Bizarre Utah Bribery Case Sucks In Harry Reid

| Wed Jan. 30, 2013 11:26 AM EST
Senate Majority Leader Harry Reid (D-Nev.)

Utah may be best known for its clean-living, teetotaling Mormon culture, but the state has long had a reputation as the home for less savory activity: financial fraud. Long known as the "scam capital" of the world, Utah has the dubious distinction of producing large numbers of con artists, penny stock scammers and other charlatans—so many that the Securities and Exchange Commission has an office in Salt Lake City (which is unusual for the agency). Yet another one of these sordid stories is underway in the state right now, and this time, an accused scammer has said he tried to bribe a big name: the highest ranking Democrat in the US Senate, Sen. Harry Reid (D-Nev.), himself a Mormon with many ties to Utah. 

The tale is a convoluted one. But it starts with Jeremy Johnson, a St. George businessman and high-profile political donor in the state who has been indicted on a variety of fraud charges stemming from his running of an internet marketing company. In 2010, the Federal Trade Commission sued Johnson's company, iWorks, alleging it had engaged in a far-reaching scam to defraud consumers through bogus money-making offers online. The company was the source of lots of those ads promising free money from government grants after the 2009 stimulus bill passed. Instead of making money, the FTC has alleged, consumers who responded to the ads ended up with unwanted charges on their credit cards that netted iWorks and its principals more than $275 million in ill-gotten gains. (The case is still ongoing.)

After he was indicted on bank fraud and money laundering charges, Johnson came to the Salt Lake Tribune with a bizarre allegation: He claimed that in 2010, when the FTC was investigating iWorks, he tried to bribe Reid, whom he thought could make the FTC investigation go away.

Johnson said the scheme was the idea of John Swallow, a Republican and Utah's newly elected attorney general. Johnson had sought Swallow's help fending off the FTC, and according to Johnson, Swallow, a former lobbyist for a Provo-based payday loan operation, persuaded him that his best chance was a well-placed bribe. Swallow, Johnson said, initially wanted $2 million but settled for $600,000 for Reid.

Swallow put Johnson in touch with Richard Rawle, a Reid donor who owned the payday loan company for which Swallow had lobbied. Rawle, now deceased, supposedly bragged to Johnson that Reid had helped him successfully beat back payday loan regulations. Johnson claimed he paid about $300,000 to a shell company set up by Rawle, with the understanding that it would be used to enlist Reid's help in squashing the FTC investigation. Not long afterward, the FTC sued Johnson. His assets were frozen and he was arrested in the Phoenix airport en route to Costa Rica, and charged with mail fraud.

Clearly unhappy with the turn of events, Johnson said he demanded that Swallow return his bribe money. When the money wasn't forthcoming, Johnson went public with his allegations—shortly after Swallow took office this year. Johnson provided the Salt Lake Tribune with a host of financial records and emails allegedly documenting his exchanges with Swallow.

Everyone Johnson has implicated denies doing anything wrong. Swallow has claimed that the money Johnson gave him was for lobbying, not a bribe. Reid has denied receiving any money from Johnson or any other involvement in the mess. After the audio of a meeting between Swallow and Johnson was released Monday, Reid's office released a new statement to the Tribune:

The allegations of bribery by Mr. Johnson, a man with a background of fraud, deception and corruption, are absurd and utterly false. Bribery is a crime for which Senator Reid has personally put people behind bars. Senator Reid will not have his integrity questioned by a man of Mr. Johnson’s low record and character, and his outrageous allegations will not go unanswered. Clearly, a desperate man is making things up.

The story gets weirder. The Tribune tracked Johnson's money trail to a law firm associated with Jay Brown, a Las Vegas lawyer and payday loan industry lobbyist whose name has repeatedly surfaced in organized crime investigations. Brown is an old friend of Reid's, and in 2006, Reid offered to amend his financial disclosure forms after failing to fully disclose the details of his involvement in a land deal with Brown that netted Reid around $700,000. Meanwhile, the US Attorney's office in Utah announced Friday that the Department of Justice and the FBI are both investigating Swallow.

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