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A $2M check, Harry Reid and one frustrated prosecutor

Published December 13, 2016 5:03 pm

Shurtleff-Swallow fallout • Davis County prosecutor wants to know if feds backed away from allegations surrounding the powerful Nevada senator.
This is an archived article that was published on sltrib.com in 2016, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The $2 million cashier's check was drawn at a St. George bank Nov. 5, 2010.

From there, it was sent by FedEx to a Los Angeles attorney who represented Ireland-based Full Tilt Poker.

Made out to "Mail Media LTD" — a Full Tilt-owned entity used to launder online-gambling funds — the millions then were deposited at Basler Kantonalbank in Switzerland, where Mail Media had an account.



And from there, Davis County Attorney Troy Rawlings is investigating whether it went into a Marshall Islands account in the name of Searchlight Holding Inc. to benefit, or even bribe, Harry Reid, the once-powerful majority leader of the U.S. Senate whom online poker companies had been courting to push a bill to legalize their gaming across the nation.

But documents gathered by The Salt Lake Tribune from state and federal investigations, court filings and public records requests — including audio recordings of interviews and thousands of pages of transcripts, summaries by investigators, emails, requests for evidence and other materials — show that the Department of Justice (DOJ) and the FBI failed to pursue a vigorous investigation of this money and any potential tie to Reid.

The available evidence contains no direct connection between the money and the Nevada Democrat, only that Rawlings wants to dig into that possibility.

Federal authorities have stymied his effort, leaving Rawlings to wonder why. Were agents ordered to steer clear of that money trail? And, if so, by whom? In short, was there a cover-up?

"Harry Reid is presumed innocent and may actually be innocent," Rawlings said in a written statement, adding that a "real, vibrant grand jury investigation" could exonerate him.

Even at the state level, though, Rawlings' push for funding for a grand jury also has stalled. Attorney General Sean Reyes' office has not turned over any funds for such an inquiry despite months of negotiations.

Reid's spokeswoman did not return emails and a phone message seeking comment for this story. Previously, his office called any bribery allegations "unsubstantiated" and accused Rawlings of grandstanding to advance his political career.

The FBI declined to answer specific questions but in a joint statement with the Utah Department of Public Safety, FBI spokeswoman Sandra Yi Barker said, "At no time has the FBI or DPS been asked to back off of an investigation of any public official."

Origins • Rawlings learned about the $2 million check from Jeremy Johnson.

The disgraced St. George businessman, according to transcripts and recordings of investigative interviews, told the prosecutor the money came out of poker funds at now-defunct SunFirst, where Johnson and his partners were illegally processing payments for poker companies. Johnson repeated the story to FBI agents that Reid, who leaves the Senate in January, was going to pocket "a little something extra" for his retirement in exchange for political help.

Johnson's encounter with the FBI came after the DOJ had aborted an investigation of then-Utah Attorney General John Swallow and his predecessor, Mark Shurtleff, without filing charges.

The cases were picked up by Rawlings, a Republican, and Salt Lake County District Attorney Sim Gill, a Democrat. The two prosecutors were joined by Utah-based FBI agents, who, documents indicate, focused only on alleged malfeasance by the two former Utah attorneys general.

Indeed, the document trove tied to the criminal probes of Shurtleff and Swallow — along with a federal bank-fraud case that sent Johnson to prison — are notable for the DOJ's disinterest in the allegations involving Reid.

"The FBI, via the Salt Lake City Field Office, was willing to investigate these allegations … wanted to actively engage," Rawlings said. "The Salt Lake office was taking steps to do so, but suddenly they were not."

Lobbying or bribery • The $2 million reached Shurtleff's radar from Johnson, his longtime friend and campaign donor, who also told the then-attorney general in 2012 about a $250,000 bid to solicit Reid's help in thwarting a Federal Trade Commission (FTC) investigation of Johnson's I Works online-marketing company.



Johnson told Shurtleff that the deal involved Swallow, then a top deputy in the Utah Attorney General's Office, and the late Provo payday-lending magnate Richard Rawle, who had access to Las Vegas attorney Jay Brown, Reid's friend and sometimes-business partner.

Shurtleff said he asked Johnson why he considered the $250,000 a bribe and not just "straight-up lobbying" money — as Swallow has argued it was.

"He says, 'because I bribed Harry Reid before,' " Shurtleff recalled in an interview with The Tribune.

Johnson went on, the former attorney general said, to tell the story about the poker companies and the $2 million. That prompted Shurtleff to turn to the feds — the U.S. attorney's office for Utah, the DOJ and the FBI — two times in 2012 and again in 2013 after he left office.

Following the check • One of Rawlings' requests to federal agencies seeks an email exchange between Full Tilt executives and Johnson that discusses "a wire transfer, or a cashier's check, for $2,000,000, or any other amount in 2010," according to records obtained through the Freedom of Information Act.



Johnson came to believe the $2 million check was meant for Reid after the Nevada senator, according to the businessman, said at a 2010 fundraising event with online-gaming groups that he would push a bill to clear up any doubt and legalize their U.S. operations under federal law.

Rawlings has granted Johnson immunity from prosecution in his investigation, dubbed "Rogue Runner." In a Jan. 9, 2014, interview that was part of the probe, the prosecutor asked Johnson, "So you actually did give Harry Reid $2 million?"

Johnson replied, according to a transcript, "Well, it wasn't written to him but—."



The funds for the SunFirst cashier's check were in an account for a company called Powder Monkeys, one of the entities set up in St. George in 2010 to process payments for Full Tilt Poker and PokerStars. The back of the check shows it was deposited into Mail Media's Swiss account.



A copy of a Nov. 5, 2010, shipping receipt shows the check went via FedEx to Full Tilt's Los Angeles attorney Ian Imrich, who did not return emails seeking comment.



Documents do not show where the money went, if anywhere, after Switzerland. But on Oct. 27, 2010 — a week before the check was cut — a Marshall Islands bank account was established under the name Searchlight Holding Inc., according to the country's Reston, Va., business office. Information on who opened the account is not public — whether it was Reid or poker interests or someone else.



Rawlings believes there is a connection between the account and Reid, who has used Searchlight, the name of the Nevada town in which he grew up, with other entities, including his political-action committee, the Searchlight Leadership Fund, and the Harry Reid Searchlight Foundation.

Documents show Rawlings has been trying to obtain evidence from federal agencies about a Searchlight Holding Inc. registered in the Marshall Islands and seven "alleged overseas accounts in the Marshall Islands and Bermuda that purportedly relate to Senator Harry Reid going back to 1997."



Vegas fundraiser • Reid was in trouble in his 2010 bid for a fifth term, locked in a nasty battle with Republican Sharron Angle, a tea-party favorite.

In June of that year, Johnson later told investigators, a Reid staffer called him and suggested lunch with the senator.

Johnson said poker representatives had told Reid that "I was Mormon and a trustworthy guy." Reid also is a member of The Church of Jesus Christ of Latter-day Saints.

Online-poker companies had been lobbying the Nevada Democrat to support a change in federal law to legalize their business, which had monies seized and seen criminal indictments since passage of a 2006 anti-gambling finance law. Washington, D.C., attorney Jeff Ifrah, who represented some of them, pushed Johnson to accept Reid's invitation.

Ifrah, who declined to comment, told Johnson in an email that "it would be very helpful to give us your assessment of whether Reid truly plans on doing anything at all."



Worried that he could be tapped for a campaign contribution, Johnson passed on lunch, but then was invited to a July 6, 2010, fundraiser for Reid sponsored by the Poker Players Alliance at the Rio All Suite Hotel & Casino in Las Vegas.

Ray Bitar, a Full Tilt owner and then-CEO, asked Johnson to tap the poker funds in SunFirst for $20,000 — money to be distributed to Reid during the fundraiser through various donors not to exceed $2,400 apiece (to stay within the individual legal donation limit), Federal Election Commission and court documents show. The FEC sued Johnson over those "straw-donor" contributions. The case is pending in federal court in Salt Lake City.

Reid, according to Johnson, told the crowd — including Bitar, Ifrah and Poker Players Alliance Executive Director John Pappas — that he was switching positions and would now support legislation to ensure that online poker was legal at the federal level. Pappas said in an interview that he didn't remember what Reid said at the meeting.

In his multiple accounts of the meeting, and specifically in a February 2014 interview with two FBI agents, Johnson has said, "Harry Reid is going around meeting people and saying 'Hi' and I was standing next to one of Ray's entourage and I'm like, 'How did you guys get Harry Reid to go against his own constituents and do this?' and he's like, 'Well, let's just say he's getting a little something extra in his retirement fund.' "



Bitar did not return emails and phone calls seeking comment.

Gold to silver • Shortly after that fundraiser, Johnson told investigators in that same February 2014 interview that Full Tilt officers "want[ed] me to send $2 million in gold to Las Vegas."

In an Aug. 3, 2010, email exchange, Johnson told Imrich and Bitar he had $2 million worth of silver, not gold, and could transport it to Las Vegas but it weighed several tons.



According to a deposition in his FTC case, Johnson said the silver bars were taken instead to Los Angeles and sold, with the proceeds going to poker interests.

Johnson also told investigators that later, in November 2010, a Full Tilt official said he wanted more money from the poker funds in SunFirst.

The $2 million check was cut three days after Reid won re-election in the wake of a flurry of emails between Johnson, Full Tilt's Nelson Burtnick and others, with Ifrah, Bitar and Imrich copied. The emails appear largely a discussion about how much money Johnson could send Full Tilt that day from the millions in poker funds that had been piling up in SunFirst.

"All I know is that there was some urgency to get this $2m now while we were working on the final number owed," Johnson wrote in an email. "I am only suspicious of the $2m because of the timing and the urgency."

Imrich also did not respond to requests for comment.

About a month after Reid's re-election, the powerful majority leader sought a change in federal law that would ensure online poker was legal and regulated under federal law. But Reid was unsuccessful in attaching the measure to a tax-cut bill in the final days of the 111th Congress. (Several states, including Nevada, now permit online poker by residents.)

FTC gambit • Johnson's troubles with the FTC, which was threatening the online marketer over his business practices, were playing out at the same time the poker companies were pushing Reid for a congressional bill.

Unable to resolve the FTC matter on his own, Johnson said he took Swallow's advice and turned to Swallow's former employer and friend, Richard Rawle, whose Provo-based payday-lending empire had storefronts across Utah, Nevada and other states.

Rawle had experience with Washington lawmakers and regulators and a relationship with Jay Brown, the Las Vegas attorney. Besides his relationship with Reid, Brown had represented Rawle's company and been a registered lobbyist for the Community Financial Services Association, a payday-loan industry group.

At an Oct. 12, 2010, meeting, Rawle and Johnson hatched a deal in which the St. George businessman would pay Rawle $600,000 to solicit Reid's help in fending off the FTC. From an initial payment of $250,000, $50,000 went to Brown.



The effort, which has been alternately described by various parties as attempted bribery or lobbying, failed. The FTC sued Johnson in December of that year.

Johnson later told Swallow — in their infamous April 30, 2012, meeting at Orem's Krispy Kreme doughnut shop — that he believed the plan would work because Rawle had told him the payday-loan industry had staved off regulatory reforms by paying someone (he doesn't say whom) $20,000 a month, according to a recording of their conversation.

Tax returns from the Community Financial Services Association show that Jay H. Brown LTD of Las Vegas had a financial relationship with the group, and received $240,000 in 2011 for consulting and the same amount the next year. Brown also has been a registered lobbyist for the group.

Brown did not return emails or a phone call seeking comment.

Johnson said he also recorded both the poker fundraiser with Reid and his meeting with Rawle, but the hard drives with those and other recordings have been missing since a court-appointed receiver in the FTC case seized all of I Works' computers, according to court documents.

Swallow, Shurtleff • The U.S. attorney's office for Utah began investigating Swallow in January 2012, according to affidavits. Later that year, the DOJ's Public Integrity Section joined the probe, which also included an investigation of Shurtleff.

Investigative documents show federal agents had plenty of questions about Swallow's business and political ties, but little interest in pursuing a case that might lead to Reid.

For example, in a March 12, 2013, interview of Swallow — by then Utah's attorney general ­— that involved FBI special agents Jon Isakson and Crystal Bowen, Swallow's then-attorney Rod Snow brings up the Reid matter and is brushed off. Snow tries again later, asking agents to let him know if they start building a case against Reid.

"Well, we got our hands full with this matter so—," Bowen said, according to a transcript.



Swallow's current attorney, Scott C. Williams, said nothing about the effort involving Rawle "represented a bribe of any sort" but instead was to be a lobbying effort.

However, Williams wrote in an email, "the transcript of the March 12, 2013, interview speaks for itself with regard to the FBI's lack of interest in truly investigating whether Mr. Reid had engaged in bribery activity on any occasion. Mr. Snow has previously been quoted in the media as stating that he did not believe that Mr. Swallow was a target of an investigation during the period when the interview was given. However, the FBI did nothing to seek information from Mr. Swallow that would go to whether Harry Reid had engaged in bribery activity with other persons. "

Also in March, Shurtleff, by then the former Utah attorney general, said he shared information about alleged bribes with a handful of Obama administration officials, including some in top DOJ posts. Shurtleff declined to name those officials.

"I don't know if they went back and told anybody," he said.

After raising the issues with agents and officials, Shurtleff finds that lack of federal interest puzzling.

"When the state attorney general comes in and says, 'This is hearsay, but I have been told these things, you should probably look into it,' " he said. "How do they ignore it?"

On May 6, 2013, the U.S. attorney's office for Utah withdrew from the Swallow-Shurtleff probe, leaving it in the hands of the DOJ's Public Integrity Section.

The same day, DOJ attorney Ed Sullivan participated in an interview of Shurtleff along with FBI agents Isakson and Bowen. Reid's name did not come up, according to a transcript.



Federal investigators at that time also didn't pursue the Reid allegations with Johnson. The businessman said that, until Rawlings and Gill picked up the Swallow-Shurtleff investigations — after the DOJ's Public Integrity Section ended its probe without charges in September 2013 — federal agents never sought to interview him.

"All the interviews I did were arranged by Rawlings" and defense attorney Ron Yengich, Johnson said. "FBI-DOJ never made any request."

In an email to the U.S. attorney's office, Rawlings asked why the feds failed to pursue alleged attempts to bribe Reid. "Johnson confessed to this," the prosecutor added. "There are recorded conversations about this."

Rawlings also has sought information on now-deceased top DOJ official David Margolis and agency attorneys who conducted the investigation in Utah. In one request, Rawlings seeks "any material concerning any relationship and/or communications" between Margolis and Reid.

DOJ spokesman Peter Carr declined to comment on the agency's handling of the investigations.

Federal agencies have provided Rawlings with millions of pages of documents related to their investigation of Shurtleff. But the Davis County prosecutor's repeated requests to get at information regarding Reid have been blocked, which ultimately helped tank his criminal case against Shurtleff, according to Rawlings' statements and court filings.

Rawlings said he has been told by federal authorities to "forget Harry Reid."



tharvey@sltrib.com

jdobner@sltrib.com

Where they are now

Jeremy Johnson • The St. George businessman was convicted in March of eight counts of making false statements to a bank, but a jury cleared him of 78 mostly fraud-related charges. He now is serving a 10-year prison term at a low-security California facility.

John Swallow • The former Utah attorney general, being prosecuted by the Salt Lake County district attorney's office, is scheduled for trial in Utah in February on a number of public-corruption charges.

Mark Shurtleff • The former Utah attorney general was prosecuted for public corruption-related crimes by the Davis County attorney's office, but the case was dismissed in July.

Ray Bitar and Nelson Burtnick • Prosecutors in the Southern District of New York made public a criminal indictment in April 2011 that swept up 11 individuals and three online-poker companies, including Bitar and Burtnick, formerly top officers in Full Tilt Poker. Bitar and Burtnick stayed out of the United States for more than a year after the indictment. Upon his return, Bitar — because of his need for a heart transplant, according to court records — reached a plea deal in which he dodged a prison term but was ordered to forfeit $40 million. Burtnick also reached a plea agreement and was ordered to forfeit $329,425. He was not sent to prison.

Sen. Harry Reid • The Nevada Democrat gave his farewell address to the U.S. Senate on Thursday night. In January, he retires after 30 years in office.

 

 

 

 

 

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