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Jeremy Johnson and I Works give internet marketing a bad name

“If you want an interesting case study of affiliate marketing, take a look at Jeremy Johnson.” Todd Harrison at Venable LLP dropped that hint to Nutrition Business Journal's Marc Brush, and he followed Harrison's advice. “Interesting” puts it mildly.

Jeremy Johnson runs I Works, a squadron of internet marketing websites targeting such perennial soft spots of e-commerce as stay-healthy programs, make-money schemes and freely available government grants. Think of açaí berry diets and that spam message in your e-mail inbox that proclaims “Pres Obama want to give you Free Cash you could be Cashing your Federal Check In as little as 12 days.” The company, based in St. George, Utah, is charged with rampant abuses along several fronts: negative option continuity plans, false and misleading testimonials, forced upsells, and some shockingly bold subterfuge involving dummy companies and straw-figure executives.

In this light, it's no surprise that a recent complaint from the Federal Trade Commission (FTC) runs to 81 pages, covering 10 individuals, 10 corporations and 51 shell companies. In January 2011, the FTC went so far as to freeze the assets of Johnson and all 61 companies involved, making clear its intention to seek the return of more than $275 million from Johnson as redress for the victims tangled in his web. According to the FTC, more than 500,000 consumers sought chargebacks related to I Works' many scams. "At its height, the scheme was ensnaring 15,000 consumers per day," says the FTC in a Salt Lake Tribune article. Johnson received more than $48 million in salary and other distributions since 2006, according to that same source.

The chargebacks might very well be what trips up Johnson. According to FTC research, VISA and Mastercard were well aware of the high number of chargebacks attributed to Johnson and his businesses, so the defendant just set up new shell companies under figurehead managment to keep processing payments. In addition, I Works would direct major banks like Wells Fargo and HSBC, as well as major processors like First Data and ECHO, to phony websites with clearer disclaimers and payment terms than the originating sites of transaction. A common example of these fraudulent transactions would involve "free" or "risk-free" products for a de minimus shipping fee of $1.99, which lead to hefty and unapproved one-time fees of $129.95 and monthly recurring fees of $59.95.

For a little history, Johnson ran afoul of the Securities and Exchange Commission (SEC) back in 2001 for touting Far East Ventures (FEVI), a stock he personally traded for $315,848 in profits while at the helm of While profiling FEVI as his pick of the month, Johnson failed to disclose his compensation in FEVI stock for the recommendation, and misrepresented material information about the company. In more recent circles, Johnson is believed to have contributed upwards of $100,000 to Mark Shurtleff's successful campaign for election as Utah's attorney general, according to reports in the Salt Lake City Weekly.

To add even more color to this portrait of Utah's darling millionaire, Johnson took to the skies after the recent earthquake in Haiti for self-directed humanitarian efforts involving his fleet of helicopters, some bulletproof vests, and $150,000 in cash. Johnson, in concert with friends and doctors, dropped into beleagured villages and offered whatever assistance he could- medical attention, cargoes of supplies and food, his own shoes. "There's a lot of people who are successful, have a lot of money, and they go through life and die lonely," says Johnson in a 2010 article from the Desert News. "Happens all the time. And I don't want to be one of those people."

The case at the FTC is pending, but Johnson has denied any wrongdoing in the press. A week after the FTC complaint was issued, Chad Elie, Johnson's business partner in Las Vegas, sued him for $10 million. The amount represents Elie's stake in an online payment processing venture that Johnson claimed was profitless via a phony balance sheet. A federal judge subsequently granted an FTC motion to intervene, calling Elie's suit an end run on the receivership process and a threat to the damages ultimately due consumers.

This article is excerpted from Nutrition Business Journal's April 2011 Internet and MLM issue. NBJ subscribers can access the entire issue on Stories include a sales and product update for the leading nutritional multi-level marketing (MLM) companies operating globally, a deep dive into the turbulent world of online supplement sales and discussion of how social media is rewriting the rules for direct-to-consumer sales within the U.S. nutrition industry.

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