Crime

PurchasePro founder Junior Johnson heading back to prison. Feds say he hid money at casinos.

Charles Johnson, Jr., founder of PurchasePro, shown on the strip in Las Vegas on Aug. 21, 2000.
Charles Johnson, Jr., founder of PurchasePro, shown on the strip in Las Vegas on Aug. 21, 2000. LEXINGTON HERALD-LEADER STAFF FILE PHOTO

PurchasePro founder Charles “Junior” Johnson will be heading back to prison after a federal judge found that he violated the terms of his supervised release.

Johnson, a Lexington native, was sentenced in 2008 to nine years in prison and three years of supervised release after he was convicted on charges related to the false inflation of revenue of his company. A little more than a week from the end of his supervised release, Johnson’s probation officer accused him of trying to avoid high restitution payments by hiding money in casino accounts and failing to report gambling losses.

In all, Johnson was accused of four violations of the terms of his supervised release, and U.S. District Court Judge Danny C. Reeves found that he was guilty of each violation. At a final revocation hearing on Thursday, Reeves ordered that Johnson serve an additional 10 months in prison. The bureau of prisons will determine where he will serve the sentence, and he is required to report to that prison on Sept. 9, Reeves said.

Ten months of incarceration was the maximum recommended sentence for such violations, Reeves said.

In the time leading up to Johnson’s reporting date, he will be confined to home incarceration and will not be able to leave his house unless it is for work or medical appointments, Reeves said.

Upon Johnson’s release from his 10 months of incarceration, he will be under supervised release for an additional 26 months. Reeves also imposed several restrictions that will be in effect during Johnson’s supervised release.

During the supervision period, Johnson will only be permitted to own one computer and one cell phone and will be prohibited from using the internet on any device other than his one computer. His computer will also be fitted with monitoring software, Reeves said.

Reeves also ordered that Johnson not take part in any solicitation of investor funds during his supervised release. Johnson is prohibited from gambling until his $9.7 million restitution is paid.

Before his probation officer accused him of being in violation of his terms of release, Johnson was paying $300 a month on his restitution. After two years and 50 weeks of supervised release, Johnson had paid $10,729.3, according to court records.

As part of his original supervised release conditions, Johnson was required to make monthly reports that listed any expenditures over $500, as well as information about his bank accounts, business holdings and transfers of assets, according to court records.

Johnson informed his probation officer that he was managing an L.L.C. called Curare, and later one named Privato, but did not report that he was a member-manager of at least five other business “entities,” according to court records. The businesses included JW2, Beaumont Noah and Luminary Diffusion Systems.

As part of his work with the companies, Johnson facilitated deals and received money from investors, according to court records. He was accused of gambling money from his investors and business deals in Las Vegas, including part of a $200,000 investment made by a Lexington doctor.

As investigators looked into Johnson’s alleged lies and omissions regarding his assets and gambling, they uncovered a “potential new crime” involving investor fraud, U.S. prosecutor Paul McCaffrey said during Thursday’s hearing. The possible investor fraud is related to the gambling of money invested by the Lexington doctor, McCaffrey said.

Johnson’s defense attorney, Andrew Sparks, said that Johnson had not fully understood the conditions of his release in 2016, but had made strides since then to rebuild his life. Sparks said that Johnson is well known in the community, and had generous with his success before his conviction in 2008.

Before PurchasePro filed for Chapter 11 bankruptcy in 2002, Johnson’s company had made millions for some investors who sold their shares when the company went public. Johnson, a former University of Cincinnati basketball player, once donated $2 million for a new gym at Lexington Catholic High School.

Reeves said at Thursday’s hearing that Johnson had breached the court’s trust and was trying to portray himself as a victim.

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