SALT LAKE CITY — A once wealthy internet marketer who lit the fuse on one of Utah's most explosive political scandals, who lost everything he owns and who still faces a federal complaint involving some of those same politicians, will have a long time to think about how he changed the course of state history.
St. George businessman Jeremy Johnson will spend the next 135 months — more than 11 years — behind bars.
U.S. District Judge David Nuffer said Johnson became comfortable with lying and deceiving and kept his business alive at the expense of his integrity.
"This case is about a personal moral failure on both of your parts," the judge told Johnson and co-defendant Ryan Riddle. He told Johnson, "Your self-importance and the desire to do what you want to do is at the root of this scheme."
A jury convicted Johnson in March of eight counts of making false statements to a bank in connection with his once multimillion dollar online marketing company, iWorks. At the same time, jurors acquitted him of 78 counts of bank fraud, wire fraud and money laundering.
"Mr. Johnson is an unrepentant, unremorseful con man. He's a schemer," assistant U.S. attorney Jason Burt said in a sentencing hearing Friday.
Johnson, wearing a green-and-white striped jail jumpsuit with TCDC PRISONER emblazoned on the back, declined to address the judge. He has been held in the Tooele County Jail since April 1.
Escorted by U.S. marshals, Johnson left the courtroom in tears at the end of the hearing. His family and friends, some of them sobbing, derisively clapped as the prosecutors filed out.
"We have two little girls who will miss him terribly, but we will never give up the fight," his wife Charla Johnson said outside the courthouse.
She laughed but declined to answer whether she thought the prosecution was politically motivated. She described her husband as a kind and generous man and said iWorks was a very well-run corporation.
"Jeremy is a beautiful ray of sunshine in our lives, and although he's been taken from us for a time, I don't doubt that he'll continue to share that," Charla Johnson said.
Nuffer sentenced Riddle, the former iWorks general manager, to 63 months — just over five years — in prison. The jury convicted him of six counts of making false statements to a bank and acquitted him of 50 fraud charges.
Karra Porter, a lawyer for Johnson, said she will appeal both the conviction and the sentence. She noted that the prison term Nuffer imposed reflects crimes for which the jury found Johnson not guilty — something she called "very un-American."
During the prosecution that goes back five years, Johnson went through several attorneys, and ultimately represented himself during the complex, seven-week trial.
Nuffer approved prosecutors' request to enhance the penalty against Johnson because he was the head of the company. Nuffer also dinged him for trying to contact a witness during the trial, for "excessive" attempts to get publicity and for seeking advice from former Utah Attorney General Mark Shurtleff on how to sabotage an earlier plea agreement, according to court documents.
"Johnson is aggressive, self-directed and intent on subverting rules and systems and demonstrated that in the course of this case," Nuffer wrote.
Johnson, 40, tried to soften his sentence with a letter from Davis County Attorney Troy Rawlings citing his help in the criminal prosecution of Shurtleff and his successor John Swallow. Nuffer rejected that notion.
As intriguing as the criminal case against Johnson was in and of itself, it took a back seat to the sensational allegations he made against Swallow and other powerful politicians. He claims Swallow helped set up a $600,000 payment to enlist then Senate Majority Leader Harry Reid, D-Nev., in an effort to get the Federal Trade Commission off his back.
Johnson's accusations led to high-profile federal, state and legislative investigations that forced Swallow from office 11 months into his first term. The Department of Justice declined to prosecute Swallow or Shurtleff but the state filed criminal charges against both men.
Shurtleff walked away from those felony charges just this week. A state judge on Wednesday dismissed the public corruption case against him, some of which was based on his relationship with Johnson. The charges against Swallow remain intact.
Johnson gained renown in his native St. George as a local boy made good.
With a thriving internet business that made him a rich young man, he had plenty of time to pursue his passion for flying helicopters. He often helped with police search-and-rescue efforts in the vast southern Utah desert. In 2010, he flew to earthquake-ravaged Haiti to transport injured victims to hospitals and deliver food to starving people.
"There is a good heart and a good intention in this man that is worth salvaging," Johnson's lawyer, Mary Corporon, told the judge, noting Johnson bought meals for and gave money to homeless people in Pioneer Park.
iWorks offered access to government grant programs to stop foreclosures, pay down debt and cover personal expenses such as utilities, and consumers bought into it at the rate of hundreds of millions of dollars. But many customers who ordered the CDs found they were not as represented and that their credit or debit cards were repeatedly charged for services they didn't sign up for or know about.
Federal prosecutors say iWorks became crippled as waves of credit card chargebacks hit the company, landing Johnson on the Terminated Merchant File list, essentially a blacklist shared between card processors.
To keep the business viable and the money flowing, Johnson began wrapping iWorks in what would ultimately become 37 shell corporations and more than 300 merchant accounts. He used the names of family, friends and employees to set up the accounts, a strategy that prosecutors say was meant to defraud Wells Fargo bank and CardFlex, the card processing company iWorks used.
U.S. Attorney for Utah John Huber called it "a one-of-a-kind crime designed right here in Utah."
Johnson argued that he guaranteed his personal wealth to back the accounts, making it clear to Wells Fargo and CardFlex exactly who they were working with. Representatives at CardFlex, he claimed, were not only aware of the plan to prop iWorks up with numerous shell corporations, but consulted with him about it.
From 1 to 86
Johnson was first arrested in June 2011 at the Phoenix airport before he boarded a flight for Costa Rica where he planned to start a helicopter tour company. Prosecutors, who claimed he was trying to flee the country, charged him with a single count of fraud in connection with iWorks. He spent three months in jail until his family and friends put up a $2.8 million property bond to free him.
A plea agreement in January 2013 that likely would have ended in much less prison time unraveled when prosecutors balked at the terms Johnson insisted upon in a bizarre courtroom drama. Johnson wanted a written promise that the government would not go after his family, friends and co-workers as he says prosecutors threatened to do. He also wanted Swallow on the list.
Two months later, the government then slapped Johnson and four iWorks colleagues with an 86-count fraud indictment that appeared to some as vindictive.
Huber said after the hearing that politics didn't enter into the numerous charges against Johnson in the case he described as having a "circus-like atmosphere" that "sucked a lot of energy out of our community."
"This case has nothing to do with John Swallow or Mark Shurtleff. This case stands on its own as an elaborate scheme by an ingenious criminal to profit from and to feed his greed," Huber said.
Two civil cases against Johnson are still pending. The Federal Trade Commission accused him of defrauding iWorks customers of more than $275 million. The FTC seized and sold off his assets including helicopters, airplanes and luxury cars. Porter said in court Friday that a settlement agreement is being finalized.
The Federal Election Commission alleges Johnson and Swallow violated campaign finance laws. The FEC accuses Swallow of arranging for Johnson to make illegal donations to Reid, Shurtleff and Sen. Mike Lee, R-Utah. Regulators claim Johnson contributed to the Shurtleff and Lee campaigns at Swallow's behest.
Email: [email protected]
Twitter: dennisromboy; DNewsPolitics