The ringleader and two other defendants in the massive IWorks online billing scheme have agreed to settle Federal Trade Commission charges that they took more than $280 million from consumers via deceptive “trial” memberships for bogus government-grant and money-making products. In addition, the wife and parents of IWorks’ owner and CEO Jeremy Johnson have agreed to settle FTC charges that they received assets and funds as gifts from Johnson that came from the unlawful scheme.
The FTC sued Johnson, nine other individuals, and 61 corporate defendants, including IWorks, in December 2010. The complaint alleges that IWorks enticed consumers to sign up for purportedly “free” or “risk free” trials, but then charged them recurring monthly fees they never agreed to pay.
After extensive briefing and a hearing, the court determined that the FTC is likely to prevail on the merit of its claims and froze the assets of Johnson and the corporate defendants to help ensure that money could be returned to IWorks’ numerous victims. The court later granted the FTC summary judgment against IWorks and the other corporate defendants on five complaint counts, and held that Jeremy Johnson and IWorks’ general manager Ryan Riddle were personally liable for IWorks’ law violations.
Johnson, IWorks, and 26 corporate defendants have agreed to a $280.9 million judgment, which represents consumers’ unreimbursed losses to the scheme, according to the FTC. The judgment will be partially suspended upon transfer to the FTC of all of Johnson’s frozen assets, including millions of dollars in bank accounts, stock, real estate and jewelry, and any interest he has in assets held by the receiver.
The orders against Riddle and Andy Johnson, who managed one of IWorks’ deceptive programs, impose judgments of more than $280.9 million and $6 million, respectively, which are suspended based on their inability to pay. The suspended judgment as to each settling defendant will become due immediately if they are found to have misrepresented their financial condition.
The stipulated orders against Jeremy Johnson and Ryan Riddle ban them from selling grant products, investment opportunities, continuity programs, and forced upsells (add-on products bundled with the offered product), and from using negative option features (automatically billing a consumer unless the consumer specifically declines the offered product). Johnson and Riddle are also banned from debiting consumers’ bank accounts without first obtaining their express verifiable authorization, and from misrepresenting material facts about any product, including the total cost or any associated risks.
The order against Andy Johnson bans him from selling products as forced upsells. The orders against Jeremy Johnson, Ryan Riddle and Andy Johnson also prohibit them from violating the Electronic Fund Transfer Act, selling or otherwise benefitting from consumers’ personal information, and failing to dispose of consumer information properly.
Under stipulated orders entered against Jeremy Johnson’s wife, Sharla Johnson, and his parents, Kerry and Barbara Johnson, Sharla Johnson agrees to surrender the family home in St. George, Utah, three holding companies, and various properties, including aircraft and investment accounts. Johnson’s parents will surrender four parcels of land in California and Utah, and hundreds of thousands of dollars worth of precious metals.
Four other individual defendants reached settlements with the FTC in October 2013, April 2014, and February 2016. Litigation continues against three remaining individual defendants and four companies they own.
In another matter involving the IWorks scheme, a federal jury in Utah convicted Jeremy Johnson and Ryan Riddle of making false statements to a bank on multiple IWorks merchant account applications. After Johnson and Riddle agreed to settle with the FTC, Johnson was sentenced to 11 years and three months in prison, and Riddle to five years and three months. Both men will be subject to three years of supervised probation upon release.
The Commission vote approving each stipulated final order was 3-0. They were entered by Judge Miranda Du of the U.S. District Court for the District of Nevada on August 24, 2016.
NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.
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