As his industry faced scrutiny, Utah lawmaker donated to Swallow
State senator’s firms gave to soon-to-be A.G., seen as friend to finance-coaching industry under intense federal scrutiny.
Published: June 2, 2013 02:25PM
Updated: December 7, 2013 11:32PM
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Steve Griffin | Tribune file photo Former Utah Attorney General John Swallow helped raise money for Sen. Mike Lee during his 2010 campaign, including enlisting help from indicted businessman Jeremy Johnson.

When state Sen. Aaron Osmond and colleagues in the build-your-personal-wealth industry believed they needed a friend in Utah government, they turned to John Swallow — and in a big-money way.

Osmond’s companies — he was CEO at several — donated $100,000 in 2011 to Swallow’s successful attorney general campaign. That amount represents the campaign’s largest cluster of contributions, not counting the cash from Swallow’s predecessor, Mark Shurtleff, and Republican Party entities.

Osmond was hardly alone, though. A Salt Lake Tribune analysis of donations of $5,000 or more shows the “financial education” industry, one plagued by consumer complaints and regulatory crackdowns, gave the most to Swallow: $205,000.

The South Jordan lawmaker concedes the donations came at a time when federal authorities had what he called a “hyper focus” on an industry that sells expensive materials, courses and coaching on real estate, stock market and other investing strategies.

Some Utahns in the industry wanted to head off tighter federal scrutiny through self-policing, an approach Osmond said Swallow supported. But he insists no promises were made in exchange for the campaign contributions.

“I never had any inference from John,” Osmond said, “about any kind of, ‘If you’re going to be in trouble, we’ll take care of you.’ ”

Three Utah businessmen have said that Swallow, as a fundraiser for Shurtleff in 2009, had suggested that a donation to Shurtleff’s campaign would win them special consideration if complaints arose about their operations to the attorney general’s office.

Swallow’s $1.4 million campaign collected $279,000 from the Republican State Leadership Committee and the state GOP. Shurtleff’s political action committee, Utah’s Prosperity Foundation, kicked in $262,000.

Nearly 62 percent of Shurtleff’s $1.9 million in donations from 2008 through 2012 came from individuals or companies with ties to online marketing, multilevel marketing, telemarketing, financial coaching, payday loans or alarm companies — all of which frequently draw attention from consumer watchdogs.

The Tribune analysis shows a similar breakdown in Swallow’s donations, with nearly 83 percent of contributions of at least $5,000 coming from those types of companies (leaving out the funds from the party and Shurtleff’s PAC).

For instance, one top Swallow donor, Vivint, a home-alarm and house-system-management company that in the past, as APX Alarm, had been subject to various consumer complaints.

Multilevel marketers also appeared among Swallow’s leading contributors, including Nu Skin International, a distributor of personal-care and nutritional-supplement products, and 4Life.

Critics contend MLMs operate much like pyramid schemes because they depend upon sales to independent distributors, many of whom soon drop out when they find they largely lose money.

The Tax Club, another top Swallow contributor, was sued by the Federal Trade Commission along with Florida and New York in January for allegedly using deceptive sales practices and failing to deliver services as promised in taking more than $200 million from U.S. consumers since 2008.

Leading donor Nathaniel Merrill is CEO of FortuneBuilders, which coached people on making money in real-estate deals. FortuneBuilders now carries a top Better Business Bureau rating after changing advertising ­— which the BBB previously described as deceptive — about earnings its customers could expect. But a related company, EMI Encore Marketing, received an F grade after 347 consumer complaints.

Another Swallow contributor, Professional Marketing International, or PMI, offers coaching and training on investments. It and related companies have had numerous consumer complaints. PMI is named in the lawsuit against The Tax Club.

Swallow donor Robert A. Lichfield runs the controversial World Wide Association of Speciality Programs and Schools that operates treatment programs for troubled teens. Its programs have faced allegations of physical and psychological abuse and has been the subject of lawsuits.

Armando Montelongo, another contributor, sells real estate investment courses and materials. He is best known for his appearances on the TV show “Flip This House.” He entered into a voluntary compliance agreement with Texas in 2011 over his sales practices.

Swallow’s campaign consultant, Jason Powers, said that all contributions were “legal and properly reported by the campaign.”

“There was no conflict with those donations,” he wrote in an email. “Those companies’ business operations in Utah are directly overseen by the Department of Commerce, which reports directly to the governor’s office, not the attorney general.”

The attorney general’s office is, however, legal counsel to the Department of Commerce and would prosecute cases.

Critics — including state Sen. Todd Weiler, R-Woods Cross, who is pushing to have Utah’s attorney general appointed rather than elected — have questioned why Swallow and Shurtleff were getting such large amounts from these businesses.

“I can’t reconcile that,” Weiler has said, “unless the donors are expecting, maybe, that person can offer them something in return.”

That didn’t happen in his case, according to Osmond. He said his companies — he has since resigned and is now a vice president at Certiport — were looking for a friend in state government after federal regulators indicated they were going to clamp down on the “financial education” industry.

“Our primary interest in John,” Osmond said, “was he was pro-business, supportive of our industry, someone who would help us figure out how to manage the interference with the federal government to work through those regulatory issues.”

Similar donations were not given in the gubernatorial race because that was seen as a lock for Republican incumbent Gary Herbert, Osmond said, and the owner of his companies, Joseph Johnson, did not want to contribute to local races.

Still, the companies helped raise funds for Sen. Mike Lee’s campaign and former state lawmaker Carl Wimmer’s unsuccessful congressional push, though Osmond said they did not donate any money.

Osmond said he was introduced to Swallow by Shurtleff confidant Rob Stahura, whom Osmond had hired as vice president of sales at one of the companies where he was CEO. Stahura also previously had a role at Mentoring of America, a coaching business and Shurtleff donor cited numerous times by regulators.

Osmond called Stahura a “key influence” in the decision to help Swallow.

“Ultimately, I made the formal recommendation that supporting John as a candidate was good for Utah and for our industry,” Osmond said. “The owners then had to decide on their own to donate or not.”

Powers, also a former campaign consultant for Shurtleff, ran Osmond’s campaign for the state Senate. But Osmond said “in no way was any donation to John Swallow tied to Jason’s involvement as my campaign manager.”

Swallow accepted contributions from a number of companies that had been cited for violations. Osmond said the companies of which he was CEO or affiliated with — Real Estate Investor Education, Booker T. Equity, Coventry Acquisition Group, Intelligent Wealth and Investor Brokerage Solutions — were largely clear of unresolved consumer complaints while he was CEO from July 2007 to January 2012, when he built them up to $30 million in annual revenue.

But Real Estate Investor Education, which did business as WealthRock, was slapped with a cease-and-desist order from the Utah Division of Consumer Protection. One of the complaints came before Johnson bought the company and before Osmond became CEO from a customer who bought a real-estate investment program for $25,000.

In responding to the complaint, Osmond made promises he knew the company was unlikely to keep since it was in shaky financial condition, the judge ruled.

The Division of Consumer Protection cited the company for failing to provide services and materials for which customers had paid, conducting telemarketing without registering those activities with the state and making untrue statements during calls.

Osmond defended his record as CEO, saying during his time there were no outstanding complaints with the Division of Consumer Protection or the attorney general’s office and said that the company maintained a B or A rating from the Better Business Bureau.

Soon after Osmond left Real Estate Investor Education, it went out of business.

tharvey@sltrib.com

Twitter: @TomHarveySltrib

Allegations against Swallow and Shurtleff

Utah Attorney General John Swallow and predecessor Mark Shurtleff have come under scrutiny on a number of fronts:

Bribery allegation • Indicted St. George businessman Jeremy Johnson has, at times, accused Swallow of helping to arrange to bribe Senate Majority Leader Harry Reid, D-Nev. Swallow says he only helped Johnson set up a lobbying deal.

Special consideration? • Three Utah businessmen have said Swallow, as a fundraiser for Shurtleff in 2009, suggested that a contribution to Shurtleff’s campaign would get them special consideration if there were complaints about their operations to the attorney general’s office.

Rules violation? • A complaint has been made to the Utah State Bar by the state’s former director of consumer protection, alleging Swallow violated attorney-client rules by discussing a consumer-protection case with a potential donor and suggesting the target meet with Shurtleff.

Withholding information? • The lieutenant governor’s office is in the process of hiring a special counsel to investigate a complaint that Swallow concealed business interests on his candidate financial disclosure forms, including a company central to the Johnson deal.

Posh vacations • Convicted businessman Marc Sessions Jenson said Swallow and Shurtleff took posh vacations to his Newport Beach, Calif., villa on Jenson’s dime while he was free on a plea deal with the attorney general’s office. During the trips, Jenson said they pressed him for fundraising help and other financial deals.

$2 million solicitation? • Businessman Darl McBride provided a recording of a 2009 breakfast meeting in which Shurtleff offered him $2 million to take down a website criticizing Mark Robbins, Jenson’s former business partner. Shurtleff said he could get the money from Jenson because of his plea deal. Jenson said he refused.