Johnson's assets to remain frozen
LAS VEGAS - A U.S. District Court judge granted a preliminary injunction Thursday intended to continue a freeze on the assets belonging to St. George businessman Jeremy Johnson and 61 corporations following a Federal Trade Commission complaint alleging illegal business practices.

In what FTC attorneys described as an indication of their likelihood to succeed in the case, U.S. District Court Chief Judge Roger L. Hunt approved the motion for a preliminary injunction Thursday during a hearing at the Lloyd D. George U.S. District Courthouse in Las Vegas.

Johnson, who is well known in the community for assisting in local search and rescue operations, is one of 10 defendants facing charges related to allegedly victimizing consumers by charging them without their permission through Internet companies.

The FTC alleges consumers lost $275 million while Johnson and the other defendants profited through iWorks and related Internet companies "by luring consumers into 'trial' memberships for bogus government-grant and money-making schemes, and then repeatedly charging them monthly fees for these and other memberships that they never signed up for."

"It looked like they were trying to avoid detection in what they were doing," Hunt said of iWorks while speaking briefly about his decision to grant the injunction.

FTC attorney Collot Guerard said the continuation of the freeze on Johnson's assets would serve to preserve the funds for alleged victims.

"The FTC - if it wins its case - will be able to use the assets to get money back to consumers we believe were defrauded," she said.

In addition to continuing the freeze on Johnson's assets, the preliminary injunction order also includes restrictions prohibiting the defendants from marketing grant programs and operating websites related to selling grant programs.

Following the hearing, Johnson voiced his displeasure with the court's ruling and argued that his company provided adequate information to its customers.

"The FTC's purpose here is to stifle our defense by tying all our money up," he said, referring to the continued asset freeze. "They want to pound you into a settlement."

A federal judge initially froze Johnson's assets by approving a motion for a temporary restraining order on Jan. 13 filed by the FTC.

During Thursday's hearing, Guerard said iWorks failed to provide adequate disclosures to its customers regarding monthly charges following free trial periods for its products.

She said disclosures included on the company's websites sometimes omitted key terms and were displayed in small text.

"(The disclosures) were overwhelmed by extravagant claims in bold text," she said, adding that some customers were automatically signed up for other programs without knowledge of the transactions.

Johnson's attorney Michael Shaw argued that iWorks was dedicated to providing adequate disclosures to its customers and said the company regularly monitored order pages hosted by its brokers to ensure the information displayed properly.

"The isolated incidents that the FTC is using as examples are, in fact, isolated incidents," and do not represent the company's typical operations, he said.

Attempting to illustrate the strength of the company's disclosures, Shaw said approximately one-third of iWorks customers cancelled their online subscriptions during the trial periods.

The FTC also alleges iWorks made false claims that consumers could obtain government grants for personal expenses.

"The customers that were sucked into their government grant program were not likely to find grants," Guerard said.

Shaw argued that there are both government and private grants available to consumers for personal expenses and iWorks simply provided a database of information concerning available grants to its customers.

While the FTC also discussed the high number of chargebacks related to iWorks' products, Shaw said the activity is not an indication of any wrongdoing by iWorks.

"It's very easy for a consumer to say 'I didn't see any disclosures,'" he said.

Shaw said iWorks paid an estimated $1.7 million in fines from credit card companies as result of chargebacks.

With the preliminary injunction hearing completed Thursday, Shaw said the case is moving into an exploratory phase during which the FTC and defense attorneys are expected to share information in preparation for a trial.

Shaw said he is uncertain about when the trial will take place, but added a year or more could pass before the case moves to trial.

While Johnson did not speak in court Thursday, the St. George man said he looks forward to an opportunity to speak in court and challenge the FTC's allegations
Originally published February 11, 2011