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Intabill, the Australian payment-processing company, collapsed in late 2008. The poker outlets were out millions, and the FBI continued to seize their monies in U.S. accounts.
Johnson and his I Works company were stressed, too. Banks were closing I Works accounts and placing it on a black list because of its high volume of chargebacks from customers, a trend that eventually led to a lawsuit by federal regulators.
The poker companies, Johnson and his partners told SunFirst about their new plan for processing online poker payments: Be upfront. Be transparent. Their argument: Online poker wasn’t gambling. It was a game of skill, not chance. Thus, taking payments from it wasn’t illegal, they said, if the processors were truthful in telling banks where the money originated.
Johnson and Elie, along with Elie’s processing partner, Andrew Thornhill, approached John Campos, vice chairman of SunFirst, with their idea. They reached an agreement to process poker payments in exchange for a $10 million investment in the bank.
Elie stepped into the background to become a "silent partner" in the SunFirst venture after the FBI seized funds from accounts he set up at New York’s Fifth Third Bank.
In September 2009, Elie forwarded to Johnson a 28-page opinion from Ian J. Imrich, longtime Los Angeles attorney for Full Tilt Poker, arguing why online poker was legal in the United States — with a brief mention of Utah that cited a 1928 case.
Johnson forwarded the document to Campos, who sent it to others at SunFirst. It made its way to the bank’s Salt Lake City attorney, Scott Clark. (No relation to Logan businessman John Scott Clark.)
"I cannot conclude that Utah law would deem poker, if played for money or credits, would be a game of skill only," wrote Clark, who warned that "proceeds from gambling in possession of the bank would be subject to seizure or forfeiture if the Utah court found that the gambling violated Utah law."
The Imrich opinion also went to Tom Bay, supervisor of banks at the Utah Department of Financial Institutions, whose agency is represented by the state attorney general’s office.
In a Sept. 30, 2009, email to SunFirst’s president, Bay pointed to the "Utah prohibition against gambling" and said the bank’s acceptance of poker payments could damage its reputation and draw the interest of law enforcement.
Despite those warnings, despite the seizures elsewhere and despite the arrests, SunFirst, Johnson, Elie and their partners went ahead in late November or early December 2009 and began processing poker payments through SunFirst.
Elie continued processing disguised poker payments through Fifth Third Bank and Bank of America until the feds froze those accounts in September 2009 and the next month seized $8.6 million.
In December 2009, the feds indicted Pope. By mid-December, Thornhill had to abandon the SunFirst processing effort after his arrest on charges also related to previous poker processing. Earlier that year, in June, a federal jury indicted Clark on processing-related charges.
The Swallow-Shurtleff gambit » In 2010, several months after the SunFirst processing had begun, poker attorneys asked Johnson to connect them to the Utah attorney general to secure a favorable opinion about the legality of online poker and, therefore, accepting payments in a Utah bank.
Johnson turned to Swallow, Shurtleff’s top deputy and handpicked successor, as an intermediary to the attorney general. Johnson and Swallow had connected previously when Swallow was a principal political fundraiser for Shurtleff.
In January 2009, one of Shurtleff’s political action committees had received $100,000 from entities related to Johnson and I Works. After Shurtleff said he was considering a bid to oust then-U.S. Sen. Bob Bennett, R-Utah, two of the attorney general’s PACs took in an additional $52,700 in Johnson-related donations.
The two men also developed a personal rapport. Shurtleff was photographed sitting in Johnson’s yellow Lamborghini with the I Works corporate jet in the background.
Shurtleff and Swallow met on April 1, 2010, with poker-company lawyers and the Poker Players Alliance in the attorney general’s office, according to documents obtained through an open-records request.
In emails that day, John Pappas, executive director of the alliance, told Johnson that Shurtleff and Swallow had warned that an opinion from the attorney general asserting the legality of online poker could backfire and "might cause members of the Legislature to demand a change in the law to make it more clear that poker was illegal."
All the while, more red flags kept popping up. SunFirst received subpoenas from two U.S. attorney’s offices related to poker processing. Daniel Tzvetkoff, the head of the Australian processing company, was indicted.Next Page >
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