If all this doesn't come out, if there's a hint of a cover-up, it will be hard for the attorney general and his ability to govern — and bad for the state. —Jim Dabakis, Utah Democratic Party Chairman
SALT LAKE CITY — A week into his first term, Utah Attorney General John Swallow faces a political firestorm over accusations that he helped broker a deal in 2010 to derail a federal investigation into an embattled St. George businessman.
Utah Democrats have called for a special prosecutor from Washington, D.C., to conduct an independent probe of the allegations against Swallow. Republicans were mum on Saturday.
Jeremy Johnson told the Salt Lake Tribune that Swallow, a Republican, would arrange through another person for him to pay Senate Majority Leader Harry Reid $600,000 to get the Federal Trade Commission to back away from an investigation into Johnson's Internet marketing company, iWorks.
Johnson supported his contention with emails, financial records and a transcript of a secretly recorded April 2012 conversation with Swallow, who served as Utah Attorney General Mark Shurtleff's chief deputy before succeeding him last Monday.
Swallow issued a statement late Saturday calling Johnson's claims false and defamatory and a desperate attempt to secure a better deal in the federal criminal case against him.
"I did not broker a deal to pay a $600,000 'bribe' to Senate Majority Leader Harry Reid to make the investigation go away," he said.
Swallow said Johnson presented himself in 2010 as an honest businessman who was not being treated fairly by the FTC. He said he introduced him to a friend and former client who had experience working with federal lobbyists and might be able to help him work with regulators.
The new attorney general said he now regrets meeting with Johnson. "I will learn from this mistake and do everything possible to make sure my actions are transparent and make sure our office will be vigilant in going after anyone who defrauds the public," Swallow said.
Johnson through his attorney declined further comment Saturday.
Utah Democratic Party Chairman Jim Dabakis said Saturday he would send a letter to U.S. Attorney General Eric Holder asking that a special prosecutor be sent to Utah to "look at it from A to Z."
"This seems to be very, very ugly chapter and we need to make sure no rock goes unturned," he said. "If all this doesn't come out, if there's a hint of a cover-up, it will be hard for the attorney general and his ability to govern — and bad for the state."
Dabakis, a state senator, said he hopes Gov. Gary Herbert and Swallow would join him in calling for an independent investigation.
State Republican leaders said they wanted more information before making any statements on the matter.
Utah Republican Party Chairman Thomas Wright was out of town and did not return a call to his cellphone. Party Executive Director Ivan DuBois said with Wright away, the state GOP had no comment.
Herbert also had no immediate comment, according to a spokesman.
"The only thing I would say at this point is that it all seems too fresh to make judgments in any direction," said Kirk Jowers, a Republican who heads the University of Utah's Hinckley Institute of Politics.
But "it's hard to imagine a more difficult way to start your term as attorney general than under the cloud of these allegations," he said.
According to the Tribune, Swallow did more than arrange for Johnson to contact someone who could help him get out from under the FTC investigation.
Johnson told the paper Swallow suggested Reid could make regulators go away for a price. He said Swallow at first wanted $2 million to enlist Reid's help. Johnson, whose company wasn't making as much money at the time, said he negotiated the figure to $600,000.
Swallow, according to the Tribune, put Johnson in touch with Richard M. Rawle, owner of Provo-based payday loan company Check City. Swallow worked as Check City's lobbyist and in-house attorney until Shurtleff appointed him as chief deputy. Rawle, who died of cancer last month, contributed to Swallow's failed congressional campaigns and to Reid's re-election bid.
On Sept. 29, 2010, Swallow sent an email to Johnson saying he had talked to Reid's guy, Rawle.
"Richard is traveling to LV tomorrow and will be able to contact this person, who he has a very good relationship with. He needs a brief narrative of what is going and what you want to happen. I don't know the cost, but it won't be cheap," Swallow wrote.
In his statement Saturday, Swallow said he did tell Johnson the lobbyists would be expensive, but that he was never involved in negotiations over the costs.
Swallow also provided an affidavit Rawle signed before his death. In it, Rawle said he told Johnson he would need a nonrefundable $250,000 to start getting iWorks' position and information in front of the right people. Rawle said he received $50,000 from Johnson and $200,000 from Johnson's former business partner Scott Leavitt.
None of the money was paid or intended to be paid to Swallow, according to Rawle.
Rawle also said in the Dec. 4, 2012, affidavit that Reid did not receive any payments.
“I have recently heard that Mr. Johnson is making allegations that money was used to inappropriately influence a member of Congress. I have no knowledge of any such plan and expressly deny this allegation," Rawle wrote.
In a meeting with Johnson in April 2012 that Johnson secretly recorded, Swallow told Johnson that he did nothing wrong criminally but politically it was a different story, according to the newspaper.
Johnson told the Deseret News that he tried to get Swallow, a former state legislator, to drop out of the attorney general's race last April. Swallow replied he had no reason to get out because he did nothing wrong. Johnson also said he made a phone call to Swallow's GOP primary opponent, Sean Reyes, but Reyes didn't return the call.
A week before the election, Johnson, who describes himself as a diehard Republican, said he met with Democratic attorney general candidate Dee Smith to size him up. He said he told Smith he had information that would swing the race in his favor. Johnson said he found Smith to be good man, but decided not to share his "bomb" about Swallow.
Smith did not return a call to his cellphone for comment Saturday.
Swallow was the chief fundraiser for Shurtleff's 2008 re-election campaign to which Johnson donated thousands of dollars.
Shurtleff said he and criminal prosecutor Kirk Torgensen met with Swallow regarding the allegations involving Johnson. Torgensen is now Swallow's chief deputy.
"I went to him and said, 'I need to know what you did do and what you didn't do,'" Shurtleff told the Deseret News last month. "There's things that Jeremy's saying and there's some documentation that may look bad and I think that's what people are basing it on. At the end of the day, I'm convinced John didn't do anything illegal."
Johnson said he is the victim of an unjust federal investigation into his company.
The FTC filed a civil complaint against Johnson in December 2010, alleging iWorks lured Internet consumers into "trial" memberships for bogus government grants and moneymaking schemes and then repeatedly charged their credit cards for programs they didn't sign up for, totaling nearly $300 million.
Federal agents arrested him six months later at the Phoenix airport before he boarded a flight to Costa Rica where he intended to start a helicopter touring company. The U.S. Attorney's Office for Utah charged him with one count of mail fraud in connection with iWorks.
Though Johnson has adamantly proclaimed his innocence in both the criminal and civil cases, he had intended to plead guilty to bank fraud and money laundering Friday in federal court. He said he was doing it because prosecutors threatened to arrest his family members if he didn't cooperate.
The plea deal fell apart when prosecutors balked at Johnson's attempt to include the names of those he wanted protected, including Swallow, in the agreement. Federal prosecutors now say they will file additional charges against Johnson within a month.
Johnson has steadfastly refused to sign a settlement agreement with the FTC, which has seized all of his property including aircraft, luxury cars, homes and gold.
Shurtleff said that he looked at Johnson's company in 2009. "At that point, he was doing everything right," he said.
When Johnson told him the FTC was investigating, Shurtleff said he told Johnson to cooperate.
"Here we are now two years this month since he was charged by the FTC," Shurtleff said in December. "(They) took everything he has and haven't proven squat."