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St. George businessman arrested in Phoenix on mail fraud charge

Published June 11, 2011 11:35 pm

Courts • Man could face $250K fine, 20 years in federal prison.
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Federal agents on Saturday arrested a St. George businessman accused of illegally sending products through the mail to defraud thousands of customers.

U.S. Internal Revenue Service agents arrested Jeremy David Johnson at the Phoenix airport as he was en route to Costa Rica where he owns a home, charging documents state. He faces one count of mail fraud, a charge that carries a possible sentence of 20 years in federal prison and a fine of $250,000.

The government alleges Johnson and his now-defunct online company, iWorks, illegally sold CD-ROMs through the mail that showed people where and how to apply for government grants to help them pay for personal expenses. Johnson and iWorks also allegedly participated in search-engine-based money-making schemes and used fake testimonials to promote numerous other products, the complaint states.

The alleged scheme, according to the complaint, involved customers purchasing a trial-free "core" product from iWorks for a nominal shipping and handling fee. Because of the purchase, customers were often automatically enrolled in membership programs that resulted in recurring charges on their credit cards or them being sent additional products they were charged for without their consent.

The scheme allegedly duped hundreds of thousands of customers and made it difficult to receive refunds from iWorks when complaints were filed, charging documents state.

The complaint also states Johnson and iWorks started "shell companies" when payment processing companies began canceling their services due to large numbers of charge-back requests. The shell companies were allegedly created to continue a working relationship with the payment processing companies so Johnson and iWorks could continue to sell products.

In February, a federal judge in Las Vegas ordered iWorks' and Johnson's assets frozen. The preliminary injunction extended provisions imposed the month before, including one that Johnson and other defendants named in a civil suit restrain from dabbling in marketing, advertising or other business practices involving the Internet.

Earlier this year, the Federal Trade Commission alleged Johnson defrauded consumers out of $270 million, $50 million of which was used to maintain a lavish lifestyle.

Charging documents filed in the new mail fraud case state Johnson often travelled internationally and lived part-time in Costa Rica. He has access to helicopters and other vehicles. He also has "substantial resources" in other countries, including real estate in Belize and the Philippines.

Johnson is well-known in southwestern Utah for flying his helicopter for wilderness rescues and searches. Last year, he flew supplies into earthquake-ravaged Haiti and helped rescue orphans.

Johnson is expected to make his first appearance in federal court on the mail fraud charge Monday in Phoenix.







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