I Works Billing Scheme Defendant Agrees to Settle FTC Charges

One of the defendants in the IWorks scheme that allegedly took more than $280 million from consumers via deceptive “trial” memberships for bogus government-grant and money-making schemes has agreed to settle Federal Trade Commission charges.

Loyd Johnston, along with Jeremy Johnson and nine others, were named in a complaint the FTC filed against the operation in December 2010. The court subsequently froze the assets of Johnson and 61 corporate defendants and appointed a receiver over their assets to help ensure that money can be returned to consumers if the case is resolved in the FTC’s favor. The FTC reached a settlement with two of the defendants in November 2013, and with another defendant in April 2014.

The settlement order against Loyd Johnston bans him from engaging in lines of business like those that were used in the I Works scheme. Specifically, he is prohibited from:

• Advertising or selling products as forced upsells (extra products automatically bundled with a purchase), or having ownership in any such business.
• being an officer, director, or manager of any business, or acting as a signatory on any account, or applying for any merchant account, for any business, unless he controls, participates in, or has knowledge of the daily operations of the business.

The order also prohibits Johnston from misrepresenting material facts about any product, and from making any of several types of misrepresentations. Among other things, the settlement prohibits Johnston from:

• making misrepresentations or failing to disclose all material terms and conditions related to a negative-option feature or continuity program;
• making misrepresentations related to the total cost to buy a product, or any associated risks;
• misrepresenting that an endorser is an independent, ordinary consumer;
• making misrepresentations related to the income or sales volume likely to come from an investment opportunity;
• debiting consumers’ bank accounts without first obtaining their express verifiable authorization; and
• misrepresenting that government grants are available to pay personal expenses, that consumers can find such grants using materials provided by Johnston, or that consumers who buy an investment opportunity from him are likely to make money.

In addition, the order bars Johnston from selling or otherwise benefitting from consumers’ personal information, and failing to dispose of it properly. It also prohibits him from making misrepresentations in order to obtain account services from payment processors, banks, and other third parties, and from failing to disclose to them any material information about a merchant account.

The settlement order imposes a $7,002,960 judgment that will be suspended based on Johnston’s inability to pay. The full judgment will become due immediately if he is found to have misrepresented his financial condition. Litigation continues against the remaining defendants.

The Commission vote approving the stipulated final order was 4-0. The order was entered by the U.S. District Court for the District of Nevada on February 22, 2016.

NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.

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