SALT LAKE CITY — A handcuffed and shackled Jeremy Johnson tearfully apologized in federal court Wednesday for his “foolish” and “selfish” actions that caused the demise of his multimillion dollar internet business and landed him behind bars.
“I’ve given up hope of being released from prison a long time ago,” he told U.S. District Judge Dee Benson.
Johnson, 42, appeared before Benson after the 10th Circuit Court of Appeals in April upheld his conviction but sent the case back to the district court for a new sentence. A three-judge panel ruled that the trial judge, Judge David Nuffer, mistakenly enhanced Johnson's sentence under federal sentencing guidelines that resulted in a 135-month prison term.
After hearing from Johnson, his wife Sharla Johnson, defense attorneys and prosecutors, Benson reduced Johnson's sentence to 87 months — a little more than seven years. He has already served about 2 1/2 years and is incarcerated in a federal prison in Safford, Arizona.
Benson said he lowered the sentence because Johnson took responsibility for his crime, showed some remorse and changed his attitude. Still, he chastised him for being "arrogant and cocky" in acting as his own lawyer during his trial.
Sharla Johnson, also in tears, told the judge that the couple's 15- and 11-year-old daughters deserve to have their father back for what's left of their childhood. She said he has paid his debt over and over again.
"I hope you will give him a chance," she said.
A jury convicted Johnson in 2016 of eight counts of making false statements to a bank in connection with his once-thriving online marketing company, iWorks. At the same time, jurors acquitted him of 78 counts of bank fraud, wire fraud and money laundering.
"Without this enhancement, Mr. Johnson would have been home with his family last Christmas," Johnson's attorney Richard Casper said.
Paul Moxley, another Johnson defense lawyer, argued that Benson should cut his sentence to 48 months, saying "I don't think his conduct was all that serious."
Assistant U.S. attorney Michael Kennedy said Johnson should serve 135 months because nothing has really changed since the first sentence, though he conceded Johnson has taken a "modicum" of responsibility and shown some "actual" remorse.
Johnson gained some acclaim for his humanitarian work in Haiti after the 2010 earthquake there. But the spotlight became brighter after he made public corruption accusations against former Utah Attorneys General John Swallow and Mark Shurtleff that led to criminal charges. Swallow was acquitted after a trial and prosecutors eventually dropped all charges against Shurtleff.
On Wednesday, Johnson admitted to breaking prison rules, including using a cellphone, saving up his sleeping pills so he could take a bunch at one time and having his family send money to poor inmates. He said he was initially angry and didn't think he received a fair trial or sentence.
But he said he has since had an "attitude adjustment" and now doesn't think he's a victim.
At Johnson's trial, federal prosecutors argued that iWorks became crippled as waves of credit card chargebacks hit the $350 million company, landing Johnson on the Terminated Merchant File list, essentially a blacklist shared between card processors. 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.
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 banks and the card processing company iWorks used.
Johnson told the judge Wednesday that he regretted having come up with a "creative" way to fix the chargeback problem.
"It was a terrible decision and one I wouldn’t make again, and it cost a lot of people dearly," he said, adding his company once employed 1,000 people. "They counted on me to do my job so they could do theirs, and I failed miserably."
Prosecutors contend the loss to the credit card-issuing banks from chargebacks was $1.7 million. Nuffer used the figure to bump up Johnson's original prison sentence.
Johnson argued on appeal that there's no evidence that banks lost near that much money and that the figure should not have been used in determining his sentence.
"There is no evidence of loss," Moxley told Benson. "Bottom line, the banks made money."
Financial experts retained by Johnson's lawyers argued in court papers that the issuing banks, far from suffering the losses determined at the July 2016 sentencing hearing, actually had a substantial net gain.
That net gain would negate the loss calculation imposed at the first sentencing, when the court prevented any discussion of what caused the elevated number of chargebacks or whether the banks lost any money because of the chargebacks, the experts contend.14 comments on this story
Kennedy told the judge it was "blatantly incorrect" to argue the banks didn't lose money. He said the chargebacks were drag on the system that hurt them financially and no evidence at the trial showed the banks made money.
Prosecutors say the original sentence was accurate and that even without the enhancement, Johnson would be in line for a 108- to 135-month sentence.
Johnson is also named in a Federal Elections Commission complaint alleging he used straw donors to contribute money to three high-profile politicians.