MINNEAPOLIS – Paul Hansmeier, one of the attorneys behind the infamous, now-shuttered “copyright troll” law firm Prenda Law, entered into a plea agreement with prosecutors last Friday.
Under the agreement, Hansmeier has accepted a guilty plea on two of the 17 seventeen counts pending against him in a federal indictment filed against him in U.S. District court in Minnesota. The agreement gives leave for Hansmeier to withdraw his guilty plea, however, if he successfully appeals the district court’s denial of his motion to dismiss the charges.
Per the terms of the agreement, the U.S. Attorney’s Office for the District of Minnesota also agrees not to charge Hansmeier with other crimes of which it is aware, in exchange for his guilty plea on two charges.
“The defendant agrees to plead guilty to Count 1 of the Indictment, charging him with Conspiracy to Commit Mail Fraud and Wire Fraud in violation of 18 U.S.C. §1349 and Count 17, charging him with Conspiracy to Commit Money Laundering in violation of 18 U.S.C. § 1956(h),” the plea agreement states. “If at the time of sentencing the defendant has complied with the terms of this agreement, any remaining counts will be dismissed. In return for his plea of guilty to Count 1 and Count 17 of the Indictment, the United States Attorney’s Office for the District of Minnesota agrees not to charge the defendant with other crimes known to it as of the date of the defendant’s Rule 11 hearing, including conduct associated with the defendant’s bankruptcy proceedings.”
The plea agreement contains a lengthy statement of facts concerning the history of the sham copyright litigation engaged in by Hansmeier, his former partner, John Steele (Steele entered a guilty plea himself, last year) and others associated with Prenda Law and other business names under which they operated. Part of that factual history involves a transition from simply representing adult producers in copyright cases to creating adult content directly, which they then used to seed torrents and thereby find potential targets for their demand letters and litigation threats.
“(B)eginning in or about 2011, defendants created various entities they surreptitiously controlled, including AF Holding LLC, Ingenuity 13 LLC, Guava, LLC and LW Systems LLC,” the plea agreement states. “The defendants used these entities as plaintiffs in copyright infringement lawsuits the defendants filed against individuals who had downloaded movies the defendants had uploaded to BitTorrent websites.”
Part of the problem with this approach, of course, is that attorneys must disclose any financial interest they have in a case – a duty which Hansmeier and Steele flagrantly ignored, according to prosecutors.
“After filing the initial complaint in these lawsuits, defendants then filed ex parte motions seeking to obtain early discovery regarding the identities of the subscribers associated with the IP Addresses used to download the movies, and therein represented to the court that the unnamed defendants downloaded the movies without authorization,” the plea agreement states. “In each of these lawsuits and the accompanying ex parte motions for early discovery, Hansmeier and Steele concealed from the court that they: (a) uploaded their clients’ movies to BitTorrent websites, (b) filmed their own pornographic movies in order to upload them to BitTorrent websites, and (c) owned and controlled the plaintiffs and thus had a significant personal stake in the litigation. Hansmeier and Steele knew that these facts were material to the courts’ decisions whether to permit early discovery.”
According to the plea agreement, “between 2011 and 2014, defendants and their entities received more than $3,000,000 in fraudulent proceeds from the lawsuits described above.”
While the agreement includes recommendations on sentencing, it also notes the “foregoing stipulations are binding on the parties, but do not bind the Court.”
“The parties understand that the Sentencing Guidelines are advisory and their application is a matter which falls solely within the Court’s discretion,” the plea agreement states.
In addition to delineating the potential period of incarceration, the terms of the plea agreement also require Hansmeier to pay restitution to the victims of his crimes. Further, Hansmeier will be on the hook to pay restitution for all the crimes in the indictment, not just those to which he has pleaded guilty.
“The defendant understands and agrees that the Court will order him to make restitution for the entire loss caused by his fraud scheme and that the restitution order will not be limited the counts of conviction,” the agreement states.
