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Complaint to target alleged laundered donations to Mike Lee

Published June 6, 2014 8:08 am

Politics • Experts doubt FEC would punish the senator for accepting allegedly laundered funds.
This is an archived article that was published on sltrib.com in 2014, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The Alliance for a Better Utah is preparing a federal election complaint stemming from revelations that indicted businessman Jeremy Johnson told investigators he laundered $50,000 in campaign contributions — at John Swallow's request — to Mike Lee's successful 2010 Senate bid.

"If Utah's freshman senator did indeed allow, whether by ignorance, negligence or complete disregard of the law, a sizable amount of money to be illegally funneled into his campaign, then Sen. Lee should be held accountable," the progressive advocacy group said Thursday in a statement.

Experts doubt that Lee's campaign, in the end, would be punished; candidates usually aren't.

The Republican senator's spokesman said Wednesday that neither Lee nor his campaign knew of any arrangement with Swallow, who resigned in December after less than a year as Utah's attorney general.

Johnson told investigators in the long-running criminal probe of Swallow and his predecessor, former three-term Attorney General Mark Shurtleff, that Swallow directed him to give $50,000 to other individuals, who then donated the money to Lee to bypass caps on federal campaign contributions.

Johnson said he also did the same for Shurtleff, kicking in $113,600 through straw donors to the then-attorney general when he was exploring his own run for Senate in 2010.

Shurtleff said he, like Lee, was unaware of any such arrangement.

Johnson had been Shurtleff's top financial backer during his previous runs for office, with more than $200,000 pouring into Shurtleff's causes from Johnson, his business or his associates.

Swallow's attorney, Rod Snow, said Thursday he is surprised Johnson's allegations are taken seriously.

"Someone [like Swallow] who had twice run for Congress and was aiding in the fundraising for serious senatorial candidates for the United States Senate," Snow said, "is not going to get involved in straw donations."

He added that, to his knowledge, none of the contributors told Swallow they had used Johnson's money.

"Johnson's game plan has been to try and trade up to save himself," Snow said, "and the only people who are buying into his plan are members of the press [who] do not care who [they] recklessly damage in the process."

The new information came to light in an affidavit accompanying a search warrant unsealed Wednesday afternoon.

"Campaign election law violations are serious business," the Alliance for a Better Utah said in its statement. "Unfortunately, too many of Utah's elected leaders seem to treat election laws like the rest of us treat speed limits — as if they were merely suggestions."

Matt Sanderson, a campaign finance law attorney with the Washington, D.C., firm Caplin & Drysdale, said the Federal Election Commission has gone after these so-called "straw donors" in the past.

"They have come down hard on people who have done that, both entities and individuals," Sanderson said, "and they've repeatedly penalized them."

The FEC can impose only civil penalties, but if there is a "knowing and willful violation," it can be referred to the U.S. Department of Justice for criminal prosecution.

It is unlikely, however, that the FEC would go after the Lee campaign.

"From the campaign's perspective, it's relatively opaque as to where the money is originally coming from," Sanderson said. "All they see is a check coming in from donors X, Y and Z. It's impossible to tell where donors X, Y and Z got that money."

If the FEC does pursue the case, it could take years for the matter to run its course, Sanderson said. Any fines usually are for the amount in question — in this case the $50,000 — multiplied by some other figure, depending on the severity of the violation.

Johnson's allegations against Swallow last year sparked the scandal that eventually drove the Republican attorney general from office. Johnson said Swallow helped orchestrate plans to aid the embattled St. George businessman in fighting a federal investigation of his I Works business.

Johnson faces 86 federal felony charges, as well as a civil lawsuit by the Federal Trade Commission in association with his business dealings.

In a June 2010 email to Johnson, according to the affidavit, Swallow wrote: "I was told that four [of] those checks bounced. I'll forward you the names."

"I am really sorry about the checks. I will get it fixed ASAP!" Johnson replied. "Let me know [whose] bounced. I was in a mad rush to get those so maybe I pushed a few people too hard."

Johnson told investigators Swallow cashed some of the checks from the straw donors before the individuals could deposit the money that Johnson had given them, causing the checks to bounce.

Swallow forwarded the email exchange to Dan Hauser, one of Lee's deputy campaign managers and finance director in 2010 who later served as the senator's state director.

Hauser said Swallow had contacted the campaign andreported that Johnson wanted to deliver a number of contributions to Lee's bid. Nobody in the campaign, including Lee, had met Johnson, but an Internet search showed the businessman had done humanitarian work in Haiti and had helped boys cast out of southern Utah polygamist sects.

"Jeremy Johnson, at that time," Hauser said, "looked like a great philanthropist and a donor any campaign would want."

Hauser said he was included in the email after the checks bounced for informational purposes.

"[We] categorically deny any involvement with any laundering scheme or anything like that," Hauser said. "The Lee campaign and Senator Lee had no knowledge if that actually occurred and never would have accepted that at all."

The report from the Utah House investigation of Swallow identified four checks totaling $9,600 that bounced. The contributions ostensibly were from Arvin Lee Black, Atia Black and Matthew Black. The Blacks have ties to Johnson.

Three of the checks arrived on or before the day of Lee's Republican primary with opponent Tim Bridgewater.

Arvin Lee Black was subsequently charged and later pleaded guilty to felony fraud charges for running what prosecutors said was a Ponzi scheme that defrauded an estimated 50 victims out of $21 million. He was sentenced last month to five years an three months in prison.

House investigators also found that Swallow tried to set up a retreat with Lee. The plan called for the two to fly aboard Johnson's private jet to Alaska, where Swallow, Lee and campaign consultant Jason Powers could map out Lee's campaign strategy. The trip apparently never took place.

It is not the first time that Swallow has found himself in the middle of federal campaign finance impropriety. When he ran for Congress in 2002, his campaign and several entities — made up of longtime Swallow supporters — were fined for exceeding contribution limits.

The campaign received checks from the business entities, but itemized them as donations from members who formed the businesses, violating campaign law. The FEC fined the campaign and the individuals more than $32,000 combined.

gehrke@sltrib.com

Twitter: @RobertGehrke —

The bounced checks

The Utah House investigation of John Swallow identified four checks — totaling $9,600 — to Mike Lee's Senate campaign that bounced. The contributions ostensibly were from Arvin Lee Black (recently sentenced to prison for a Ponzi scheme), Atia Black and Matthew Black — all of whom have ties to Jeremy Johnson.