Interview with Charis

Finally, a newspaper prints a fair story!

OBSERVER EXCLUSIVE
'There was no ill intent'

An agreement with the SEC means Charis Johnson cedes control of what she considers an online ad business, others a Ponzi scheme. Charis Johnson, the Charlotte woman behind what government regulators call a $50 million worldwide scheme to defraud investors, said she never intended to run an illegal business -- just one that helped people make some money from the Internet.

"I'm working with the government to fix this," Johnson told the Observer. "I think it's important for people to understand there was no ill intent. We were the moral compass in the industry. We were running our business legally as far as I knew." Johnson, 33, ran the 12dailypro Web site that offered 12 percent daily return on membership fees from $6 to $6,000 for viewing a dozen Web sites daily. She said members could include their own sites in 12dailypro's rotation of sites for promotion. "They used this for advertising," she said. "Where else could they reach so many people?"

But what Johnson considered an Internet advertising business, the Securities and Exchange Commission considered a Ponzi scheme -- an investment built virtually solely on money gathered from new members.

The SEC accused her and 12dailypro of failing to register to sell investments and tell investors exactly how the business made money. Johnson has agreed with the SEC to hand over control of 12dailypro to a receiver, who will examine company records and try to secure refunds for members.

Johnson, who still faces civil penalties, does not deny or admit any of the SEC's allegations in signing the agreement. The FBI said Tuesday it continues to investigate the company.

She told the FBI last month that 12dailypro's 300,000 members have been paid more than $300 million over since May, according to a transcript of her statement to authorities. She told the Observer she's earned between $150,000 and $200,000.

Members continue to stand behind Johnson. "I so respect everything you have done, and we will follow you anywhere. You are one awesome lady!" wrote one member this week on the company forum.

Said Johnson about members: "The more I read, the more they became family. I was glad that I could create something that could help so many people."

Johnson, a one-time television producer and filmmaker, said she found auto-surf programs while looking for a way to earn money after moving to Charlotte from the Triad in 2004 with her husband and young daughter.

She said many programs ended quickly or treated members poorly. "I wanted to create something more mainstream," she said. "I wanted to build a community."

She said she used marketing and Web design skills she taught herself to build 12dailypro, named after daily percentage paid to members and her desire to help people become professional Web entrepreneurs.

Membership doubled most every month, she said: "I had no clue it would get this big. We did our jobs so well that people started telling their friends, families and co-workers."

Johnson told the FBI that 95 percent of 12dailypro's money came from new members, according to documents. Members were told this on the company Web site, but 12dailypro also cited other revenue, including advertising and non-site investments. "Investors have the right to know the particular risk involved, not a general statement," said Kelly Bowers, the SEC's assistant Pacific region director.

Ben Luke, a 60-year-old from Charlotte, said he spent $24,000 in fees since July for him and his daughter, using money from a home-equity loan and his retirement fund. He said he took out $5,000 before Christmas for presents and to make a mortgage payment for a relative.

"I was letting it ride," said Luke, who's gone back to substitute teaching. "I'm mad at myself. I'm mad at (Johnson). There was not enough warning about this business."

Johnson said the site was not intended for people to bankroll a lot of money and she never said returns were guaranteed. "This was never for people to make their mortgage payments," she said. "We always talked about diversifying unless you were doing this professionally."

Money belonging to 12dailypro members remains frozen in accounts held by a Tennessee electronic payment service, StormPay. Johnson said she has no idea how much of 12dailypro members' money StormPay holds. The SEC said it's $50 million. And Johnson told the FBI that StormPay held $35 million of 12dailypro's account alone. StormPay officials did not return calls Tuesday.

Johnson said she has let go all but two of her 13 full- and part-time employees. She's not renewing the lease on a south Charlotte office. She will get $5,000 in living expenses as part of her agreement with the SEC to freeze her bank accounts. Johnson said after the investigation ends that she wants find other ways to help people build their Web businesses.

"People are looking to me for guidance," she said. "People see value in what I've done. After what they've been through, I want to help them generate something positive out of all of this."