Regulators go after another Utah attorney general donor
By Robert Gehrke
The Salt Lake TribuneFirst published Jan 16 2013 08:03PM
Federal regulators recently swept in seeking to shut down The Tax Club, alleging the business had scammed customers out of $220 million since 2008 — the latest in a growing list of generous donors to former Utah Attorney General Mark Shurtleff and his successor, John Swallow, who have been accused of cheating customers.
The Federal Trade Commission lawsuit, filed last week in federal court in New York, says that The Tax Club, which got its start in St. George but exploded into a profitable business with offices on the 60th floor of the Empire State Building, promised customers individualized business consulting.
What customers allegedly got instead were boilerplate documents and almost immediate pressure to buy more and more expensive products.
"The defendants promise, but fail to deliver, customized tax advice, personalized business planning and individualized business credit counseling," the suit alleges, adding that once customers are hooked, they receive repeated follow-up sales calls for products costing thousands of dollars. "The products and services sold by The Tax Club Enterprise give little or no substantive guidance or assistance."
It has become a recurring storyline as the affluent direct-marketing companies that poured tens, if not hundreds of thousands, of dollars into the campaigns of Shurtleff and then his former fundraiser and handpicked successor, Swallow, run afoul of federal regulators.
The Tax Club and its various associated businesses contributed more than $165,000 to Shurtleff since 2008, campaign finance records show. Swallow brought in another $30,000 from The Tax Club’s network last year.
Utah is one of the few states with no limits on how much individuals or corporations can give to candidates.
David Irvine, an attorney who works with Utahns for Ethical Government, said his group is renewing its push for campaign-contribution limits and emphasized it’s high time that the state take the proposal seriously.
"This is exactly the kind of thing that indicates there is a huge, huge problem," he said. "It’s just crazy to think that contributions on the magnitude of $50,000, $60,000, $100,000, $200,000 don’t corrupt the process. They really, really do."
Recently, regulators have cracked down on some businesses that have, through the years, given more than $455,000 to Shurtleff’s political campaigns.
Most notable is I Works, founded by Jeremy Johnson, the embattled businessman who alleges Swallow helped broker a $600,000 bribe to enlist Senate Majority Leader Harry Reid to thwart the FTC case against I Works.
Reid has disavowed any knowledge of Johnson’s case, and Swallow has repeatedly denied Johnson’s claims, calling them false and defamatory lies from a desperate man.
Johnson and his various affiliated business interests, partners and family members contributed more than $230,000 to Shurtleff from 2008 to 2010, when the FTC froze Johnson’s assets.
Johnson also supported various charities in which Shurtleff was involved. Photographs from 2009 show Shurtleff and Johnson grinning aboard Johnson’s private jet and Shurtleff behind the wheel of Johnson’s bright yellow Lamborghini sports car.
It was a well-known practice among Utah’s booming call-center industry, said former business owner Ryan Jensen, that if you wanted to thrive, you had to give money to Shurtleff and, after that, Swallow.
Jensen’s business was the target of an investigation by the Utah Division of Consumer Protection. He attended a Swallow fundraiser last year but did not contribute money.
"When we first got into this, in 2007, we were told from a group [in the industry] … ‘Get some money together and we’ll get you a round of golf with Shurtleff and you’ll be fine,’ " Jensen said. "All through my career in this industry, I’ve been told, ‘Get with Shurtleff, get with Shurtleff.’ "
Neither Shurtleff nor The Tax Club responded to a request for comment.
Many in the industry have opened their wallets for both Shurtleff and Swallow.
In September, Google Money Tree — which is not affiliated with the search engine — agreed to return $2 million to customers after the FTC alleged it had made unauthorized charges to customers’ credit cards.
The company behind the scam had contributed $30,000 to Shurtleff.
A month earlier, a federal judge had issued a $478 million judgment against a group of companies, including Mentoring of America, that had marketed a fraudulent "get-rich-quick" scheme.
Mentoring of America had given $30,000 to Shurtleff as well.
Other so-called mentoring programs have given tens of thousands of dollars to Shurtleff, much of which came in after he had declared he was not seeking re-election.
Shurtleff, in turn, poured money into Swallow’s campaign. Swallow spent more than $1.1 million on a race that he won by a 34 percentage-point margin. His challenger, Democrat Dee Smith, spent less than $67,000.
Attorney General spokesman Paul Murphy said Wednesday the fundraising is a campaign issue and referred calls to Swallow and Shurtleff’s campaign consultant, Jason Powers, who could not immediately be reached for comment.