Jailed online entrepreneur Jeremy Johnson, family settling federal lawsuit

Online entrepreneur Jeremy Johnson and his family are settling the lawsuit brought against them by federal regulators, and his parents are applying part of their returned money to appeal his conviction and prison sentence.

Johnson, who is awaiting transportation to a federal prison to begin an 11-year sentence in a criminal case, is agreeing to a default judgment against him of $280.9 million, the amount sought by the Federal Trade Commission when it first sued the St. George businessman in December of 2010, according to court documents. But the payment of that amount is suspended upon surrender of Johnson's assets and those of his companies.

Johnson's wife, Sharla, also reached a settlement in which she will move out of their St. George mansion, but will keep a car and some other property.

Johnson's parents, who also were dragged into the case and had most of their assets seized, have agreed to settle for the return of $750,000. They will use that money to help fund appeals of Johnson's criminal convictions, said Karra Porter, a Salt Lake City attorney who represented the Johnson family and his companies in the lawsuit, but not Johnson himself.

"The federal government has destroyed this family," said Porter, who now is also handing Johnson's appeals in the criminal case.

The FTC lawsuit filed in Las Vegas alleged that Johnson and others from his I Works companies and affiliates had bilked consumers who bought get-grants or make-money products by charging their credit cards recurring monthly or one-time fees that were not properly disclosed on various websites.

The FTC persuaded a federal judge in early 2011 to appoint a receiver and seize the assets of Johnson, his companies and other defendants, and then later brought Johnson's wife, parents and others into the lawsuit. In total, $22.9 million in assets were seized but a great deal of that has been spent on professional fees for the receiver and its attorneys, according to court documents.

After filing the lawsuit, the FTC approached the U.S. attorney's office for Utah about possible criminal violations. Johnson was charged in June of 2011 with one count of mail fraud, but that grew to 86 counts related to alleged bank fraud after a plea deal between Johnson and prosecutors blew up.

A jury in March found Johnson guilty of eight charges of providing false information to banks, but found him not guilty on 78 fraud-related counts. On Friday, U.S. District Judge David Nuffer sentenced Johnson to 11 years in prison.

Porter said the family had wanted to go to trial on the FTC lawsuit but circumstances changed with Johnson's lengthy prison term.

"We were not going to admit any wrongdoing, because we have spent years proving that the FTC case lacked merit," Porter said in a news release.  "So we did not agree to any language that the FTC would have won its case. But the family's top priority had to be Jeremy's criminal case."

Family members have created a website to raise funds and speak out about what they believe were the injustices of the cases against Johnson. They also plan events to raise funds for the appeal, which they vowed to take to the U.S. Supreme Court, if necessary, according to the news release.

"The court's gag order has finally been lifted, and we are going to take this opportunity to explain to people what Jeremy's case is really all about," Sharla Johnson said. "We also want to point out things that we think the public would be shocked to hear about the federal criminal justice system and this case."

An FTC spokesman said the agency may have a comment once the Nevada judge approves the settlements.

tharvey@sltrib.com