Lexington man who led billion-dollar company heads to prison over lies about finances

A Lexington man convicted of fraud in reference to a $1 billion firm was sentenced Friday to 21 months in jail for probation violations, together with mendacity about his funds.

It’s the second extra jail sentence for Charles E. Johnson Jr. after he completed his preliminary nine-year sentence within the fraud case involving PurchasePro, an organization he based.

Johnson, 62, generally known as Junior Johnson, was positioned on supervised launch — primarily probation — after he obtained out of jail in 2016. He was required to offer probation officers with details about his funds, partially so they might maintain monitor of his capacity to pay $9.7 million in restitution in his preliminary case.

However in 2019 and once more this 12 months, he admitted he didn’t disclose data as required.

Within the 2019 case, federal authorities alleged that whereas Johnson had paid solely $10,729 in restitution, he had misplaced misplaced greater than $442,000 playing at a Las Vegas on line casino and in addition hadn’t reported his curiosity in a number of firms.

Chief U.S. District Choose Danny Reeves despatched Johnson again to jail for 10 months for these violations.

In the newest case, Johnson pleaded responsible earlier this 12 months to giving false data to a probation officer.

The prosecutor, Assistant U.S. Legal professional Paul McCaffrey, stated in a sentencing memorandum Johnson lied about his funds so he may use cash for functions aside from paying restitution.

Quickly after ending his 10-month sentence in August 2020 for the sooner violations, Johnson had a pal arrange an organization referred to as OZE LLC. Johnson claimed it was a drive-thru COVID-19 testing enterprise, but it surely principally served as a “pass-through entity and a slush fund” for Johnson, the memo stated.

Johnson’s pal, recognized solely as G.D. within the public courtroom file, supplied Johnson with a debit card and clean, pre-signed firm checks, and Johnson additionally obtained entry to switch cash electronically.

He used cash from the corporate to repay greater than $60,000 in bank card debt for him, his ex-partner and a girlfriend, McCaffrey stated. He additionally paid $27,000 on a private mortgage and disguised the aim by placing “hire” on the memo line of the examine.

Johnson additionally issued checks and payroll funds by OZE to his girlfriend and different younger girls he met on the web, regardless that none of them labored for the corporate, and tried to cover the aim with entries similar to “journey” and “consulting” on the memo traces, in accordance with the prosecutor’s memo.

He additionally issued tax statements to a few of the girls to make it seem they have been being paid for work for OZE, not “private companionship” for Johnson, McCaffrey stated.

All informed, Johnson used his management over OZE funds for no less than $140,000 in private bills, however informed the probation workplace he obtained simply $3,500 a month in wage from the corporate.

“The defining traits of this Defendant are compulsive mendacity, conceitedness, and a whole lack of respect for the regulation,” the prosecutor stated within the memo.

After federal officers moved to revoke his probation, once more, Johnson left Kentucky, going to Las Vegas and lacking a courtroom listening to earlier than finally ending up Minnesota, the place he was arrested in Might.

Along with pleading responsible to creating false statements, Johnson pleaded responsible to failing to seem for a courtroom listening to.

Massive cash and an enormous fall

Johnson’s story is acquainted to many individuals in Central Kentucky.

The Lexington native performed on the Lafayette Excessive Faculty crew that received the Kentucky boys’ basketball championship in 1979.

He went on to discovered PurchasePro, a software program supplier that reached a market capitalization of $1.2 billion after it went public in 1999 and buyers snapped up shares of rising tech firms within the so-called “dotcom growth.”

Johnson had a mansion in Las Vegas and a personal aircraft, and donated hundreds of thousands to causes in Lexington, together with $2 million for a brand new fitness center at Lexington Catholic Excessive Faculty.

Nonetheless, regulators later charged he had lied about PurchasePro’s income. He was convicted in 2008 conspiracy, securities fraud, witness tampering and obstructing an official continuing, in accordance with courtroom information.

Johnson’s conduct on the firm included mendacity in regards to the firm’s funds, altering information, telling workers to lie and destroy or disguise proof, and even giving his attorneys fabricated paperwork as a part of his protection, McCaffrey stated within the sentencing memo.

Some buyers in Kentucky who backed Johnson early on made some huge cash, however the firm finally went bankrupt, costing others hundreds of thousands.

In courtroom Friday, Johnson’s lawyer, Yale Galanter, stated Johnson has been extra contrite over his newest violations than Galanter had ever seen him.

“I feel he has been humbled by this expertise,” Galanter informed Reeves.

Johnson has been in custody since Might and was in handcuffs and chained on the ankles in courtroom. He spoke solely briefly, getting choked up as he apologized to the courtroom and his probation officer.

McCaffrey informed Reeve’s that Johnson’s lies have been a part of a long-standing sample going again to his days at PurchasePro.

Reeves sentenced Johnson to 6 months for violating the phrases of his launch and 15 months on the legal expenses of giving false data to the probation workplace and lacking a courtroom listening to, to be served consecutively.

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