Regulators demand improvements at bank tied to poker, fraud cases
A small Utah bank tied to the Internet poker crackdown and to fraud suspect Jeremy Johnson has been hit with another Federal Deposit Insurance Corp. enforcement order.

The FDIC on Friday made public the order against SunFirst Bank of St. George, Utah, which through the first half of this year had lost $2.7 million on interest income of $3.8 million.

The bank, with $212.7 million in loans and other assets, had $179.5 million in deposits at the end of the second quarter and equity capital of about $17 million.

The bank last year agreed to the FDIC’s demands that it stop processing funds for one of Johnson’s companies also named in his civil fraud case in Las Vegas. The company, Elite Debit, had processed credit and debit card charges for another Johnson firm named in the fraud lawsuit, I Works.

In the latest enforcement order dated July 28, the FDIC said SunFirst is "significantly undercapitalized" and it was ordered within 30 days to beef up its finances by selling stock or other obligations or to merge with another bank.

It was also ordered not to accept expensive brokered deposits, to limit the interest rates it pays on deposits, to not make any capital distributions or dividend payments and to not pay bonuses or award raises to staff.

This "Supervisory Prompt Corrective Action Directive" will remain effective until the bank shows it’s adequately capitalized for four consecutive quarters.

The bank gained notoriety earlier this year because of its dealings with Johnson and after it was caught up in the national Internet poker crackdown that led to the April 15 indictment of the principals of PokerStars, Full Tilt Poker and Absolute Poker.

Among those indicted were John Campos, vice chairman of SunFirst Bank, who was accused of arranging for the bank to illegally process Internet poker transactions.

The U.S. Attorney’s Office in Manhattan has alleged Campos was induced into doing so by Las Vegas businessman Chad Elie, also a defendant in the criminal poker case.

In exchange for processing the transactions, Campos was to receive a $20,000 "bonus" and Elie and an associate – apparently Johnson – would invest $10 million in the bank.

SunFirst is also a creditor in the Johnson civil fraud case in Las Vegas.

Johnson, known in Las Vegas as a high-roller gambler who did business with the Internet poker companies, and other defendants are accused in the Las Vegas case of defrauding consumers out of $289 million by running Internet scams out of St. George that the government says went on for years.

Besides the civil FTC lawsuit, Johnson was arrested in June on related charges of scamming consumers in the alleged Internet scheme.

The FTC has charged that to perpetrate the scheme, Johnson and his companies lured consumers into obtaining trial memberships for bogus services like providing them dubious government grant information -- and then repeatedly charged their credit and debit cards monthly fees for the worthless services.

Separately, U.S. District Judge Roger Hunt in Las Vegas last week signed an order allowing the FTC to auction off Johnson assets worth millions of dollars, with the hope that some of the money can be provided to consumers to cover some of their $289 million in losses.

The assets to be sold include real estate in Utah, California and Belize; numerous airplanes and helicopters, a vintage auto collection and two houseboats each running 74 feet or more in length. These Skipperliner boats alone, at Lake Powell, are thought to be worth $1 million or more apiece.

Johnson and some of the defendants opposed the sales plan, arguing "the current depressed state of the economy favors waiting to sell any assets until a later time."

Hunt found this argument lacked merit, ruling the FTC’s receiver is charged with preventing the value of the assets in receivership from declining through ongoing expenses to maintain, insure, store and protect them.

"Nothing in the oppositions filed suggest that the parties with alleged interests in those assets to be sold now would be injured if their interests are converted to cash to be held by the receiver," Hunt wrote in his order.

As the FTC case in Las Vegas developed, it was revealed Johnson was a high-roller at Wynn Las Vegas who lost $1.35 million there between 2006 and early 2011. He also gambled at MGM Resorts International properties including the MGM Grand, Luxor and Bellagio.

It was also revealed Johnson lost another $1.536 million playing on the Full Tilt Poker website between April and October 2010 and that he did business with Internet poker companies.
Originally published Tuesday 30 August 2011