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An accountant for businessman Jeremy Johnson's online marketing company told jurors on Friday that the owner of a California firm assured him the process of setting up new accounts for charging credit cards was open and "transparent."
Scott Leavitt, one of two co-defendants in a federal court trial along with Johnson, also said he was not involved in the decisions to open those accounts that are at issue in the case, but that he had been assured everyone who was directly involved knew about the process.
The testimony during the fifth week of the trial came during a day when U.S. District Judge David Nuffer called three "timeouts" as he and Leavitt's attorney clashed over some of the judge's decisions limiting evidence the defense wants to use.
Leavitt, of St. George, was the accounting department manager for Johnson's I Works Inc. Leavitt, Johnson and former I Works manager Ryan Riddle face 86 charges related to bank fraud for allegedly submitting false information that caused Wells Fargo Bank's agents to open accounts for use in charging credit cards after I Works' own bank accounts had been shut down because of a large number of chargebacks.
Leavitt, under questioning from his attorney Marcus Mumford, said he had not been involved in putting together the plan to create new corporations using the names and personal information of employees and family members that were used to apply for the new bank accounts.
He also said he had been reassured at a meeting with the owner of CardFlex Inc., the California company that opened the accounts on I Works' behalf, that the process was legitimate and CardFlex was aware of everything.
"I remember at that meeting, when he left I felt for the first time 100 percent that CardFlex knew what I Works was doing," Leavitt said.
His testimony and that of other defense witnesses is in contrast to that of Andy Phillips, the owner of CardFlex. Phillips testified that he did not know that I Works was setting up corporations using employees' names, and he opined that Johnson was not honest.
A Federal Trade Commission lawsuit against Phillips, CardFlex and others said they had helped or advised I Works to pursue the strategy for obtaining new accounts. Phillips said he settled that suit because it was cheaper than fighting it and the settlement says he did not admit to the allegations. I Works and Johnson also were sued by the FTC; that case is set for trial in July.
Mumford tried to ask Leavitt questions about reserve moneys that were maintained with each account in order to pay off any chargebacks or fees that might have occurred. But Nuffer cut off that line of questioning, saying he didn't see how it was relevant.
Then Mumford tried to introduce as evidence IRS 1099 forms, an I Works accounting ledger and exhibits Leavitt had produced himself to show the movement of funds. But Nuffer declined to allow those in the trial, saying the documents hadn't been produced to the prosecution in a timely manner as required.
Mumford then tried to argue that the 1099s were in the IRS possession and IRS agents had testified at the trial. After Nuffer affirmed his ruling, Mumford said the government had "destroyed" I Works' records.
"Let's take a minute," Nuffer said — the second "timeout" he had ordered that day.
The courtroom was silent for a minute until Nuffer restarted the proceedings. The same thing happened later in Leavitt's testimony when Nuffer declined to allow other evidence that Mumford tried to get into the record, arguing that it would correct errors in government exhibits prepared by the IRS agents.
One lighter moment came when Riddle was trying to question Leavitt about whether the I Works managers had been open about what they were up to.
Nuffer upheld a number of objections by a government prosecutor until Riddle asked, "Mr. Leavitt, who didn't know about this mass conspiracy?"
With a smile on his face, Nuffer also tossed out that question.
Nuffer is trying to bring the trial testimony and arguments in the trial to a close by the end of next week, though it's uncertain whether he'll accomplish that.
Riddle and Johnson may also testify on their own behalf.