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A federal judge has removed St. George businessman Jeremy Johnson from control over companies that he has been accused of using to carry out a massive Internet-based fraud that took in hundreds of millions of dollars.
U.S. District Judge Kent J. Dawson of Nevada also issued a temporary restraining order that froze all assets of Johnson, his I Works companies and related entities.
Calls and e-mails to Johnson and his attorneys seeking comment were not returned Thursday. Phone calls during business hours to I Works corporate headquarters and a customer service number were answered with a recording saying the company was closed.
In a lawsuit filed last month in Las Vegas, the Federal Trade Commission alleged Johnson, I Works and 60 related entities "tricked consumers into providing their credit and debit card billing information and then repeatedly billed these customers for memberships in various websites they never agreed to join."
The websites touted products for "make-money schemes," "stay-healthy programs" and information about government and private grants that purportedly could be used to pay personal expenses, the lawsuit said.
Johnson has denied the allegations, calling them "absolutely not true."
Since 2006, Johnson's companies took in more than $350 million from sales, but returned about $75 million to customers who complained to their credit or debit card companies, while keeping more than $275 million, according to court records. "At its height, the scheme was ensnaring 15,000 consumers per day," the FTC said.
Johnson has received more than $48 million in salary and other distributions since 2006, the FTC said.
The temporary restraining order prohibits Johnson and the companies from using, disposing or altering his and the companies' assets.
Robb Evans & Associates, a California company with an office in Las Vegas, was appointed the temporary receiver. The firm assumed control of the companies and has the ability to remove any company officer or employee. It also takes control of all assets and documents.
Dawson signed the temporary restraining order last week, but it was not made public until Wednesday.
According to the lawsuit, Johnson's companies used false testimonies to advertise products and misrepresented such things as the availability of federal grant monies. One advertising e-mail, with a mail "drop box" set up by Johnson, promoted a "Grand Funding Toolbox" with a subject line reading "Pres Obama wants to give you Free Cash," court documents said.
Consumers who gave credit or debit card numbers for what was supposed to be a minimal handling charge, usually $1.99, also were charged a one-time fee of $189 then monthly fees of $59.95, according to the suit.
About 500,000 consumers — an "astronomical" number according to the FTC — asked for refunds. When customers sought these so-called charge backs, the agency said, they were told they could be placed on a list of bad consumers on BadCustomer.com, which "will result in member merchants blocking [the consumer] from making future purchases online!" BadCustomer.com is owned by Johnson and I Works, court documents say.
When credit card companies cut off many I Works accounts because of the large number of charge backs, Johnson created dozens of shell companies to open new card processing accounts, the lawsuit said.