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SALT LAKE CITY — In a brief opening statement Tuesday, former St. George multimillionaire Jeremy Johnson told jurors his defunct online company was transparent in its dealings as it set up a web of shell corporations to navigate a crush of credit card chargebacks.
Johnson told jurors that iWorks was straightforward with CardFlex, the California-based card processing company it began working with when his company came up against steady demand for refunds.
Johnson, who is representing himself in the federal fraud trial that has been five years in the making, had deferred his opening statement when the proceedings began four weeks ago. On Tuesday he took about 10 minutes introducing his case, which he says disputes testimony he was out to con the people he was working with. The prosecution rested its case on Monday.
Johnson claimed that his company was working jointly with CardFlex to set up a web of shell companies to process credit card transactions and insisted he and his business partners did nothing wrong.
"We did not hide or disclose the issues we were having, and we worked hard to solve them," said Johnson, who is also a key figure in the public corruption cases against former Attorneys General John Swallow and Mark Shurtleff.
Shane Fisher — a former agent of CardFlex through his own company, Blaze Processing LLC — testified Tuesday that CardFlex was aware from the beginning of its relationship with Johnson that iWorks was having issues with large numbers of credit card chargebacks and that the planned response was to open shell corporations.
By the end, Fisher said, the operation was "very, very large," dealing with "a massive amount of corps."
On cross-examination, assistant U.S. attorney Michael Kennedy questioned Fisher about emails implying CardFlex representatives weren't aware of the full scope of iWorks' operation. He also brought up Fisher's contract with the company saying that he, as an agent, would only offer merchant services to bona fide businesses.
Fisher maintained that CardFlex representatives had told him to have Johnson's company establish corporations under different names.
Kennedy noted that Fisher and his company faced their own charges from the Federal Trade Commission for their involvement in iWorks. The case was settled in 2014 and Fisher was barred from acting as a payment processor for any third parties. He now operates a hair salon in Idaho, he said Tuesday.
Johnson and two former business partners, Ryan Riddle and Scott Leavitt, are fighting an 86-count indictment alleging conspiracy, bank fraud, wire fraud and money laundering in connection with Johnson's once prosperous Internet marketing company, iWorks.
Prosecutors say that, crushed by a flood of credit card chargebacks that prompted banks to start closing iWorks' accounts, Johnson and his partners opened 37 shell corporations to do business through and keep the company from buckling. The shell companies were set up in the names of employees, family or friends, then were used to set up merchant accounts at Wells Fargo through brokers to process iWorks customers' credit card transactions.
One of those companies, Net Fit Trends, was set up in the name of Megan Spurling, iWorks' customer service manager at the time. Spurling was the first witness to take the stand for the defense, testifying that she and others were informed iWorks would be opening merchant accounts in their names, and then would take over handling paperwork and managing the account.
Kennedy pressed Spurling on whether she fully understood how her name and information would be used, including establishing the Net Fit Trends corporation, filing tax documents and opening associated bank accounts.
"Did you understand what you were doing here?" Kennedy asked.
Spurling said she did not.
Riddle, who is also representing himself in the trial, asked Spurling whether she ever felt pressured to sign any documents. Spurling said she did not.
At the conclusion of the trial, Johnson will turn around and defend himself in a parallel civil trial regarding iWorks in Las Vegas set to begin March 28.
Johnson had attempted to call Swallow and Shurtleff — who are accused of trading favors during their time in office for preferential treatment — as witnesses in his trial because he claims they had once declared his business legitimate. But U.S. District Judge David Nuffer barred him from mentioning the two former attorneys general.
Last month the Federal Elections Commission named Swallow in allegations that in 2009 Johnson made illegal campaign contributions to Shurtleff, Sen. Mike Lee, R-Utah, and then-Senate Majority Leader Harry Reid, D-Nevada.
