MINNEAPOLIS – John Steele, 45, formerly a principal partner in the now-infamous and defunct copyright-troll law firm Prenda Law pleaded guilty on Monday to federal felony charges of conspiracy to commit mail fraud and wire fraud, and conspiracy to commit money laundering.
The charges stemmed from Steele’s effort, in collaboration with colleagues Paul Hansmeier and the late Paul Duffy, to extort millions of dollars from consumers they accused of downloading pirated pornographic films. More problematic for the Department of Justice, which prosecuted the case, were the Prenda principals’ attempts to defraud state and federal courts nationwide as part of their criminal enterprise.
According to Steele’s admissions in the 16-page plea, he and Hansmeier, both licensed attorneys at the time, used the court system as a fulcrum in an elaborate plot that saw tens of thousands of victims pay to prevent potential copyright-infringement litigation. Between 2011 and 2014, the scheme netted the pair at least $6 million.
As part of the endeavor, Steele admitted he and Hansmeier created a series of sham entities — including Livewire Holdings, AF Holdings, Ingenuity13 and Guava LLC — to obtain copyrights to pornographic movies. They filmed some of the material themselves. They then uploaded the movies to file-sharing websites including The Pirate Bay in order to lure people to download the content.
Once internet users took the bait, Steele and Hansmeier filed bogus copyright-infringement lawsuits that concealed their role in distributing the movies, as well as their personal stake in the outcome of the litigation.
After fraudulently inducing courts to issue subpoenas to internet service providers in order to determine the identity of the persons assigned the IP addresses to which film downloads could be traced, Steele and Hansmeier blackmailed the victims, threatening them with enormous court-ordered financial penalties and public embarrassment unless they paid a $3,000 “settlement” fee.
To distance themselves from the specious lawsuits and any potential fallout, Steele admitted that he and Hansmeier created and used Prenda Law, Steele Hansmeier PLLP and Anti-Piracy Law Group, among other firms, to pursue their claims.
According to the plea, after various courts began to restrict the pair’s ability to sue multiple individuals in the same copyright lawsuit, they changed their tactics and began filing lawsuits falsely alleging that computer systems belonging to sham clients had been hacked. To facilitate their phony “hacking” lawsuits, Steele and Hansmeier recruited “ruse defendants,” who had been caught downloading pornography from a file-sharing website, to be sued in exchange for Steele and Hansmeier waiving their settlement fees while pursuing claims against their supposed “co-conspirators.”
According to the plea agreement, as courts began to uncover the attorneys’ unscrupulous litigation tactics, judges began denying their requests to subpoena ISPs, dismissing lawsuits, accusing Steele and Hansmeier of deceptive and fraudulent behavior and imposing sanctions against Steele and his associates.
The counts to which Steele pleaded were two of 18 against him. He faces a statutory minimum sentence of 40 years in prison, plus restitution, but the judge will have broad discretion in levying the actual sentence. According to attorney and blogger Ken “Popehat” White, the judge is likely to mete out 97-121 months, based on the stipulations in the plea.
“This is not a highly favorable plea agreement — Steele isn’t getting any killer deal (yet) for pleading guilty,” White wrote. “The feds made him plead to both mail fraud and money laundering — a ‘good deal’ would drop the money laundering. In addition, the feds made Steele agree to just about every [sentencing] guideline enhancement I can think of, rather than leaving those enhancements open to argue. Steele has truly hurled himself on the sword here.”
Hansmeier, 36, who was indicted with Steele in December 2016, has not yet been tried. A plea in his case may be difficult to arrange after Steele’s thorough confession.
“He’s, at best, second in the door, and can’t hope to get much credit for cooperation unless he starts giving up third parties,” White wrote, apparently suggesting the rabbit hole may be even deeper than previously thought.