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The Federal Deposit Insurance Corp. has ordered a St. George bank to stop providing third-party payment services to companies controlled by philanthropist Jeremy Johnson, who has been sued for allegedly operating a giant Internet scam.
SunFirst Bank must "immediately cease" supplying processing services to Triple Seven LLC, Mastery Merchant LLC, Powder Monkeys LLC, Elite Debit and any other "associated account holders, customers or clients," according to a consent order the FDIC made public Thursday.
John Allen, president of SunFirst, declined to discuss the order, issued Nov. 9. It also instructed the bank to improve its policies and procedures dealing with consumer protection issues.
"I'd better not comment at this point," Allen said Thursday.
Elite is listed as a corporate defendant in a lawsuit filed earlier this month by the Federal Trade Commission. Johnson is president and sole officer of Elite, which was incorporated in Utah in December 2009.
Elite's address is in St. George, where Johnson lives. The company processes credit and debit card payments for products allegedly bought from I Works, another corporate defendant in the FTC suit.
The FTC did not name Triple Seven, Mastery Merchant and Powder Monkeys in its suit. Johnson, however, said Thursday he is associated with them, but isn't sure what they do.
"A whole bunch of different things. I don't even know off the top of my head," he said.
The FTC suit charged Johnson, nine other individuals, 10 corporations and 51 shell companies as being part of a "far-reaching Internet enterprise" that allegedly scammed consumers out of millions of dollars by charging them for products and services they never ordered.
Johnson is widely known in Utah. Earlier this month, he flew his own helicopter to supply residents stranded by floods in the St. George area.
When a massive earthquake struck Haiti in January, Johnson flew doctors, food and medicines into the devastated island. Later, he carried orphaned children to Florida, where they met their adoptive parents.
The FTC depicted Johnson as the linchpin of the scam. He has denied the charges.
Johnson and the other defendants allegedly lured consumers into trial memberships for bogus government-grant and money-making schemes. Their credit or debit cards were then repeatedly hit with monthly fees for the memberships, as well as other memberships they hadn't signed up for, the FTC said.
The FDIC steps into cases such as these to protect banks and consumers. Payments made by consumers with credit or debit cards are deposited into merchant bank accounts. If a cardholder is charged for something he didn't authorize, his recourse is to ask his credit card company to reverse the payment.
If the payment is reversed, the consumer's credit card company will seek to be reimbursed by the merchant's bank, which must pay the reversal. To do that, it will remove money from the merchant's account to settle the debt. But if the merchant's funds are insufficient, his bank must write off the loss. If there are lots of reversals, the bank can be seriously damaged.
In the Johnson case, hundreds of thousands of consumers sought reversals of charges to their credit cards and debits to their bank accounts, the FTC alleges.
The high number of reversals has landed the defendants in Visa's and MasterCard's charge-back monitoring programs and resulted in millions of dollars in fines for the charge-backs, according to the FTC.
The defendants created 51 shell companies to keep the scam going, the agency said.