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A witness in the trial of St. George businessman Jeremy Johnson told a federal court jury on Tuesday that he didn't know Johnson was behind a series of companies prosecutors allege were set up to defraud Wells Fargo Bank.
But then Will Swaim, the former operations director of a California company called CardFlex Inc., also said under cross-examination that he didn't notice that the owner of 90 of the 281 companies at issue was the manager at Johnson's online marketing company I Works, whom Swaim dealt with most of the time.
Swaim's testimony came during the fourth week of the trial of Johnson and two former I Works employees on 83 charges related to allegations they defrauded Wells Fargo Bank through accounts that were set up by CardFlex.
The government alleges that in 2009 and 2010 the defendants created companies under the names of employees, family and friends to hide Johnson's involvement in order to obtain new bank accounts after I Works' accounts were shut down because of a large number of credit card chargebacks.
Swaim's testimony could prove key because Johnson and co-defendants Ryan Riddle and Scott Leavitt have argued that CardFlex knew full well that Johnson and I Works were behind the companies and even offered the blueprint that led to their creation.
Swaim testified that he and another CardFlex official visited I Works' headquarters in St. George in early 2009 and were told that the I Works business model would be changing. The company's products were to be sold by independent businesses with I Works providing support services, such as hosting websites and setting up credit card processing, Swain said.
Assistant U.S. Attorney Jason Burt, one of four government prosecutors on the case, asked if Swain ever told I Works to submit false information on an application for a credit card processing account.
"Never," Swaim replied.
"We're not allow to set up shell companies," he added, calling such an arrangement "not real, it's phony."
Swain said he interpreted Johnson's personal guarantee on the account applications as only meaning that Johnson was helping the new companies get started.
I Works' manager Loyd Johnston was listed as a contact on the applications, but Swaim said he believed that was because I Works was providing services to the new companies, and not that I Works owned them.
Riddle, who like Johnson is acting as his own attorney, asked Swaim on cross-examination whether he noticed that Johnston's name as the company owner was on applications for 91 of the 281 companies.
"I don't recall," Swaim answered.
Another witness, Barbara McIntosh of First Data Corp., a credit card processor that worked with CardFlex, testified that it was important to know the real operators of a company "to ensure you are doing business with the right party."
But she also admitted the CardFlex had the full authority to approve companies for credit card processing.
Tensions in the courtroom continued at a low boil over what the defendants can bring in as evidence at the trial.
Prosecutors have continually objected to certain questions, many of them in areas prohibited by pretrial orders issued by U.S. District Judge David Nuffer. On Monday, one count showed 205 objections to defense questions, most of them sustained by Nuffer.
On Tuesday, Nuffer warned attorney Marcus Mumford several times not to stray into those areas and not to repeat questions to which Nuffer had already sustained objections.
Johnson filed a motion late Monday asking Nuffer to revise a pretrial ruling that prohibits the defendants from seeking information on whether Wells Fargo had lost money because of the credit card processing accounts linked to I Works.
Johnson argued that prosecutors had solicited testimony at the trial that purported to show that Wells Fargo had incurred various fines or fees as a result of the chargebacks. But Johnson wrote that he was not allowed to cross-examine witnesses about those issues and that such an examination could show that I Works paid all fines and fees out of I Works funds set up in reserve accounts.
Nuffer's continued prohibition of that line of questions violates his Sixth Amendment rights to confront witnesses brought against a defendant, Johnson wrote.
The government can't solicit testimony about bank losses on the one hand and then on the other use the court's order to prohibit cross examination on those issues, Johnson argued.