Federal Trade Commission officials claim they have shut down an Internet scam that duped hundreds of thousands of people into providing their credit and debit card information and forcing payment for things they did not purchase.
Jeremy Johnson and brother Andy Johnson, and Duane Fielding, all of St. George, Utah, are named in a federal complaint filed this month in Las Vegas. Also named are dozens of shell companies they are alleged to have used to steal a staggering $275 million.
Jeremy Johnson lives a lavish lifestyle and owns helicopters, planes and two huge houseboats, FTC officials said.
"This is one of the largest ones out there," FTC attorney Collot Guerard said. She said the Internet is chock full of similar scams, but none approaches the scale of this case.
In the past, the Department of Justice has filed criminal charges against defendants in FTC civil cases. No criminal charges are pending in this case.
According to the Trade Commission's case summary, the defendants "operate a far-reaching Internet enterprise that deceptively enrolls unwitting consumers into memberships for products or services and then repeatedly charges their credit cards or debit funds from their checking account" without their knowledge or authorization, an unfair and deceptive trade practice.
A common lure offered "free" information on how to get government grants or start an Internet business for a shipping and handling fee of $2.99 or less. The consumer would later discover major fees on their credit card bill, according to the complaint filed in federal District Court in Las Vegas.
On Tuesday, U.S. District Judge Roger Hunt froze the assets of all defendants and set pretrial hearings for Feb. 10. Guerard said Jeremy Johnson might have taken about $48 million from his company, I Works Inc., before the federal government could request the freeze.
Major credit card companies reported the scams after hundreds of thousands of consumers complained. MasterCard and Visa have programs that monitor charge backs and excessive requests to remove improper charges.
Guerard said the Securities and Exchange Commission in 2000 reached a settlement that included heavy fines for Johnson and his company, and cancellation of his Internet merchant accounts.
The FTC alleges Johnson created scores of shell companies, many with Las Vegas addresses, faster than the government could close merchant accounts. Among the corporate defendants are Cloud Nine Marketing, a Nevada corporation with a mail drop at 2232 S. Nellis Blvd.; Internet Economy Inc., which ran Grant Search; Network Agenda LLC; Big Bucks Pro Inc.; Bottom Dollar Inc.; Bumble Marketing Inc.; and Business Loan Success LLC. Addresses used were in Reno, Carson City, Sparks and Henderson.
Johnson also operated in Delaware, New York, Oklahoma, Utah and California.
All were linked to Johnson and his company, I Works, which he founded in St. George in 2000. The defendants are not charged with theft. FTC officials accuse them of violating the Federal Trade and Electronic Fund Transfer acts.
"Defendants' misrepresentations, deceptive omissions and unfair billing practices have generated more than $350 million in sales," read the complaint. "Consumers have suffered and will continue to suffer substantial injury."
Credit card companies reimbursed about $75 million to victims, but more than $275 million remains unpaid.
According to court papers, the defendants' led people to believe "tax-free grant money" was easily obtainable while grants to individuals are not.
The Internet startup scam "promises that consumers can generate large amounts of income" through advertising, rebate programs and eBay-style auction sites.
Once a consumer signed on to get more information for a small shipping fee, the defendants would "immediately enroll their victims in plans for online memberships." The consumer would then get hit with "unauthorized" and "significant" one-time or recurring charges.
Contact Doug McMurdo at email@example.com or 702-224-5512 or read more courts coverage at lvlegalnews.com.