George Orwell once said that "a humanitarian is always a hypocrite." In the case of Jeremy Johnson, the government is also trying him as a criminal.
Johnson, a Utah businessman who flew his own helicopter to deliver food and supplies to Haitian children after the 2010 earthquake, is being accused by the FTC of perpetrating one of the largest marketing frauds in United States history. The New York Times has a fascinating profile this week on Johnson, who was known for benevolent acts like rescuing lost hikers with his helicopter and sheltering families fleeing polygamy. When Johnson flew to Haiti, he gave away even the shoes off his feet, flying home in just his Paul Smith socks.
But according to the government, he also swindled more than $275 million from customers of his company, I Works. His (now-shuttered) online company promised to assist in the securing of government grants, but also signed customers up for pricey subscription services.
The government is accusing Johnson of tricking customers into providing their credit card numbers to I Works, which he would then recharge monthly through a variety of connected entities with names like Grant Search, Center 4 Grants and Business Fund. While this type of "negative option" or "advance consent" marketing — where customers must opt out within a time window to avoid recurring charges — can be legal, prosecutors say Johnson failed to adequately disclose to customers that they were ever signing up for these subscription services in the first place.
The FTC became involved after credit card companies began noticing high rates of chargebacks (customers seeking to reverse charges) associated with Johnson's companies. According to the Times, when more than 1 percent of charges become chargebacks, credit card companies will blacklist the offending company. The government says Johnson eventually maintained more than 50 shell companies in an effort to ensure the banks would process the charges.
"They had no employees, they had no office locations, they were mail drops" said Collot Guerard, the lead FTC attorney on the lawsuit, told the Salt Lake Tribune when the charges were first brought. "They were essentially fronts and they didn't have any substance to them other than lending their name to obtain a new merchant account when Jeremy Johnson and I Works were no longer able to get merchant accounts."
However, Johnson, a six-foot, red-haired, 34-year-old, contends that the FTC is engaging in serious misconduct. He claims that the government has frozen his assets in an attempt to prevent him from adequately defending himself, and says that his company is no different than the myriad of legal opt-out subscriptions, like those offered by American Express, among others. Johnson has also registered multiple URLs and email addresses like http://evilftc.com, that detail his defense against the governmental allegations. Johnson claims he took a polygraph when the charges were first leveled that exonerates him against the charges.
Although Johnson has made it clear that he is not interested in settling with the government, he's been publicly barred from commenting on the case since May. In the meantime, a receiver company has racked up $3.9 million in fees and expenses trying to trace Johnson's assets through his various companies.
[NYT, photo via AP]