Appeals Court Trashes Prenda's Appeal, Affirms Sanctions

from the many-shoes-dropping dept

The shoes keep dropping for Team Prenda (now basically down to just Paul Hansmeier and John Steele). As it appears that the FBI is getting close to bringing a criminal action against the two, it's big appeal in the 9th Circuit has fallen flat on its face. This was the appeal of Judge Otis Wright's blistering opinion, slamming Team Prenda for all sorts of dishonest and sketchy actions, passing on their info to law enforcement (possibly kicking off the FBI investigation) and issuing $81,319.72 in legal fees and sanctions for the games they played with the court, involving copyright trolling, lying about who actually ran the "company" that was suing (Ingenuity 13) and otherwise general lying to the court.

Steele had insisted that they would win on appeal and that Judge Wright was impossibly biased against them, but when the case was heard over a year ago, it appeared to go very badly for Team Prenda. And that's confirmed today with this short and sweet ruling by the appeals court upholding Judge Wright's original ruling. The crux: all of the evidence basically showed that Wright was absolutely correct that Hansmeier and Steele (and Paul Duffy, who has since passed away) were up to no good:

Based on the myriad of information before it—including depositions and court documents from other cases around the country where the Prenda Principals were found contradicting themselves, evading questioning, and possibly committing identity theft and fraud on the courts—it was not an abuse of discretion for Judge Wright to find that Steele, Hansmeier, and Duffy were principals and the parties actually responsible for the abusive litigation. Similarly, it was not an abuse of discretion for Judge Wright to find that the Prenda Principals were indeed the leaders and decision-makers behind Prenda Law’s national trolling scheme.

Also this:

The district court did not abuse its discretion in ordering the Prenda Principals to post additional bond to cover Doe’s attorney’s fees on appeal. The district court had ample reason to do so. The Prenda Principals have engaged in abusive litigation, fraud on courts across the country, and willful violation of court orders. They have lied to other courts about their ability to pay sanctions.... They also failed to pay their own attorney’s fees in this case. Considering the Prenda Principals’ tactics throughout this case, it was not an abuse of discretion to increase the bond amount to cover the projected cost of attorney’s fees on appeal.

So, yeah, the grand appeal here has fallen completely flat. This is the second appeals court to do so, as the 7th Circuit did it a couple years ago too. At this point, it's difficult to see how either Hansmeier or Steele will keep their law licenses (though both have been filing ADA trolling cases in the meantime), and depending on how the FBI case goes, things may get even worse for them.

Filed Under: 9th circuit, copyright, copyright trolling, fraud, john steele, otis wright, paul duffy, paul hansmeier
Companies: prenda, prenda law

Bankruptcy Fight May Be The Least Of Team Prenda's Concerns, As The FBI Comes Knocking

from the whoo-boy dept

If you've been following the Prenda Law saga around here for any length of time, you're aware that it's been going on for years, with sketchy copyright trolling practices that appeared to include Team Prenda uploading their own content to torrent sites, tracking who downloaded them, and then filing questionable lawsuits. That scheme fell apart after a series of judges, led by Judge Otis Wright, called out Team Prenda for committing fraud on the courts, and referred the issue to the feds, while also hitting them with a fine. That was three years ago. Other courts piled on more fines and attorneys' fees -- and more referrals to the feds. After the second such referral, Ken "Popehat" White noted that these things take time, but that something would probably happen eventually:

The wheels turn slowly, friends, but make no mistake, the wheels turn. The wheels are grinding down Team Prenda, and doing so faster and faster every month. With two different federal judges referring the matter to state bars and the U.S. Attorney's office, the probability of bar investigations and federal grand jury investigations approaches certainty.

Of course, it's been three years since then and a few things have happened. One of the three main members of Team Prenda (though, probably the least involved of the three) passed away. But the other two are both facing bar complaints over ethical violations. Paul Hansmeier also famously tried to declare bankruptcy, but appears to have lied to the court in the process. Fight Copyright Trolls just recently had an update on that case, and suffice it to say, it's hilarious. Hansmeier has not just lost his lawyer after she told the court that she could no longer represent him and be a servant of the court (i.e., heavily hinting that Hansmeier was likely asking her to lie to the court), but he's also lashed out at the trustee handling his bankruptcy for... buying a new car.

And, of course, both Hansmeier and Steele have moved on to a revamped version of the same old trolling trick, but this time using the Americans with Disabilities Act as the fulcrum, rather than copyright law.

But, it appears that all that may be small potatoes. Because, as White told us three years ago, the wheels of justice do keep turning, and he now has strong indications that not only is the FBI actively investigating Steele and Hansmeier for fraud, but that they may be just about ready to move on to the next steps:

Based on my 21 years in the federal criminal justice system, I believe the letter reflects an active, determined investigation in its later stages. The letter represents an abandonment of operational security and confidentiality; it suggests the FBI no longer sees a need for stealth. That, in turn, suggests that the FBI believes it's already developed the evidence it needs to prove the substance of its case (that Team Prenda committed wire and/or mail fraud) and is just identifying as many victims as possible for potential witnesses and to establish the amount of damages. Bear in mind that under the Federal Sentencing Guidelines, the more money wrongdoers made, the more time they're facing.

Now, to be fair, over the years we've noted many times that the DOJ often misrepresents things in criminal filings, so it will be interesting to see what charges are actually filed, assuming that the case really is ready to move. But as White also noted, "Team Prenda needs federal criminal defense attorneys, and needs them right now."

Filed Under: ada, ada troll, copyright, copyright troll, fbi, fraud, john steele, paul hansmeier
Companies: prenda, prenda law

Next Shoe Drops For Prenda's Paul Hansmeier: Minnesota Law Board Seeks To Disbar Him

from the couldn't-happen-to-a-more-deserving-person dept

Well, well. In August, we saw that the Illinois Attorney Discipline Board finally decided to file a complaint against Team Prenda front man, John Steele. The complaint made it quite clear that the board had been spending a lot of time going through the fairly long list of questionable activities by Team Prenda in a variety of lawsuits across the country. If you somehow missed the Prenda saga, it was a group of copyright trolls who were shaking down lots and lots of individuals, to the point that they apparently decided to cut out the middleman, set up their own fake company, seed porn films themselves and then hide behind various "trusts" and offshore corporations. It was also pretty clear from the Illinois complaint that the board was planning to file a similar thing against the only "official" partner in Prenda, Paul Duffy... but Duffy had passed away just about a week before the complaint came out.

That left the third of the Prenda triumvirate, Paul Hansmeier, who had taken his skills for copyright trolling into a new business: ADA trolling of small businesses. Hansmeier would go around to small retail businesses in Minnesota and sue them for minor ADA violations, and just like with the Prenda scam, would demand a payout to drop the lawsuit. The whole thing was super scammy, leading small businesses who were just making ends meet to shut down in some cases. At the same time, Hansmeier has still been dealing with the aftermath of the various Prenda lawsuits where multiple judges around the country have demanded that he and Steele pay attorneys' fees for the people they sued on false pretenses. Hansmeier has been trying to avoid all of this by declaring bankruptcy. That hasn't been going all that well (more on that in a minute), but now he also has to deal with the possibility of being disbarred in Minnesota.

Yes, it looks like a similar disciplinary board to the one that went after Steele in Illinois, is now targeting Hansmeier in Minnesota. The Office of Lawyers Professional Responsibility has filed to take disciplinary action against Hansmeier, including the possibility of having him disbarred. The complaint goes through a number of reasons that Hansmeier deserves discipline and kicks off with the Spencer Merkel affair. If you don't recall, Merkel was one of the people sued by Team Prenda, who then revealed that he had originally agreed to take a dive in a Prenda lawsuit. Specifically, he had been caught in a Prenda trolling operation, and agreed to be sued and that he would cough up details (i.e., IP addresses/log files) as part of "discovery" in the lawsuit against him, and then the lawsuit would be dropped. It was a fairly transparent way for Prenda to get around the fact that courts had been blocking its discovery efforts in other cases. Just find a willing patsy who doesn't fight it, and get a new list of IP addresses to shake down. Except that Prenda screwed up, and sued him from a different company than promised and then went after him again later, leading him to reveal the whole thing.

Now, in the disciplinary action, the Minnesota Lawyers Professional Responsibility board reveals some more details of how Hansmeier actually recruited Merkel's lawyer, promising to get her another paying client in a different matter down the road as payment, and then setting up the whole operation. In other words, they have pretty detailed confirmation that the Merkel and his attorney had agreed to this deal... and then Hansmeier flat out lied in court after Merkel told the court about the deal:

At the January 25 hearing, respondent falsely state that there was no agreement with Merkel to settle the claims against him, stating:

I think it's very natural for a Defendant to want to say that this case is settled and there's no reason for it to continue. But again, if there's an agreement that he's going to be exonerated from liability, I would expect to see something in writing. I don't think I would -- well our client is [sic] not agreed to settle the matter I guess is the bottom line.

The filing against Hansmeier is filled with examples of him moving money around and misrepresenting finances over and over again. For example, as the Merkel case went south, Hansmeier first transferred $65,970 from his current firm "Alpha Law" to his new firm "Class Action Justice Institute" (which he later used for another similar type of sketchy shakedown game involving bogus class action lawsuits. Then he transferred another $80,000 from Alpha law to his personal bank account... and then shut down Alpha, telling the state that "there are no pending legal, administrative or arbitration proceedings by or against the limited liability company..." completely ignoring that Alpha was on the hook for attorneys' fees in the Merkel case.

Then there's the whole Monyet, LLC saga, that has been discussed before. Monyet was a trust set up by and controlled by Hansmeier, though he continually insisted he had no control over it or gave just weird nonsensical answers about it. It appears that he even lied about Monyet under oath:

On June 30, 2014, respondent testified under oath at a judgment debtor's examination before the district court. When asked about a May 3, 2011, $75,000 check from Alpha Law Firm to Monyet, LLC, respondent testified as follows:

Q. Do you know what Monyet, LLC, is?

A. It's presumably a limited liability company.

Q. I see you're the signatory to the check and you're also the signatory on the back of the check. You don't know what Monyet, LLC is?

A. To the best of my recollection, the Monyet, LLC entity is simply an account associated with estate planning but I don't know -- the reason. I can't tell you how it operates within the whole estate planning scheme is because I did not set up the estate planning myself that's something that's well beyond my expertise. * * * A. I mean yeah and that's my testimony that Monyet distributions were made for estate planning purposes not for Alpha Law Firm.

Q. Whose estate planning then?

A. It's just setting up a trust for well now my son I guess he would be the beneficiary of it.

On July 2, 2014, respondent again testified under oath at a judgment debtor's examination regarding Monyet, LLC, as follows:

Q. And it's [Monyet, LLC] a limited liability company organized in the State of Delaware, is that correct?

A. I don't know where it's organized. I don't know if that's correct or incorrect.

Q. Well who set up Monyet, LLC?

A. An attorney.

Q. On whose behalf?

A. It -- I'm not aware of the circumstances of on whose behalf it was.

Q. Was it at your direction?

A. I'm trying to be precise here because I've botched this once before. The way I would describe it to be most precise and hopefully most accurate, is that it was set up as a part of the trust and estates planning and that's how I describe it.

Q. Trust and estates planning for whom?

A. I guess I would describe it as my family.

Q. And who makes up your family? * * * A. Okay. Well my family consists of me, my wife and my baby son.

Q. Do you know where this money is located?

A. I do not.

Q. Well how would you ever as benficiary of this money ever get any of it?

A. I don't think I could get any of it.

That last line is kind of important. Because, the board notes, Hansmeier himself is identified as the manager of Monyet, LLC on the operating agreement for the trust. Later, Hansmeier himself set up a brokerage trading account at Scottrade for Monyet, listing himself as the manager. He later did the same with TCF Bank. And then there's the fact that not long before the hearing where he stated all of the above, Hansmeier was actively moving money around with Monyet.

On June 28, 2013, respondent transferred $10,000 from Monyet to Livewire Holdings, LLC, a company in which he was an investor.

From May 2013 through at least May 2014, respondent signed at least 19 authorizations directing Scottrade to make wire transfers from the Monyet, LLC account to various entities totaling $590,033.50.

It then lists out those transfers, including a bunch to his other firm listed above "Class Justice" and a bunch to his wife, including the largest single transfer of $175,000 on November 22, 2013. It's pretty incredible to argue that you barely even know what the trust is for, where it's set up, or who's in charge of it when you're the one managing it and shifting money around with it all the time. It's especially incredible to do that multiple times while under oath. But, that's Paul Hansmeier for you.

From there, the complaint discusses more sketchy behavior by Hansmeier in the Lightspeed case. Once again, it involves Hansmeier trying to dance out of being in trouble by lying under oath. In this case, it involved the efforts seeking attorneys fees against him in the Lightspeed case, where Hansmeier insisted that he had not been notified of the motions against him, claiming that he was working for Alpha Law Firm rather than Prenda. The judge called him on it, noting that it was clear that he worked with Prenda, and Hansmeier insisted that he did not and had never made an appearance for Prenda. The complaint then goes on to list a whole bunch of documents that Hansmeier had signed, claiming to work for Prenda Law.

Also: "From December 2011 through February 2012, respondent issued and signed checks drawn totaling more than $41,000 on the Alpha account that were used to pay Prenda's payroll obligations." So, yeah.

And also:

From December 2011 through June 2012, Prenda paid at least $350,107.20 directly to respondent. From March 2012 through November 2012, Prenda paid at least $1,011,000 to Under the Bridge Consulting, a company in which respondent had a 50% ownership interest. Under the Bridge Consulting, in turn, paid to respondent at least $480,000 of funds paid to them by Prenda.

So, yeah. The claim that Hansmeier has nothing to do with Prenda... and claiming so under oath... perhaps not so smart. Later in the filing, in discussing another case, it notes similar games concerning Hansmeier pretending to have no role with Prenda.

Q. Did you ever work for Prenda Law, Inc.?

A. No.

Q. You were never attorney of record with Prenda Law, Inc.? You were never of counsel there?

A. I guess I'd have to go back over the various appearances that I filed. I don't recall anything specifically. Does that mean that there's not one on record somewhere, I can't say with exact certainty. * * * Q. So Steele Hansmeier was formally dissolved and then as soon as you dissolved Steele Hansmeier, did you at that point work for Prenda Law at all?

A. Not as an employee, no.

Q. In what capacity?

A. Part of my role -- I guess I had no formal affiliation with Prenda Law. I don't believe I can point to any specific affiliation. Part of it we wanted to aid Prenda Law in transitioning from, you know, Steele Hansmeier operating the cases and whatnot. Prenda Law was appearing in a lot of the cases, so there's a natural, you know, kind of aid them, help them facilitate the transfer.

Q. So who was responsible for handling the financial aspect of the transition?

A. I believe Mr. Steele would have been in charge of managing -- the handling of funds.

As the filing notes, this was "false and misleading."

Meanwhile, the Minneapolis Star Tribune, who first publicized this new development, also reports on the fact that Hansmeier's attempt to hide in bankruptcy isn't going so well either:

As Hansmeier’s creditors closed in, he filed for bankruptcy protection seeking to reorganize more than $1.5 million in debts, taxes and court sanctions. He has asked the federal bankruptcy court to let him restructure his debts so that he can move on with his life.

Neither his creditors nor the bankruptcy trustee think that should happen. They filed more than 500 pages of documents late last week objecting to his plan, arguing that Hansmeier filed for bankruptcy protection “in bad faith.”

U.S. Bankruptcy Trustee Daniel McDermott characterizes Hansemeier’s financial disclosures as incomplete and misleading. McDermott alleges that Hansmeier made fraudulent transfers of assets to his wife, Padraigin Browne, and that they’re selling their condo in The Carlyle, a downtown Minneapolis luxury high rise, without court approval.

A few years ago, concerning Hansmeier's partner in crime, John Steele, I noted that he reminded me of people who incorrectly think that they're smarter than everyone else, and that they can just talk their way out of their own actions when they're caught trying to "outsmart the system." It would appear that Hansmeier is in that same camp. No wonder they paired up.

Filed Under: discipline, john steele, minnesota, minnesota bar, paul duffy, paul hansmeier, spencer merkel
Companies: alpha law, alpha law firm, class action justice institute, lightspeed, prenda, prenda law

Illinois Attorney Discipline Board Finally Moves Against Prenda Mastermind John Steele

from the going-down dept

People have been wondering for more than two years how it was possible that Team Prenda was still allowed to practice law. With both John Steele and Paul Hansmeier having moved on to shaking down small businesses by abusing the ADA, while still getting regularly smacked around in court, it seemed amazing that they were still practicing law. After all, it was in May of 2013 that Judge Otis Wright referred Team Prenda to their associated state bars (along with the feds and the IRS). And nothing seemed to be happening -- though, as Ken White noted, long ago, the wheels of justice "turn slowly, but make no mistake, the wheels turn."

And it appears they've finally come around on John Steele. The Illinois Attorney Registration and Disciplinary Commission has just filed a humdinger of a complaint against John Steele. It's worth a read, but we'll go through some highlights below. Let's just say that the IARDC may have taken a long time to get this done, but there appears to be a good reason for that. Pretty much everything is in there -- and it must have taken quite an effort to pull it all together. It goes through the history, with Hansmeier and Steele starting a copyright trolling business, and then pretending to hand it off to Paul Duffy* but still actually running the copyright trolling business they pretended they'd left behind.

There are seven counts against Steele, and if you've been following the Prenda saga, none of them will surprise you. The first count is for "Dishonest Conduct and Fraud on the Court," involving everything from Alan Cooper's fraudulent signature in the AF Holdings and Ingenuity 13 cases, to pretending those cases were not connected. The complaint goes through a rather detailed blow-by-blow account of all of Steele and Hansmeier's questionable activities. And it concludes that all of the following were misconduct by Steele:

bringing a proceeding without a basis in law and fact for doing so that is not frivolous, by conduct including filing lawsuits without supporting facts, under the names of fictional entities, and misusing the identity of Alan Cooper, for purposes of exacting settlements, in violation of Rule 3.1 of the Illinois Rules of Professional Conduct;

knowingly disobeying an obligation under the rules of a tribunal by conduct including failing to abide by Judge Wright’s order quashing discovery, and failing to appear as ordered at the OSC hearing, in violation of Rule 3.4(c) of the Illinois Rules of Professional Conduct;

in a pretrial procedure making a frivolous discovery request(s), by conduct including filing the motions for early discovery on behalf of shell corporations in violation of Rule 3.4(d) of the Illinois Rules of Professional Conduct;

in representing a client, using means that have no substantial purpose other than to embarrass or burden a third person, or using methods of obtaining evidence that violate the legal rights of such a person, by conduct including sending the settlement shakedown letters in violation of Rule 4.4 of the Illinois Rules of Professional Conduct;

conduct involving dishonesty, fraud, deceit, or misrepresentation, by conduct including filing lawsuits without supporting facts, under the names of fictional entities, misusing the identity of Alan Cooper as a principal of Ingenuity 13 and AF holdings, for purposes of exacting settlements, in violation of Rule 8.4(c); and

conduct that is prejudicial to the administration of justice, by conduct including failing to respond to reasonable inquiries posed by the tribunal regarding lawsuits Respondents initiated, in violation of Rule 8.4(d) of the Illinois Rules of Professional Conduct.

So, yeah. And that's just the first count. I love the fact that the ARDC flat out calls them "settlement shakedown letters." No beating around the bush here.

The second count involves the lawsuit that Alan Cooper filed against John Steele and Prenda for forging his signature and getting Cooper wrapped up in Steele's shakedown business. It turns out that Steele "settled" the case by paying Cooper $35,000. However, he, nor Duffy, ever wrapped up the fact that the lawsuit was also against Prenda Law. Apparently just last month, the court found that Prenda was in default and should pay Cooper another $5,000 for humiliation and $250,000 for punitive damages. Steele appears to have ignored basically all of that. Oops.

Count number three involves Guava v. Spencer Merkel case, in which Team Prenda was once again smacked around and ordered to pay a pretty big set of attorneys' fees. If you don't recall, this particular case had some "special" features. It started with a fairly sketchy CFAA claim rather than a copyright claim (this was tap dancing, in which Steele pretended that people had "hacked" into the computer to download the videos that he himself had apparently put up). There were also claims that team Prenda would find the opposing lawyer who was actually working with them, leading one judge to flat out ask if the two sides "were in bed together." And that story was given a lot more credence when Spencer Merkel admitted that he'd agreed to "take a dive" for Team Prenda in exchange for getting off easy in Prenda's accusations against him. After running through the detailed history there, it lists the same basic "misconduct" list from the first charge, but for the Guava case.

Count number four is about the Lightspeed v. Anthony Smith case (the one where Team Prenda was just last week ordered to pay another $94,000). Once again, the IARDC walks through all the details... and charts out the misconduct list again.

Count number five is still about the same Lightspeed case, but this time related to "obstructing discovery and dishonest conduct." As you may recall, Steele directly reached out to falsely tell parties that subpoenas had been quashed, even though they had not been. These were subpoenas looking into whether or not Steele was lying in pleading poverty to the court to try to get out of paying yet another ruling against him. Or, hell, let's just let the IARDC tell it:

On February 19, 2014, Judge Herndon entered an order denying Respondent’s motion to quash the subpoenas Smith issued in case number 12-CV-00889. Respondent learned of the order shortly after it was entered.

On March 3, 2014, two weeks after Judge Herndon had denied Respondent’s motion to quash, at Respondent’s direction Paul Duffy sent a file-stamped copy of the motion to quash to JP Morgan.

Paul Duffy’s actions, in sending the file-stamped motion to quash to JP Morgan after it had already been denied, were intended to mislead JP Morgan officials into believing that they did not have to respond to Smith’s subpoena because it was subject to a motion to quash.

As of April 16, 2014, there was no stay in place in 12-CV-00889. On that date, Respondent Steele sent an e-mail to officials at Sabadell informing them that a stay was in place in case number 12-CV-00889. Respondent Steele’s statement was false and Respondent Steele knew it was false because he knew that a stay was not in place when he made that statement in his e-mail, and his statement that a stay was in place was intended to mislead Sabadell officials into thinking that they did not have to comply with the subpoena Sabadell had received.

The misconduct here included:

making a false statement of fact to a tribunal, by conduct including claiming an inability to pay the sanction awards imposed against them, in violation of Rule 3.3(a)(1) of the Illinois Rules of Professional Conduct;

knowingly disobeying an obligation under the rules of a tribunal by conduct including failing to comply with reasonable discovery requests, in violation of Rule 3.4(c) of the Illinois Rules of Professional Conduct;

conduct involving dishonesty, fraud, deceit, or misrepresentation, by conduct including obstructing discovery and misleading the court in an effort to avoid paying sanction awards imposed against them, in violation of Rule 8.4(c); and

conduct that is prejudicial to the administration of justice, by conduct including obstructing discovery and misleading the court in an effort to avoid paying sanction awards imposed against them, in violation of Rule 8.4(d) of the Illinois Rules of Professional Conduct.

Count six is about more of the same in another Guava case -- one of the ones involving what appeared to be another Alan Cooper situation with the ever changing person "Allan Mooney"/"Alan Mooney"/"Alan Mony." This was in one of the St. Clair County CFAA cases, that sought to hide that it was really a copyright case. Again, the IARDC finds all sorts of misconduct.

Finally, the seventh count involves that time when Steele (and Duffy and Prenda) sued Alan Cooper and his lawyer, Paul Godfread, (and a bunch of internet commenters) for defamation. As you may remember, Steele quickly dismissed his own direct lawsuit against them (perhaps once he realized that he had not followed the proper procedures in Florida for filing a defamation case), though the case technically filed by Prenda lived on -- and was finally tossed out a few months ago.

But, as you may recall, there were some shenanigans there as well, where the original Prenda suit was filed in Illinois state court, which Cooper and Godfread removed to federal court, correctly noting that the plaintiffs were in Illinois and they were in Minnesota (which creates diversity, which allows the case to be removed). Except, Team Prenda then lied to the court, said the original complaint had not been served, and then filed an amended complaint that randomly added Paul Hansmeier's Minnesota law firm, so that there would no longer be diversity (diversity is only if there is no overlap in states between plaintiffs and defendants). Not only was this a pretty blatant (and bullshit -- since none of the already questionable statements that the suit claimed were defamatory about Hansmeier's law firm) attempt to try to get around having the case removed to federal court, it also involved lying to the court to file that amended complaint. Then there were more games, where Duffy tried to get the case sent back to the state court again, playing some more tricky games (this post is getting long enough so you can read the full story to get the details).

And, yup, the IARDC was paying attention to all of that too.

In the end, it's difficult to see how Steele gets out of this in a manner that will ever let him practice law again. There's a lot in there. The IARDC filing is pretty damn thorough, though it does miss a few of Steele's other adventures -- such as his infamous comedy routine in a Florida court where he was not allowed to practice law (but appeared to be doing so anyway). Also missing: the evidence suggesting that Steele himself was uploading all the videos he'd later claim were infringing. But, you know, there's plenty in there already.

One wonders if something similar will show up for Hansmeier in Minnesota at some time soon. And if the federal investigations will eventually become public as well...

* As a side note, Duffy, the third wheel with Hansmeier and Steele, who was the only official partner of Prenda Law, passed away last week, which explains why he's discussed throughout, but is not listed as a respondent himself.

Filed Under: discipline, iardc, illinois, illinois bar, john steele, paul duffy, paul hansmeier
Companies: prenda, prenda law

Team Prenda Smacked Around Again, Ordered To Pay Another $94,000

from the punching-bags dept

It appears that the courts are now just piling on when it comes to Prenda Law. In the case of Lightspeed v. Anthony Smith, the court that was one of the first to call out team Prenda for "flat-out lies" and then blasted their weak attempt to plead poverty -- leading, instead, to holding Team Prenda in contempt -- has struck again. Having lost badly on appeal, the district court slammed the lawyers again, arguing that Team Prenda lied to the court and obstructed the discovery process concerning where they hid their money. It ordered sanctions of $65,263 and asked Smith's lawyers at Booth Sweet to submit their costs to be added on to the total. Those costs came out to $94,343.51 -- and Prenda lawyers John Steele and Paul Duffy complained that the number was unfair.

Not surprisingly, the court is not buying what Steele and Duffy are selling:

Steele objects to the submitted expenses.... Steele’s objections are not well taken. As is customary for Steele, his objections minimize his misconduct and distort the facts of the case. For the reasons discussed herein, the Court finds that all of the submitted expenses are reasonable and recoverable. The Court awards sanctions against Steele and Duffy in the amount of $94,343.51, apportioned equally between Steele and Duffy. The sanctions shall be paid on or before August 10, 2015.

Note that this filing came out on August 10th. So the judge, David Herndon, basically said pay up now.

This litigation has been entirely frivolous. Moreover, Lightspeed’s counsel’s falsehoods and obstructionist tactics have created significant costs for Smith. The Court agrees that the submitted expenses, costs and fees are eminently reasonable given the history of this litigation and the more than a year Smith spent defending against obstructionist tactics and engaging in extensive discovery to obtain proof of Duffy and Steele’s misconduct.

Of course, with more and more of these types of rulings piling up, it still raises questions as to how the lawyers of Team Prenda are still allowed to practice law -- with both Steele and Paul Hansmeier having moved on to a very similar scam in shaking down small businesses over seemingly trivial ADA violations.

Filed Under: anthony smith, contempt of court, david herndon, john steele, paul duffy
Companies: lightspeed, prenda, prenda law

Team Prenda Gets Hit Hard With Contempt Sanctions For Lying To Court

from the how-many-shoes-are-there-to-drop? dept

It looks like Team Prenda has been smacked around once again. This is in the Lightspeed case -- which is one of the rare earlier cases where they were actually representing a real third party, rather than a made up entity that they really owned themselves. This was the case where they tried to drag Comcast and AT&T into the lawsuit and it all failed terribly. If you don't recall, in late 2013, the district court smacked them around as judge Patrick Murphy clearly figured out what was going on: "The litigation smacked of bullying pretense." Yup, you got that right. The defendant, Anthony Sweet, represented by Prenda killers Booth Sweet, asked for attorneys' fees and got them at the end of 2013, with the court ordering Team Prenda to pay up $261k, saying that Team Prenda "flat-out lied" to the court.

In response, Team Prenda pleaded poverty, saying they couldn't pay up, but the court found them in contempt, arguing that even the financial statements they had filed with the court appeared to be submitted with the intent to deceive the court. Following that, Booth Sweet issued subpoenas trying to reveal more information on how Team Prenda had been hiding their money, leading Prenda mastermind John Steele to tell various banks that the subpoenas had been quashed when they had not been. That, as you may imagine, is not a good idea.

So it was somewhat surprising, last November, when the court failed to add more sanctions, saying that while it didn't trust Team Prenda, Booth Sweet hadn't presented enough evidence to make its case, despite all of the issues uncovered previously. However, late last week, the court changed its mind. After seeing more evidence, it believes that Team Prenda, once again, lied to the court and obstructed the discovery process. Steele and Paul Hansmeier tried to defend themselves, but the court doesn't buy it. Paul Duffy didn't even bother to respond to the court, so it assumes that he was "intentionally obstructive."

First up, we have the bogus claims by Steele that the subpoenas about his financial info had been quashed:

This new information demonstrates that, on January 29, 2014, Steele informed JP Morgan he intended to file a motion to quash subpoenas issued by Smith requesting Lightspeed’s counsel’s financial records. The following day, Steele sent a copy of said motion to JP Morgan without a file stamp. Several days later, JP Morgan requested a file stamped copy from Duffy. Duffy finally supplied a file stamped copy of the motion to quash on March 3, 2014 - two weeks after the Court had denied the motion and allowed discovery to proceed. Without any defense from Duffy, the Court takes his actions as intentionally obstructive, as he had reason to know the motion to quash had been denied at the time he relayed it to the bank.

Smith also points to communications in the record between Steele and Sabadell United Bank on April 16, 2014..., in which Steele said the subpoena matter was stayed on April 4, 2014. Just five days before, Steele acknowledged that the Court’s stay order did not pertain to the subpoenas, but rather a joint motion for contempt that had been filed by Smith weeks earlier. Steele agreed to resolve any misunderstandings about the subpoenas being withdrawn, but he clearly did not do so based on his April 16th email to Sabadell Bank. Despite Steele’s explicit knowledge that discovery of his financial records had not been stayed, he proceeded to inform the bank that a stay was in place. This demonstrates his knowing interference in Smith’s discovery efforts.

Based on the above, the Court finds that Duffy and Steele both engaged in unreasonable, willful obstruction of discovery in bad faith. As such, discovery sanctions are warranted as to Duffy and Steele.

Next up, a discussion of how Steele and Hansmeier insisted they had no assets at all and couldn't pay the sanctions... while at the same time Steele was doing tons of renovations on his home and claiming (in his divorce proceedings...) that he had assets of over $1 million.

Smith also provides the Court with newly discovered financial evidence to support his assertion that, despite their pleas of insolvency, Steele and Hansmeier had sufficient assets to satisfy the Fee Order. On January 29, 2014 Steele and Hansmeier both signed and filed memoranda claiming the Court’s sanction posed a “crippling financial liability” on them.... Similarly, at a hearing on February 13, 2014, they asked the Court for leave to show inability to pay....

With regard to Steele, new evidence reveals that, in the two months before he filed his memorandum on January 29, 2014, he deposited over $300,000 into a new bank account with Sabadell Bank.... Moreover, within a month of asking the Court for leave to show his insolvency, Steele wrote checks totaling nearly $200,000, some of which were written to himself, for expenses related to home renovations. Between April and September of that year, Steele had deposits in that account totaling over $100,000. Steele briefly held a second account with Sabadell between September and October, into which he deposited $50,000, most of which he paid out to himself. Smith additionally points out that the value of Steele’s home more than doubled from April 2013 (when he purchased it) to October 2014 (when it was on the market). Further, on November 12, 2014, Steele still pled insolvency. Yet, just one month later, he represented in his divorce proceeding that his assets approached $1.3 million

Then there's Hansmeyer. It appears that Booth Sweet figured out the shell company where he's been hiding his money as well:

As to Hansmeier, Smith presents evidence that, in the years leading up to the judgment against him, Hansmeier had transferred nearly half a million dollars to a company called Monyet LLC..., of which Hansmeier was the sole member, manager, and signatory for its accounts .... In a debtor’s exam of a related proceeding in June 2014, Hansmeier admitted that Monyet, LLC was set up as a trust for his son for purposes of estate planning .... However, documents from Scotttrade, Inc. reveal that Monyet, LLC was not solely associated with estate planning, as the bulk of its assets went towards expenses such as payment of appellate bonds and attorney’s fees, investments in Liverwire Holdings, LLC, and loans to his Class Justice LLC law firm .... Said expenditures occurred throughout the 2013 year and up to May 2014, demonstrating that Hansmeier had access to the Monyet funds both before and after he pled insolvency to the court.

In light of the above facts, the Court finds Steele and Hansmeier in contempt. The Court finds that the newly discovered evidence directly contradicts their claims of insolvency.

Yup. At the same time that Hansmeier was pleading insolvency to the court, he was using his own shell company to give himself money to set up his big ADA trolling operation, financed with the funds he was hiding from his copyright trolling operation.

Given all of this flat out deceit, it's actually a bit anti-climactic that the court then orders sanctions of just $65,263 against Steele and Hansmeier for contempt of court over the lies. As for the obstruction of discovery, the court orders Duffy and Steele to pay Booth Sweet's costs, which the lawyers are told to submit. Some people (including us...) are still reasonably wondering why none of this pattern of deceit, lying and abusing the court system still have not resulted in anything more serious. However, these court records are likely to be useful for those facing either Steele or Hansmeier in their new careers as ADA trolls...

Filed Under: contempt, john steele, paul duffy, paul hansmeyer
Companies: lightspeed, prenda, prenda law

Prenda Lawyer's ADA Shakedown Efforts Running Into Resistance From Public, Judges

from the hoping-this-ends-up-in-tears-and-sanctions-as-well dept

Paul Hansmeier, having learned all he needs to know about practicing law from his years in the trolling trenches as part of Prenda Law, is now shaking down businesses using ADA (Americans with Disabilities Act) lawsuits. This new (but not really) approach is slightly more palatable to the general public than attempting to fish a few bucks from randy torrenters via infringement lawsuits, but not by much. Those on the receiving end of these shakedown efforts don't see much difference between Hansmeier's new approach and the actions that netted him and Prenda Law sanctions from multiple courts.

Hansmeier still seems enthralled with the possibility of easy money, even if his experience with Prenda Law didn't exactly pan out the way its principals hoped. Most are still in the process of extracting themselves from the flaming wreckage of Prenda, but they're limping away, rather than strutting. Some may even face jail time for contempt.

Hansmeier and his non-profit (Disability Support Alliance) -- which exists nowhere but the Minnesota business registry and as a nominal plaintiff in his 50+ ADA lawsuits -- are running into roadblocks on Easy Buck Ave. One of the businesses he recently sued addressed his allegations by filing a $50,000 counterclaim for abuse of process and civil conspiracy.

Now, there's more trouble on the way.

Cal Brink was tired of the lawsuits that just kept coming. Since the first suit claiming lack of disability access was filed more than a year ago, businesses in this southwest Minnesota town of nearly 14,000 people have been worried that they, too, would be hit.

Nine lawsuits have been filed here so far by the Disability Support Alliance, a nonprofit group formed last summer, including one against the only bowling alley in town. The owner said he will soon close rather than pay the DSA’s $5,500 settlement offer or make the $20,000 of changes needed to comply with the Americans with ­Disabilities Act.

“Nobody fights them, because it’s going to cost you more to fight,” said Brink, executive director of the local Chamber of Commerce.

Now Marshall is fighting back. Working in concert with the Minnesota State Council on Disability, Brink developed an access audit for local businesses, allowing them to develop a plan to fix ADA issues and potentially to ward off litigation.

The plan has won the attention of the state Department of Human Rights, which hopes it could be used in other communities hit by serial litigation.

Since the putative goal is to improve access for the disabled, you'd think something called the "Disability Support Alliance" would be behind it. But the DSA isn't about improving access. It's about making money. Eric Wong, a member of the four-person-strong DSA says companies just need to pay it first and worry about complying with the law later.

His group “is currently in the process of producing a voluntary mass settlement agreement for those businesses in Marshall that are ready to confess to their crime, fully comply … and pay the damages/restitution that they are liable for under the law,” Wong said in an e-mail.

“The lawsuits will stop when there is no more access crime to prosecute,” he said. Many businesses “fail to understand that … we are now a zero tolerance state.”

Roughly translated: the trolling will continue until it's run off the rails by the public or the courts. The lawsuits have already caught the eye of Hennepin County's chief judge, which noted that the flurry of filings "raised the specter of serial litigation" and has ordered all DSA/Hansmeier's lawsuits filed in this county be handled by one judge. This will probably prompt Hansmeier to take his "business" elsewhere, rather than deal with extra scrutiny from a judge who won't have to connect the dots between multiple filings in multiple venues. With any luck, Hansmeier's efforts elsewhere will be greeted with the same local resistance and judicial distrust.

Filed Under: ada, ada trolling, copyright trolling, eric wong, john steele, minnesota, paul hansmeier, serial litigation
Companies: disability support alliance, prenda, prenda law

Team Prenda Has A Very Bad Day In Court... And You Can Watch It All

from the make-sure-to-bring-lots-of-popcorn dept

It has been almost exactly two years since Judge Otis Wright released his blistering opinion of Prenda Law and the guys behind it, John Steele, Paul Hansmeier and Paul Duffy ("Team Prenda"). There have been various fights here and there since then, but the specific appeal in that case was finally heard yesterday and you can (and should) watch the whole damn thing (which runs almost exactly an hour and a half -- though if you're short on time, you can skip the Morgan Pietz part, and just focus on the first and last parts involving Team Prenda's lawyer, Daniel Voelker). If you follow a lot of appellate case or Supreme Court cases, you should know that it's generally not a good idea to read too much into any particular line of questioning, or even to assume which way judges are leaning. In this case, however, it would be nothing short of shocking if Team Prenda comes out of this story "winning" -- though, in an astounding bit of what appears to be cluelessness, Voelker said that Team Prenda would be perfectly happy having part of the case sent back to the lower court for criminal contempt sanctions. The three-judge panel seemed so shocked by this, that they asked him if he was sure, and one judge, Judge Tallman, pointed out:

"Do you understand that the maximum penalty for contempt is life imprisonment?"

In short, Team Prenda's own lawyer not only seemed completely unprepared and out of his depth in the hearing, he ended up arguing that rather than just pay $250,000, his clients would prefer to face criminal charges with the chance of life in prison (though, admittedly, such a sentence would be highly unlikely). From all indications, all three judges seem prepared to give Team Prenda what their lawyer appeared to be claiming they wanted.

There were many guffaw-worthy moments throughout the arguments, including Judge Tallman asking about the infamous Alan Cooper forgery, and Voelker playing really dumb, leading Tallman to ask if the "tooth fairy" made the document appear. Judge Tallman also repeatedly pointed out, in disbelief, that Voelker could assert that his clients had no idea how the document got forged when Cooper was Steele's "gardener" (actually housekeeper, but close enough).

All three of the judges seemed well aware of what Team Prenda was up to and how nefarious copyright trolling is. Judge Pregerson, who is 91 years old, talked about how his clerks explained to him how BitTorrent works, and then pretty clearly detailed how Team Prenda (and other copyright trolls) abuse the court system to "extort" settlements from end users. He concludes his description by saying, "Now that is just an ingenious... crooked, extortionate operation." Later he said, "They used our court system for illegal purposes -- to extort money." At least one of the other judges, Judge Nguyen referred to copyright trolling as "extortion" as well. The judges didn't refer to Prenda as a company or a law firm, but rather an "operation." It was a complete bloodbath. The judges also seemed well aware of other Prenda proceedings elsewhere in the country as well.

Basically, the judges seemed not just aware of, but very convinced by the evidence against Prenda's copyright trolling practices. Much of the opening part of the arguments consisted of the judges asking Voelker about those facts -- and Voelker dodging every one of those questions or responding that he didn't know, and then going back to procedural questions. The three-judge panel all found this completely unconvincing, and even where they were willing to grant potential procedural problems (mainly with the punitive sanctions on top of attorneys' fees), noted that if they rejected those, at the very least they were likely to (as mentioned above) just send the case back for criminal proceedings, which almost certainly would leave Team Prenda even worse off. Voelker's standard response: "They want their day in court." It sounds like they might get it.

There were two other really amazing tidbits, both from Judge Pregerson. First, right after describing the whole copyright trolling mess and (as noted above) calling it a "crooked, extortionate operation," he noted how historic this case was and how badly it was going to reflect on Voelker, even suggesting that Voelker may be implicated directly as well:

Pregerson: This is going to be written about for years and years, and you're probably going to be part of the story. They all will be. I don't know where this is going to end up. If they really want to have a trial on this... are you sure they want that?
Voelker: Absolutely your honor! They want a trial...
Pregerson: Is that what you want?
Voelker: Your honor, what I want is irrelevant. I'm just an appellate attorney. I'm not...
Pregerson: Well, you may be involved in this.
Voelker: I'm sorry your honor?
Pregerson: You may be involved!
Voelker: I don't believe so, your honor, with all due respect. I'm just the attorney.

And then that leads into this astounding bit of courtroom drama:

Pregerson: And you're a great lawyer.
Voelker: I really appreciate that.
Pregerson: That's what your ad says when you go on the internet, right? I wonder how many "super lawyers" there are in this country?
Voelker: There are a lot of them.
Pregerson: There are a lot of them. And a lot of them is BS too.

Ouch. It appears that Pregerson wasn't joking around either. From Voelker's website: Either way, I can't see how the hearing could have gone much worse for Prenda.

If you want another recap from someone who knows a hell of a lot more about how epically bad this went for Prenda, check out Popehat's take, which includes this:

I have never seen an oral argument go so badly for an advocate. The judges were immersed in the details of the record and plainly convinced that Prenda was a criminal operation that merited some sort of sanction. They clearly viewed the case not in isolation, but as part of a series of cases involving Prenda across the country — most of which are turning out very badly for Prenda. It seemed clear that they believed that Judge Wright had the power to impose some sort of sanctions, and that the record supported his doing so.

I know that many of the Prenda watchers among our readers here keep wondering how it is that Team Prenda is not yet in jail. There are a lot of reasons for that, frankly, but their appeal in the 9th Circuit may actually lead them much closer to being in jail, in part because their own lawyer effectively said that's what they wanted.

Filed Under: 9th circuit, alan cooper, copyright, copyright trolling, copyright trolls, daniel voelker, forgery, john steele, morgan pietz, paul duffy, paul hansmeier
Companies: af holdings, ingenuity 13, prenda, prenda law, steele hansmeier

John Steele Looking To Join Former Prenda Lawyer Paul Hansmeier In ADA Lawsuit Shakedown Business

from the once-a-parasite... dept

For more than a year now, Paul Hansmeier has attempted to offset the losses generated by the flagging Prenda Law brand with class action lawsuits predicated on supposed ADA (Americans with Disabilities Act) violations. Hansmeier isn't suddenly a do-gooding social warrior seeking equitable treatment for disabled Americans. He's just shifted the focus of his modus operandi. Hansmeier sues and sues and sues, offering out-of-court settlements to the defendants. This is money Hansmeier shouldn't theoretically be able to demand, but he's found a loophole that works for him.

In most cases, federal and state laws governing disability access don’t provide punitive relief. They can only be used to get property owners to correct shortcomings and to recover the plaintiff’s reasonable legal expenses. However, Hansmeier has been making claims under a Minnesota law that the property owners are committing a bias offense, which is a misdemeanor. In correspondence seeking a settlement with Peterson, he wrote that the law exposes defendants to a fine of $500 per incident, as well as punitive damages.

Using this, Hansmeier has demanded anywhere from $2,500 to $15,000 from the businesses he's sued. The end result has been some companies paying up rather than fighting back, while others have decided to cease doing business entirely. The 84-year-old owner of an antique shop targeted by a Hansmeier suit has closed her business as a result of his litigious actions. At the point it shut down, it was making around "$50 a day." Now, the business is completely inaccessible -- both to the disabled and non-disabled alike.

Like copyright trolling, the hit rate may be low but the margin is comfortably high. Only a small percentage of those sued need to pay up to ensure profitability. Hansmeier has managed to extract a few settlements at this point, which will only encourage him to continue exploiting a good law for negative ends. The biggest hurdle he faces now is his own terrible reputation.

[T]he chief judge of Hennepin County District Court has ordered that a half dozen of Hansmeier’s disability cases be reassigned to a single judge to ensure that they’re handled uniformly.

“ … the serial nature of these cases … raises the specter of litigation abuse, and Mr. Hansmeier’s history reinforces this concern,” Chief Judge Peter Cahill wrote.

The Minnesota attorney general’s office recently referred complaints about Hansmeier to the board that disciplines attorneys for ethical violations, even as he continues to press for cash settlements with small business owners.

The lure of easy money has now attracted another one of Prenda's principals: John Steele.

DarthSkeptic tweeted out two bits of information that point to Steele moving from one shakedown business to another.

On December 30, 2014, John Steele incorporated the "Accessibility Law Group, LLC" in the state of Illinois (screenshot below as the Illinois Secretary of State's business search provides no permalink to search results). The address of the "business" traces back to virtual offices offered by DaVinci Virtual Office Solutions, which would suggest Steele plans to pursue businesses for ADA violations without actually having to set up (physical) shop in Illinois.


He's also renewed his Illinois law license.


Given Steele's past, one should probably expect a flurry of filings in the near future, pursuing low-risk targets with low-to-medium settlement offers, much like Hansmeier's "work" in Minnesota. The paperwork can be filed from anywhere with work farmed out to local lawyers willing to do the groundwork in exchange for a percentage of collected settlements.

Steele's new hunting grounds favor his chosen business model. Time Magazine pointed out in a 2008 article about ADA lawsuit abuse that Illinois (along with California, Hawaii and Florida) is one of the easiest states to file (and collect on) frivolous lawsuits. The American Tort Reform Foundation has also called out Illinois' flawed legal system in the past, naming it one of the nation's foremost "judicial hellholes." One of the issues specifically listed is the willingness of the state to entertain lawsuits filed by non-residents -- something that works in Steele's favor if he doesn't actually reside in Illinois. Prenda Law was nominally a Chicago operation, but also included work done from Florida and (see Hansmeier) Minnesota.

Once a troll, always a troll, it seems. Prenda Law may no longer be an entity, but the lawyers behind it are back in the settlement business. Sure, ADA violations may be more publicly palatable than chasing porn downloaders, but underneath it all, it's still the same shady business that has the potential to wreak the same sort of financial havoc on its victims.

Filed Under: ada, copyright trolling, illinois, john steele, lawsuits, minnesota, paul hansmeier, shakedowns, trolling
Companies: accessibility law group, prenda, prenda law

Unsealed Motions Shows How Team Prenda Sought To Hide Money

from the can't-have-anyone-find-this-cash,-could-we? dept

Back in April, we wrote about a really enraged John Steele (famous for his likely leading role in the Prenda scam) angrily hitting back against a sealed motion for contempt against him, arguing that he was lying and hiding assets in his attempt to plead poverty, after a court ordered Team Prenda to file detailed financial statements. They did not do so. Instead, as the court noted:

In the case where there has been no attempt to comply with the Court's order, plaintiff's counsel must show a "complete inability to pay." ... Plaintiff's counsel, "stated differently, . . . [has] the burden of establishing clearly, plainly, and unmistakably that compliance is impossible." ....

The Court finds that plaintiff's counsel has not met its burden. They submitted incomplete, and to say the least suspicious, statements of financial condition. Attached to each statement was a letter from their certified public accountant ("CPA"). In these letters, the CPA indicates a departure from generally accepted accounting principles. He further notes that plaintiff's counsel elected to omit substantially all of the disclosures required by generally accepted accounting principles. The Court finds these statements insufficient to establish plaintiff's counsel's inability to pay.

Following that, lawyers Dan Booth and Jason Sweet filed the motion that got Steele so angry -- highlighting significant evidence that Steele and others had hid money offshore. Steele hit back at that, with little effect, and, as Fight Copyright Trolls now alerts us, the original filing that reveals some of Steele's financial shenanigans has been unsealed. Not surprisingly, it paints a picture of a lot of "shell games" for how the money was moved around. Here's just some of the details:

1. On December 13, 2011, Steele opened a CitiCard account. In the application for the account he identified his income amount as $900,000.00 and his total income for 2011 as $930,000. See Exhibit A hereto.

2. A statement from Fifth Third Bank shows that Steele had $2,177.005.27 in personal savings accounts there on September 5, 2012. See Exhibit B hereto. By September 25, 2012, two deposits totaling that amount had been transferred from Steele’s personal account into Prenda’s IOLTA account. The remainder of that money was then wired to an unknown destination the next day. See Exhibit C hereto.

3. On December 18, 2012, Prenda Law, Inc. (“Prenda”) paid out $5,000.00 to McCullough Sparks, an asset protection law firm located in Provo, Utah. See Exhibit D hereto. McCullough Sparks promotes its key service as the “541 Trust,” which “removes assets from your personal ownership and from any disclosure of your personal assets. It is a private document and it cannot be discovered through any public records.” See Exhibit E hereto. A CPA would not know about such a trust unless Plaintiffs’ Counsel disclosed it to them.

4. Plaintiff’s Counsel brought this case, like hundreds of others, as part of their coercive litigation settlement practice. See Dkt. No. 61 pp. 14-19. Between 2010 and 2013, when that practice was at its height, BluePay, one of several online credit card processors they used to process settlements from Doe defendants, processed more than $4.4 million in settlement monies, paid out to Prenda, Steele Hansmeier PLLC, Media Copyright Group, LLC, and LiveWire Holdings, LLC. See Exhibit F hereto; see also Dkt. No. 124 p. 4 n.3 (detailing relationships between Plaintiff’s Counsel and these and other non-parties).

5. Smith’s subpoenas sought information about eighteen closely related non-parties. See Dkt. No. 116-1; Dkt. No. 124 p. 4 n. 3. The non-parties opened at least forty-seven bank accounts in just two of the banks subpoenaed since 2010, and have closed all but a few of those accounts. Several of these accounts were opened and shut so quickly as to suggest that Plaintiff’s Counsel have transferred monies between accounts and related entities in a deliberate attempt to obscure its sources and their current holdings. For example, on August 13, 2012, Steele withdrew $29,924.56 from Media Copyright Group, LLC. See Exhibit G. He then opened two Fifth Third Bank accounts in his personal name the same day, depositing $27,924.56 into the account identified in Exhibit H and $2,000 into the account identified in Exhibit I. He then closed the account in Exhibit H on September 25, 2012, transferring all its funds into the other account in Exhibit I, which he closed on January 7, 2013 (after transferring $1,000 to Prenda Law, Inc. on October 2, 2012.).

6. Likewise, on December 15, 2011, John Steele transferred $159,000 from his personal account to that of Steele Law. See Exhibit J. That same day, Steele Law transferred $160,000 into the account of Miami Beach Consulting (“MBC”). Id. MBC is a business owned by John Steele’s wife, Kerry Steele (neé Eckenrode). See Exhibit K. Four days later, $150,000 of that money was wired to an unknown destination via Sabadell Untd. Bank, a subsidiary of Banco de Sabadell, S.A. and provider of international banking services.6 Miami Beach Consulting’s account was closed two months later. See Exhibit L.

7. Duffy and Steele are the two signatories Prenda’s IOLTA and operating accounts with Fifth Third Bank. See Exhibit M hereto. This tends to refute Steele’s repeated denials that he has an ownership interest in Prenda.7 Similarly, and despite his denials otherwise, Paul Hansmeier was a partner in Media Copyright Group (a/k/a/ 6881 Forensics), the IT firm which Plaintiff’s Counsel used to identify alleged infringements. A check made out to Media Copyright Group from Alpha Law and signed by Hansmeier clearly states “capital contribution” “for 50% interest” See Exhibit N hereto.

In the footnotes, it also highlights that the use of "Steele Law" for transferring money is especially suspect, given that Steele claimed that Steele Law was gone as an entity ten months earlier. The filing also discusses money transfers to Latvia, combined with evidence that Steele had been reading about hiding money in Latvia with a program designed to get you a Latvian passport and citizenship.

It's still somewhat circumstantial evidence, but as FCT notes, it's somewhat surprising that Steele apparently missed the deadline to try to keep this particular document sealed...

On top of that, in a second filing, even more questionable moves are revealed. Again, just a snippet:

A. Sabadell Bank.
Smith has identified transactions between accounts owned by Steele and Sierra Investment Partners (“Sierra”) totaling $212,125.00. See, Ex. Q. Sierra is a business Steele co-owns with Robert Balzebre that maintains an account at Sabadell Bank. See, Ex. R. Mr. Balzebre has been involved with Steele in several business ventures going back to 1997—including Steele Hansmeier. See Ex. S. Continued discovery would clarify the true extent of Steele’s financial holdings.

B. ING.
Hansmeier transferred at least $62,979.00 into an account at ING (now owned by Capital One). See Ex. T. Similarly, Hansmeier has transferred $515,000 to Monyet LLC with the notation that such checks were for “estate planning.” See Ex. U. Smith can only surmise that Monyet’s account(s) may also be found at ING. Said company has no discernible address, officers, employees, products or services—but a transfer from Livewire indicates who the owner is: “Monyet/Paul Robert Hansmeier.” Id.

C. Pershing, LLC.
Steele’s frenzied attempt to prevent GMS Group, from complying with discovery though Smith has not yet subpoenaed them, is now understood. Dkt. No. 158. Documents produced by Pershing include statements from GMS Group. Pershing is a clearing firm for GMS Group, and while it has in its possession some documents from GMS Group, it by no means has them all. What Smith was able to obtain indicates Steele transferred via GMS Group in excess of $200,000.00 to various accounts, and under at least two other of his business aliases/shell companies to banks with branches in the US, UK and Canada. See Ex. V.

Remember how, among other things, Judge Wright had referred Team Prenda to the IRS? I wonder if they'll be interested in some of these transactions....

Filed Under: anthony smith, john steele, laundering, money, paul hansmeier
Companies: prenda, prenda law