice sued Utah for $357 million in December 2009. They claim the Utah Division of Securities engaged in extortion, bribery and witness tampering while investigating them from 2000 to 2005. The lawsuit lists Shurtleff among the defendants.

The suit came after the state securities division revoked their securities licenses. Brock settled with the division in 2006, but his license was not reinstated.

A federal judge in Salt Lake City dismissed Brock's lawsuit in July 2010, but the U.S. 10th Circuit Court of Appeals kicked it back a year later, saying some aspects of the case should be reconsidered. It was again dismissed last March, but Brock and Rice filed an objection to the decision. The court didn't act on that filing.

The Swallow campaign sees no problem with the contribution because the court lists the case as closed.

Swallow campaign strategist Jason Powers said in an email that "in adhering to the highest ethical standards, it is the policy of the campaign to not accept contributions from any individual or company currently in litigation with the state."

Brock said he has never talked to Swallow or his campaign. He said he considers himself a constitutionalist and made the donation because he sees Swallow as a defender of the Constitution.

As for the lawsuit, Brock said he and his attorney have talked about it in the past few weeks and he understands he has a year from the March 26, 2012, dismissal date to refile the case. Asked if he intended to do that, Brock said, "Regarding that question, I better answer no comment."

Should that happen, it would put Swallow in the position of having to defend the state against a lawsuit filed by someone who contributed to his campaign.

"I think it's dang curious," said Utah Department of Commerce Executive Director Francine Giani, when asked about the potential conflict. She oversees the securities and consumer protection divisions.

Ethical box

Kirk Jowers, who heads the Hinckley Institute of Politics at the University of Utah, said some political contributions can be problematic for the attorney general.

Individuals and companies most likely to donate are those concerned with investigations from the state's top law enforcement office or other consumer protection and business regulators, he said.

"I think anyone running for attorney general under Utah's current system is being put in a very difficult ethical box because Utah is one of the only states that allow unlimited campaign contributions," Jowers said. "I think the incentives and pressures are not aligned right for that office."

The Governor's Commission on Strengthening Utah's Democracy, for which Jowers served as chairman, advocates that the governor appoint the attorney general along with the offices of state treasurer and state auditor. Seven states currently appoint rather than elect the attorney general.

Short of that, Jowers said, the state should impose campaign contribution limits.

Johnson relationship

Swallow first met Johnson while working as Shurtleff's chief fundraiser in 2008.

Johnson didn't contribute to Swallow's campaign but gave more than $200,000 to Shurtleff. Shurtleff, through his Utah's Prosperity Foundation PAC, donated $130,000 to Swallow.

Shurtleff did not respond to a request for an interview.

Johnson's allegations against Swallow have raised both criminal and ethical questions about his actions. The U.S. Attorney's Office for Utah said it is conducting an investigation, something Swallow himself requested while vehemently proclaiming his innocence.

The Federal Trade Commission alleges Johnson's online company, iWorks, scammed customers out of $300 million by billing their credit cards for services and products they didn't order. Johnson also faces criminal fraud charges in connection with the business.

Swallow maintains the $250,000 Johnson and a business associate paid to a friend of Swallow's was intended to lobby the FTC on Johnson's behalf. Johnson claims it was part of a payoff for Senate Majority Leader Harry Reid, D-Nev., to thwart the agency's investigation. Reid has disavowed any knowledge of Johnson's case.

Johnson secretly recorded a conversation he and Swallow had about the deal in a Krispy Kreme doughnut shop in Orem last April. Swallow says the recording shows he did nothing illegal.

Holding on

Most observers are taking a wait-and-see attitude as the federal investigation runs its course. Simmering rumors of a federal grand jury continue to dog the office.

Former state Republican Party Chairman Dave Hansen, who managed Swallow's unsuccessful 2002 bid for Congress, said he told Swallow to hang in there if he hasn't done anything wrong.

"This is the time to have ice water in your veins to withstand what some people are going to say about you," he said he told Swallow.

Hansen said Swallow has what it takes to weather the storm.

"If nothing new comes out, he'll be fine. He's going to be scarred, there's no question about it, but he has three and half years to get over that. Then he just has to be a damn good attorney general," Hansen said.

Jowers, however, said public perception might leave Swallow clinging to the job in a weakened position for what would likely be his only term.

Republican insiders say Swallow's position is tenuous. Names of possible replacements have already been circulating. Even the governor's office has quietly sought out candidates to replace him.

Regardless of the outcome of the investigation, the party's central committee could consider reprimanding Swallow this month.

Swallow has said he has no plans to step down.

Pelo, Swallow's friend from their college days at BYU, said an attorney general who stands up for what he believes is more important than having perfect judgment.

"This is someone who just saw John coming," Pelo says of Johnson.

Pelo doesn't believe Swallow would be involved in bribing a U.S. senator, even for someone he considered a friend as Swallow did Johnson.

"Absolutely not," Pelo said. "He wouldn't do that for me."

Hansen said Swallow has a trusting nature and a desire to help people "without necessarily always looking down the road and saying, 'If I have that meeting with that person, this could come out or it could look like this.'"

More questions

Some of Swallow's campaign contributions and other political encounters last year could also cause observers to question his judgment.

On April 7, 2012 — three weeks before Johnson secretly recorded Swallow in the Orem doughnut shop — Swallow was surreptitiously recorded talking to a Utah telemarketer.

"When I'm attorney general, this is kind of confidential, I'm going to try to restructure it so that consumer protection is under the A.G. and the A.G. has more authority over those investigations, in fact, complete authority over that," Swallow told Aaron Christner in a recording posted on the City Weekly website.

Christner had run-ins with the state Division of Consumer Protection and appeared on its "Buyer Beware List" linked to three companies fined for soliciting customers without being registered.

Swallow also said in the recording that "Utah is so dysfunctional right now — the client is the Department of Commerce and Consumer Protection and that is not someone we can control or even influence greatly. It's because they work for the governor's office right now."

City Weekly reported that Christner mentioned an upcoming fundraising event for Swallow in their conversation, but that exchange was not part of the posted recording.

Campaign finance records don't show a contribution from Christner.

Swallow said during the campaign that he would explore moving the Consumer Protection Division to the attorney general's office. But attorney general's office spokesman Paul Murphy said that is a dead issue since Gov. Gary Herbert made it clear that consumer protection should remain in the commerce department.

"I hope lessons have been learned," Giani said. The department, she added, will continue to conduct investigations as it has in the past "regardless of who's giving money to our attorneys."

Swallow did receive campaign funds from a telemarketing company founded in Utah that the FTC charged in January with bilking more than $200 million from consumers.

Federal regulators allege The Tax Club deceived customers into believing its services would help their Internet or home-based businesses succeed. The company sold products and services such as tax return preparation, business plans and credit development services, most of which the FTC says were boilerplate documents.

The Tax Club began in Utah in 2008 and expanded to comprise at least 12 entities doing business under a dozen names. It operated out the 60th floor of the Empire State Building in New York City.

The company and its affiliates were generous donors to Shurtleff, giving at least $104,000 to his campaign fund since 2008, state financial disclosure reports show. They contributed at least $7,500 to Swallow last year.


In the secretly recorded conversation with Johnson, Swallow worried whether investigators were aware of his using Johnson's houseboat on Lake Powell.

"Do they know about the houseboat?" Swallow asks in the April 30, 2012, meeting. "Is there any paper trail on that?"

"There’s no paper trail on the houseboat. Nobody knows about it," Johnson assures him.

"No emails on the thing, and, no, my wife doesn’t even know you were on there," Johnson said. "You went down there for a weekend and that's it."

Swallow has acknowledged using Peps I, a 75-foot-long houseboat with several cabins, a home theater and a helipad. The government has since seized the boat and put it up for sale.

Johnson said he doesn't know why Swallow brought that up during the meeting or why he sounded nervous about using it. Johnson said he let many people use his houseboat.

"Nothing was expected from letting him use it. It was no special deal," Johnson said.

Swallow, who turned 50 last November, was scheduled to go on a cruise with Pelo, another friend and their wives last month to celebrate their 50th birthdays together. But Swallow stayed behind, Pelo said, to "remain attentive to the affairs of the day."

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