Over doughnuts at Krispy Kreme in Orem, John Swallow deflected Jeremy Johnson’s suggestions that he had done anything improper in trying to help his friend derail a federal probe into his business dealings.
But one topic — Swallow’s use of Johnson’s massive, million-dollar Lake Powell houseboat — seemed to cause some anxiety for Utah’s then-chief deputy attorney general.
Johnson’s attorney wants out
The attorney for indicted St. George businessman Jeremy Johnson filed a motion Wednesday asking to withdraw from the federal case.
The move by Salt Lake City lawyer Nathan Crane came just two days before a hearing in which the U.S. Attorney’s Office for Utah was to argue for a gag order to prevent Johnson from speaking to the news media and posting critical comments about prosecutors and investigators in his case.
Crane and Johnson have been at odds themselves over Johnson’s media push.
Crane declined comment Wednesday. But his motion says the “attorney-client relationship has been irreparably damaged to the point that counsel can no longer provide effective assistance.”
Johnson pointed to strained relations with himself and the U.S. Attorney’s Office as reasons for the withdrawal motion.
“Nathan has been a trusted adviser, friend and advocate for me since he was appointed as my attorney,” Johnson wrote in an email. “I am sad to see him submit his motion to withdraw, but I understand his reasoning.”
Melodie Rydalch, spokeswoman for the U.S. Attorney’s Office in Utah, said she expects Friday’s hearing to take place. It’s unclear, however, whether it now will include the motion to muzzle Johnson.
Johnson was indicted in June 2011 on a single mail fraud charge stemming from an investigation of his I Works company by the Federal Trade Commission.
The FTC sued Johnson in December 2010, alleging he improperly billed customers after they bought a product for a small fee.
Johnson has denied the allegations in both cases and waged a campaign through the news media and the Internet accusing the government of misconduct.
"Do they know about the houseboat?" Swallow asks in the April 30, 2012, meeting that Johnson secretly recorded. "Is there any paper trail on that?"
"There’s no paper trail on the houseboat. Nobody knows about it," Johnson assures him.
"There’s no email, there’s no ... " Swallow continues before Johnson interrupts.
"No emails on the thing," Johnson reiterates, "and, no, my wife doesn’t even know you were on there."
Swallow, then a candidate for Utah attorney general who assumed that office earlier this month, has acknowledged using the houseboat, "Peps I," a 75-foot-long floating mansion with numerous cabins, a home theater and a helipad — from which Johnson can be seen in a YouTube video taking off in his copter.
Similarly sized houseboats on Lake Powell rent for between $12,000 and $15,000 a week, according to listings for rentals from various concessionaires. At that rate, a weekend outing could cost more than $6,000.
The Federal Trade Commission obtained a judge’s order allowing both of Johnson’s houseboats to be seized and sold in an attempt to recoup some of the $275 million the commission said he took from customers.
David Irvine, an attorney and former state legislator with the watchdog group Utahns for Ethical Government, said Swallow’s use of the houseboat may have violated Utah law.
"I think it’s a dubious transaction," Irvine said.
State law bars officials from accepting gifts if the official has recently been or may reasonably be expected to be involved in action affecting the giver in the near future.
Under a law that Irvine sponsored when he was a legislator, the Utah attorney general’s office has sole authority to file class-action suits on behalf of citizens who have been defrauded. The state law parallels the federal one that the FTC cited when it sued Johnson in December 2010, a few months after Swallow used Johnson’s houseboat.
"I think it makes it very dicey," Irvine said, "for Swallow to say he was not in a position where he might have to deal, or could deal on behalf of Utahns defrauded in an action against that company."
The law provides a potential "out" for officials, provided they disclose the gift, but Swallow filed no such disclosure, according to an open-records request filed by The Salt Lake Tribune.
Swallow has acknowledged using the houseboat for his family trip in 2010 and said he saw no harm in doing so.
"At the time I considered Mr. Johnson a friend, and I did not view spending one day on a friend’s boat as a gift," Swallow said, "especially since we brought our own equipment, including WaveRunners, and paid for our own food, fuel and other necessities."
Tom Harvey contributed to this story.
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