Scams leave teacher, others paying for more than they wanted

In retrospect, Nicky Miller never had a chance. She thought "free" meant "free."

The Minden special education teacher today operates a center for children with learning disabilities in the Northern Nevada town, but back in 2008 she was looking for a funding grant to help offset the startup costs of her school.

Like so many others, Miller took to the Internet and began searching. And like so many others, she found an inviting website that held out the possibility of applying for and receiving federal funding to make her dream of running her own small school for kids with learning disabilities come true.

The site asked the question, "Will A New President Change The Federal Grant System?" It featured a photograph of President Barack Obama and touted the information to be found in its materials and the official sounding Your Federal and Private Grant CD. 

Best of all, it was absolutely free.

All she had to do was pay $2.29 for shipping and handling. She entered her debit card number, and a few days later a small package arrived at her door.

The material was anything but official. It was too general to help her create her own 501(c)3 nonprofit. It appeared her search for answers would have to continue, but at least she hadn't lost anything in the exchange, right?

Wrong.

When she punched in her debit card number, Nicky Miller inadvertently fell down a rabbit hole and into the world of alleged Internet mega-scammer Jeremy Johnson. When Miller studied her bank statements a few months later, she discovered that the unhelpful CD had been anything but free.

There were charges for a "Grant Search" that cost $39.95, one for WWW5013Cdotcom for $37.50, another $39.95 charge from thecenter4grants.com, and on it went. Total damages: $221.52 in bogus programs and another $245 in bank overdraft fees.

Although Miller's complaints led to partial refunds, she lost money and time.

"I felt like I had been scammed," Miller said in a sworn statement in November 2010. "I thought I ordered a free CD with information about how to obtain a grant for $2.29 shipping and handling. Instead, I was unwittingly enrolled in three different membership programs and charged an additional $221.52 without my authorization."

Miller had been victimized by what insiders call "upsales." Once an Internet boiler room operator gets a debit or credit card number, he's off to the races with what appear to be charges related to the promotional product. In reality, it's all about the upsale.

Around these parts, IRS investigators and other federal authorities consider St. George, Utah, resident Johnson the latest king of upsales. Johnson is being held without bail in Utah on federal fraud charges. He's also the focus of a Federal Trade Commission civil suit.

How big is his business?

In the September 2010 deposition in an FTC case, convicted Internet con man Kyle Kimoto recounted a conversation he'd had aboard Johnson's private helicopter. Johnson admitted his grant funding operation was attracting from 500 to 15,000 sales per day. Estimated annual gross upsales: as much as $200 million. The FTC alleges in its Las Vegas-based civil case filed in December that Johnson's iWorks company scammed thousands of consumers out of an estimated $350 million.

In Utah, however, Johnson is also known for his charitable giving, volunteering his aircraft for search, rescue and relief missions from St. George to Port-au-Prince, Haiti, and for his generous political support and intimate friendship with the state's attorney general, Mark Shurtleff.

You may also recall Johnson's name from the fraud and money laundering case involving Internet poker site promoters Absolute Poker, Full Tilt Poker and PokerStars.

Johnson is alleged to have offered to use his connections inside the Utah banking community to help arrange to launder hundreds of millions in player winnings.

While Nicky Miller and many thousands like her won't recover their losses, they stand a good chance of seeing one alleged Internet fraud king knocked off his throne.

John L. Smith's column appears Sunday, Tuesday, Wednesday and Friday. Email him at Smith@reviewjournal.com or call 702-383-0295. He also blogs at lvrj.com/blogs/Smith.