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"They don’t have a single consumer," she said, "who’s actually complaining about it."
By alleging all I Works products were fraudulent, Porter added, the FTC persuaded a judge to close the operation.
While some problems emerged early at I Works with improperly disclosed terms of sales, the defendants’ attorneys say, the company fixed the errors, especially after it began following the agency’s own guidelines spelled out at a 2007 conference attended by Johnson and others.
A main FTC complaint is that I Works advertised it could help consumers get government grants for personal expenses, none of which existed. But the memo argues the government relies on a narrow grant definition and ignores the availability of private grants that also were advertised.
Even so, defense attorneys argue, government grants are available for education, home improvements, rental assistance, car repairs, medical needs, phone bills, energy savings and more.
The defense memo also attempts to counter the FTC’s contention that Johnson directed others to create "shell companies" to continue to process consumer payments after credit card companies and banks began to cut off I Works because of high chargeback rates.
But Kelly Macfarlane, an attorney working with Porter, said Johnson’s involvement was fully disclosed as the guarantor of the accounts for those companies, the formation of which is standard practice for Internet sellers.
"There was not a single dollar lost [by banks]," Macfarlane said. "It was the largest fraud case in the history of the world that had no damages."
While Porter said defense attorneys were commenting only about the FTC lawsuit, the question of fraud involving banks is at the heart of the criminal case against Johnson and the four others.
If Porter succeeds against the government’s motion for summary judgment and the civil case goes to trial, it could be the first real challenge to the FTC’s litigation strategy, the memo says.
"This case," Porter wrote, "thus presents a rare instance in which the FTC’s evidence is actually being tested."
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