MINNEAPOLIS – The U.S. Attorney for the District of Minnesota on Friday charged Paul R. Hansmeier and John L. Steele, formerly the principal partners in now-infamous copyright-troll law firm Prenda Law, with conspiring to fraudulently obtain millions of dollars by deceiving federal and state courts.
Each man faces and 18-count indictment: one count of conspiracy to commit mail fraud and wire fraud, one count of conspiracy to commit perjury and suborn perjury, one count of conspiracy to commit money laundering, 10 counts of wire fraud and five counts of mail fraud.
The indictments stem from an elaborate attempt to use the court system as part of what has since been labeled an extortion scheme. Hansmeier, 35, and Steele, 45, claiming to act on behalf of porn-producer clients, threatened copyright lawsuits against tens of thousands of individuals whom they accused of illegally downloading pornographic movies using peer-to-peer networks. According to the indictment, the attorneys created and used a convoluted series of sham entities — including Steele Hansmeier PLLP, Prenda Law and Anti-Piracy Law Group plus the technology and copyright shell companies Livewire Holdings, AF Holdings, Ingenuity13 and Guava LLC — to obtain copyrights to adult movies, some of which they filmed themselves, and then uploaded the movies to file-sharing websites like The Pirate Bay in order to lure people to download the movies.
Between 2011 and 2014, the scheme netted Steele and Hansmeier approximately $6 million, according to U.S. Attorney Andrew M. Luger. Forbes put the amount closer to $15 million.
“The defendants in this case are charged with devising a scheme that casts doubt on the integrity of our profession,” Luger said. “The conduct of these defendants was outrageous: They used deceptive lawsuits and unsuspecting judges to extort millions from vulnerable defendants… [M]y office will use every available resource to stop corrupt lawyers from abusing our system of justice.”
According to the indictment, Hansmeier and Steele set about learning the identities of their potential victims by filing bogus “John Doe” copyright-infringement lawsuits against hundreds of people at once. Then, they sought permission from courts to subpoena internet service providers for subscriber information associated with IP addresses allegedly used to download porn movies. After getting the subscriber information, the defendants used extortionate letters and phone calls to threaten the victims with enormous financial penalties and public embarrassment unless they agreed to pay a settlement of thousands of dollars.
Various courts began to restrict the attorneys’ ability to sue multiple individuals in single copyrights lawsuit, so Steele and Hansmeier changed their tactics and began to file lawsuits falsely alleging computer systems belonging to their sham clients had been hacked. To support the ruse, the attorneys recruited sham defendants who agreed to be sued in exchange for Hansmeier and Steele dropping other lawsuits against them. Hansmeier and Steele used the sham defendants as named defendants in order to seek discovery against their supposed “co-conspirators.”
According to the indictment, when courts became suspicious of the attorneys’ tactics and motives, Steele and Hansmeier began a long process of lies and deceit designed to conceal the truth and deflect responsibility from themselves. As courts began to uncover the defendant’s unscrupulous litigation tactics, judges began denying the defendants’ requests to subpoena ISPs, dismissing lawsuits, accusing the defendants of deceptive and fraudulent behavior, and imposing sanctions against the defendants and their associates.
For example, on May 6, 2013, the District Court for the Central District of California issued an order imposing sanctions against the defendants. The order read, in part:
Plaintiffs [including Hansmeier and Steele] have demonstrated their willingness to deceive not just this Court, but other courts where they have appeared. Plaintiffs’ representations about their operations, relationships, and financial interests have varied from feigned ignorance to misstatements to outright lies. But this deception was calculated so that the Court would grant Plaintiff’s early-discovery requests, thereby allowing Plaintiffs to identify defendants and exact settlement proceeds from them. With these granted requests, Plaintiffs borrow the authority of the Court to pressure settlement.
In September 2016, the Supreme Court of Minnesota stripped Hansmeier of his license to practice law in the state. He was arrested Friday in St. Paul, Minn. Steele maintains a law office in Chicago but lives in Florida, where he was arrested on Friday. A third partner in the Prenda Law legal hydra, Paul Duffy, died in 2015.
The FBI and the Criminal Investigation Division of the IRS cooperated in the investigation that led to the federal indictments.
Images: top, Paul R. Hansmeier; mid-page, John L. Steele.
