Appeals Court Affirms $1.5 Million Restitution Judgment Against Paul Hansmeier

from the kent,-i'd-be-lying-if-i-said-my-law-firm-wasn't-committing-crimes... dept

The long saga of Paul Hansmeier -- one of the Prenda Law Firm partners who turned the already-shady business of copyright infringement lawsuits into a rolling debacle composed of fraud, extortion, and catastrophic failures -- has produced another coda.

Hansmeier got into the copyright enforcement business thinking it would produce a steady stream of easy cash. He and his associates went after people who allegedly downloaded porn, thinking that people would pay anything asked to avoid having their sexual predilections exposed to friends, family, and the public at large.

When that didn't work as well as Hansmeier had hoped, he went further. He and his associates produced their own porn (but didn't star in it, thankfully) and served it up to piracy services in order to produce a steady stream of defendants. (These home productions were never made available for legal viewing. They only existed as lawsuit bait.) It all ended in a criminal indictment and a guilty plea by Hansmeier, who had recently branched out into ADA trolling in his home state of Minnesota.

That brings us to the Eighth Circuit Court of Appeals, which has affirmed everything Hansmeier wishes wasn't happening to him, like his 168-month prison sentence for fraud and money laundering and a $1.5 million restitution order.

The court recounts the sordid details of the long-running scam, including the numerous shell companies created to hide the origin of copyrighted films, as well as the profits (and losses) of the law firm supposedly representing a handful of porn-producing clients. It details the use of "ruse defendants" to avoid courts' limitation of discovery requests after judges started figuring out just how shady Hansmeier and Prenda Law were. What began as sanctions and subpoena denials slowly and steadily turned into disciplinary action from state bars and, finally, a criminal investigation that resulted in guilty pleas by both Hansmeier and his partner, John Steele.

Hansmeier doesn't want to be on the hook for $1.5 million in restitution. But the Appeals Court [PDF] doesn't see anything that warrants a reversal of the lower court's order. As it points out, Hansmeier still comes out ahead, even after being ordered to pay back $1.5 million of his illegal takings.

Based on his review of Hansmeier and Steele’s financial documents, Agent Kary estimated that, between 2010 and 2013, the alleged infringers Hansmeier and Steele targeted paid over $6 million total in settlements. Agent Kary then summarized a spreadsheet the FBI created to estimate the proper restitution amount. The spreadsheet did not include all of the settlement money that came in over this time period. Rather, it was limited to payments made after April 2011, which is when there was evidence that Hansmeier and Steele posted to file-sharing websites a movie to which they held the copyright—in other words, when, under the government’s theory, their fraud scheme began—and to payments that he could link to specific victims. Based on these parameters, he calculated a restitution figure of $1,541,527.37.

The Appeals Court notes Hansmeier's actions didn't just screw over internet users and defraud Prenda's clients and partners. The fraud also affected the courts handling Prenda's copyright cases. Had judges known what Hansmeier was engaged in, they would have rejected discovery requests and handed down sanctions even sooner than they already did.

It does, however, reject the government's argument that Hansmeier waived his right to appeal the judgment. The court says he can appeal. But it ultimately doesn't matter. The figure derived from the government's inspection of Hansmeier's criminal activity is as close to accurate as it gets without straying from the "actual loss" guidelines. As noted above, the government was able to find documentation for $6 million in possibly fraudulently obtained settlements. The court only ordered the return of a quarter of this amount. That's good enough for the Eighth Circuit, which says Hansmeier gets to keep serving his time and watch whatever assets he has left start getting liquidated to pay off this order.

Here, the government met its burden of showing by a preponderance of the evidence that the $1,541,527.37 loss total was attributable solely to settlement payments from the fraud scheme. [...] In coming to his final loss amount, Agent Kary included only settlement payments from April 2011 on, when Hansmeier and Steele directed an associate to upload a movie called Sexual Obsession, which they held the copyright to and which they used in their fraudulent lawsuits, to file sharing websites. Agent Kary explained that Sexual Obsession became the “go-to movie as far as gaining settlements from individuals.” He said that other movies were not a “significant” source of profit from that point on, constituting just “a few [payments] trickling in here and there.” Considering this information, the district court characterized potential payments from “legitimate” lawsuits over this period as making up no “more than potentially a negligible amount” of the money Hansmeier and Steele received.

Even more narrowing of the amount followed. But the smoking gun here is Hansmeier's own testimony, which is perhaps more damning than the results of the government's investigation. Even with this in play, Hansmeier is still only "out" half of what he took from others illegally.

Finally, Hansmeier himself acknowledged in his plea agreement that, between 2011 and 2014, he and Steele “received more than $3,000,000 in fraudulent proceeds” from their lawsuits.

The $1.5 million judgment stands. The man who helped ruin the lives of dozens of people will have to continue to deal with his multiple self-inflicted wounds. Hopefully, he'll be a cautionary tale that will dissuade future IP enforcement opportunists from engaging in litigation-adjacent get-rich-quick schemes that defraud the public and the court systems their tax dollars pay for.

Filed Under: ada trolling, copyright trolling, extortion, john steele, paul hansmeier, scams
Companies: prenda, prenda law

Prenda's John Steele Gets 5 Years In Prison; Insists He's Really, Really, Really Sorry

from the redeemable? dept

A month after his partner in crime Paul Hansmeier was sentenced to 14 years in prison, with scathing commentary from the judge in the case about Hansmeier and his copyright trolling scheme, John Steele has been sentenced to five years in prison in a sentencing that appeared to go quite differently than Hansmeier's. In front of the very same judge, a very different story was told. At the Hansmeier hearing, the judge said this:

"It is almost incalculable how much your abuse of trust has harmed the administration of justice," [Judge Joan] Ericksen said during the sentencing hearing in U.S. District Court in Minneapolis.

At the Steele hearing, after federal prosecutors apparently heaped praise upon Steele for confessing, and helping build the case against Hansmeier, Erickson gave Steele a chance to speak, at which point he at least put on a credible performance of contrition. He explained how he had met Hansmeier, how Paul had concocted the scheme and he joined in -- including lying to federal judges about what they were up to. From the Star Tribune's Dan Browning's excellent reporting:

First, he said, he enrolled at the University of Minnesota Law School at the age of 37 without any sense of mission other than making money. It was there that he met and befriended Hansmeier, which led to a second poor decision in April 2010.

“I’ll never forget that day,” Steele said, choking up. “I received a call from Paul Hansmeier about an idea he had about seeding pornography content online.”

The third bad decision came when federal judges around the country began questioning Hansmeier’s and Steele’s methods of filing hundreds of lawsuits to identify the owners of computers that were used to download pornography so that they could pressure them to settle to avoid public humiliation.

Steele said he could have told the judges the truth but opted to blame others and hide behind offshore companies that had technical ownership of the copyrights on the movies.

This is... a very different version of Steele. I remember the long interview he gave with Kashmir Hill where he boasted of the success he was having and mocked the idea that his copyright trolling, by threatening to expose people's porn habits, was unethical by saying:

“People don’t like to get caught doing anything wrong,” he says. “They should be embarrassed about the stealing.”

Interesting quote. Or then there's the interview Steele did with Joe Mullin in which he did his usual bluster after a judge (Otis Wright) had first called him on his bullshit trolling scam. At the time, Steele seemed overly boastful of his ability to succeed:

It's not our job to—there was no evidence against us! I think everyone, even the people that dislike anti-piracy litigation, would agree that I don't have to answer questions if I don't want to. That's my right. The fact that people take the Fifth Amendment, against compelled testimony, is not allowed to be a negative inference.

I have no involvement in this case. I've never made a misrepresentation [to the court], either me or Paul Hansmeier.

This judge is completely biased against our type of litigation. Anyone who's researched this judge knows it. There have been some very harsh rulings by this judge against intellectual property plaintiffs. I think there were some errors made, and that's why we have appellate courts.

I think the judge knows we're going to appeal. He wrote that the sanctions were designed to cost just less than [an effective appeal]. Look, you may hate me and the litigation that's gone on in the past, but most people have to be a little nervous when a judge puts out a number and says that.

In that interview, he insisted that he had "no involvement" with the shell companies AF Holdings and Ingenuity 13. Of course, part of the federal charges, which Steele admitted to in great detail in his guilty plea, was that he and Hansmeier set up AF Holdings and Ingenuity 13. In his guilty plea documents:

In or about 2011, defendants convinced R.R., the owner of Heartbreaker Productions, to transfer the copyrights to Sexual Obsession and Popular Demand to AF Holdings. In order to disguise their control over AF Holdings, defendants used the name of an acquaintance of STEELE--whose initials are A.C.--on the copyright transfer agreement to purportedly sign on behalf of AF Holdings. Furthermore, defendants represented and caused to be represented to multiple courts that AF Holdings was owned by a trust named "Salt Marsh" whose manager and sole beneficiary was M.L., a paralegal employed by STEELE and Hansmeier. In fact, and as defendants knew, M.L. was nothing more than a figurehead who agreed to pose as the owner of AF Holdings in order to help STEELE and Hansmeier obscure their ownership and control over the company.

For long time Prenda watchers, you may recognize those initials. A.C. being Alan Cooper, a former caretaker for a cabin John Steele owned, whose name Steele forged on the various documents. Cooper, having no idea what was going on, later sued over the forged documents. M.L., of course is Mark Lutz, the "paralegal" who Steele and Hansmeier falsely tried to present as the real mastermind behind everything.

This week, in court, Steele told a very different story.

He said he went back to building and rehabbing homes and began studying stoicism. He said for the past couple of years he has been working for one of his sisters in Phoenix.

“I’m trying to live a life of virtue,” Steele said. “All I can control is obviously the thoughts and actions now and in the future. I think it’s important that I stand here today and look at you and apologize.”

The Assistant US Attorney in the case heaped praise upon Steele for his cooperation, and contrasted Steele to Hansmeier in how they dealt with the charges -- including noting how much Steele's assistance helped in getting Hansmeier to plead guilty as well (though Hansmeier's was "conditional" based on some of his legal attempts to dump the case).

Judge Ericksen still noted how abusive and serious the trolling operation was, but also noted that it appeared that Steele recognized how serious this whole thing was:

“You abused the court system, as you say, for your personal ends,” she said, adding that the courts “are not a tool in the box for anybody’s hustle.”

Even so, Ericksen agreed with prosecutors that given Steele’s cooperation and efforts to turn his life around, five years in prison was “eminently fair.” ....

“I condemn the actions that you took in committing this crime. I congratulate you, however, on the actions you took” in responding to the charges, Ericksen said.

The Judge had already order Hansmeier to pay back $1.5 million, and now put that on Steele too, making the two of them "jointly and severally liable" -- effectively meaning that the two of them together need to figure out how to come up with that cash to pay back.

Given how vocal and how adamant (and, frankly, how sleazy and confident he was that he could talk his way out of any mess) Steele was over the years, consider me not totally convinced that he's really had a change of heart. It would be great if that were true, but it's going to take more than a single performance in court to convince most of us. Either way, five years in prison is still a significant prison sentence. And, now, it appears we can finally close the books on Prenda.

Filed Under: copyright, copyright trolling, john steele, paul hansmeier
Companies: prenda, prenda law

Prenda Mastermind Gets 14 Years In Prison, Told To Pay Back Just $1.5 Million

from the welcome-to-the-big-leagues dept

The process may have taken forever, but Paul "welcome to the big leagues" Hansmeier, who was the apparent mastermind behind the Prenda copyright trolling scam has finally been sentenced to 14 years in prison, and told to repay $1.5 million to 704 victims of his scam. We've been covering the actions of Hansmeier and his partner in crime, John Steele, going back many, many years now. None of us have the time to recount all of the many scams they've pulled, but they took copyright trolling to new lows. They tried using Florida's "pure bill of discovery" rules to try to abuse the system to get names to shakedown based on IP addresses. They sent totally unqualified and unprepared "associates" into courts to try to hide their own involvement in cases, they abused the CFAA by pretending movies they uploaded themselves were "hacked" in an attempt to get around restrictions on copyright trolling, they got someone they threatened to sue to basically take a dive in order to get access to other people to shake down (and then they went after that guy anyway). Oh, and then there was the whole thing about setting up their own fake movie production house, creating their own porn films to upload themselves, and then pretending in court that they were not the owners of the company in questions. And we don't even have much time to get into the time Steele tried to forge the signature of his housekeeper to pretend he was the actual officer of one of those fake shell companies.

Over and over and over again, Hansmeier and Steele played every possible game with a single focus in mind: getting names of people to send threatening shakedown letters to. And, apparently, they took in about $6 million over the years -- though a bunch of civil cases have forced them to cough up plenty of that before the criminal charges came down.

And there is no indication that Hansmeier had any regrets about all of this. Even after his arrest, he (and his wife) engaged in an analogous scheme of ADA trolling, looking for small businesses who might technically violate the ADA, and demanding cash from them to avoid a lawsuit. Hansmeier is facing an investigation over that as well.

Oh, and then there was the whole bankruptcy fraud thing. Seriously, the list goes on and on and on and everytime you think you remember it all, you're reminded of some other really sketchy thing Hansmeier and Steele did.

So it should probably come as little surprise that the judge in the case was not impressed, and even said he considered giving him even more time in jail:

"It is almost incalculable how much your abuse of trust has harmed the administration of justice," [Judge Joan] Ericksen said during the sentencing hearing in U.S. District Court in Minneapolis.

[....] Ericksen said she considered going beyond sentencing guidelines but decided instead to impose the maximum of that range, followed by two years of supervised release. She ordered Hansmeier to pay restitution, calling it a conservative toll for his crimes. While the amount of money is significant, she said, "that's not even a major part of the harm" he'd done with his scheme.

"The major harm here is what happens when a lawyer acts as a wrecking ball," Ericksen said.

She did actually sentence him to longer than the DOJ requested, but only said he has to pay back $1.5 million, as that's the amount they apparently received after they started posting torrent files themselves in order to track down people to shake down.

John Steele's sentencing is still to come, though, unlike Hansmeier, Steele actually started cooperating much earlier, meaning it's likely that he'll get a somewhat shorter sentence.

As I said years ago, Steele and Hansmeier remind me of some people I've met over the years who basically seem to think that they can talk their way out of anything, and thus lie and scam with impunity, and when caught, just keep thinking they can talk their way out of that as well. In this case, it finally caught up to them.

Filed Under: cfaa, copyright, copyright trolling, fraud, jail, paul hansmeier
Companies: prenda, prenda law

Federal Prosecutors Recommend Paul Hansmeier Spend The Next 12 Years In Prison

from the not-so-clever-Hans-heads-for-the-federal-glue-factory dept

Cue the Ron Paul "It's Happening!!!!" gif. The wheels of justice have been grinding away for years now, but they've finally generated several years for longtime copyright troll/supervillain Paul Hansmeier. After making a career out of extorting settlements from alleged porn-watching infringers, extorting settlements from small businesses with bogus ADA complaints, attempting to hide his wealth from his creditors (some of which were owed money for sanctions imposed in copyright trolling cases), and otherwise putting on a one-man show entitled "Why We Hate Lawyers," Hansmeier is facing the possibility of spending the next decade in prison.

The sentencing recommendation [PDF] prepared by the prosecutors has nothing good to say about Hansmeier. In fact, the prosecutors make it clear they'd have given him even more than the 12+ years they've recommended. (h/t Virgil Abt)

Here are the numbers:

As reflected in the report, the appropriate guidelines range for Paul Hansmeier is 135 to 168 months in prison.

And here's the reasoning for the lengthy sentence:

Paul Hansmeier was the driving force behind this massive scheme. It was Hansmeier who came up with the idea to construct a copyright settlement mill focused on pornographic films. It was Hansmeier who directed his brother to upload clients’ movies onto file-sharing websites to lure downloaders. It was Hansmeier who drafted nearly all of the legal pleadings used to deceive judges. It was Hansmeier who invented phantom hacking allegations. And it was Hansmeier who lied to judges, dissembled in depositions, and coerced others to conceal the truth.

The government says John Steele was basically the muscle -- an intimidating figure who also handled the bookwork for the scheme. But it was Hansmeier who did the dirtiest of the dirty work. And as such, he should be dealt with more harshly. And this is hardly the end of the government's summary of Hansmeiers' dirty work. The filing continues in this fashion for several pages -- a fitting tribute to Hansmeiers' scamsmanship.

The headings alone indicate the depth of Hansmeiers' grift.

Hansmeier repeatedly deceived courts

Hansmeier and Steele owned and controlled the plaintiffs

Hansmeier invented allegations of hacking

Hansmeier protected himself by using proxies

The details interspersed between these headings are devastating in their description of Hansmeier and his long-running fraud.

Hansmeier concealed from the courts that he filmed and produced much of the pornography in this case himself, not for commercial distribution, but for the sole purpose of using the resulting pornographic movies as bait.

[...]

Hansmeier compounded his egregiously disgraceful misuse of Judge Bransford’s subpoena authority by lying directly to her face in open court…

[...]

Hansmeier hid the fact that he and his codefendant, John Steele, were the attorneys responsible for filing every fraudulent copyright infringement lawsuit in this case. Hansmeier and Steele recruited an alcoholic and now-deceased Chicago attorney named Paul Duffy to serve as the putative owner of “Prenda Law,” the firm that represented AF Holdings, Ingenuity 13, and the other sham plaintiffs in the various copyright cases.

[...]

[W]hen courts around the country sought to hold Hansmeier responsible for the fraud and damages he had wrought, Hansmeier resorted to perjury and suborning perjury to escape blame and retain the proceeds of the scheme. Hansmeier and Steele swore out false declarations, gave false testimony in depositions and at court hearings, and caused Lutz to do the same…

[...]

Even after Judge Wright’s widely-read order sanctioning Hansmeier, Hansmeier continued to hide the money he gained through the fraudulent scheme. Hansmeier transferred money into his new law firm, Alpha Law, into accounts controlled by his wife, Padraigin Browne, and a sham trust called “Monyet,” and then filed a fraudulent bankruptcy case concealing the fact that Hansmeier retained control over a substantial amount of the proceeds of his fraud case.

The whole recommendation is a depressing read simply for the fact this scam went unimpeded for so long. The government wraps up this ugly narrative with its recommended sentence, but only after offering this last appraisal of Paul Hansmeier.

In summary, Hansmeier was greedy, arrogant, devious, mendacious, and consistently positioned other people to be damaged by his conduct, even as he enjoyed the proceeds of the scheme he orchestrated. Even now, Hansmeier continues to accept responsibility only in conditional terms, hoping to convince the appeals court that his shocking abuse of his position of trust as a Minnesota attorney, and an officer of its courts, was somehow legal.

The government says its final call is 150 months, but the footnote attached indicates the government would have handed out so much more if it had not already agreed not to.

In the plea agreement, the government agreed not to recommend a sentence above 150 months.

Twelve years is a lot of time. But Hansmeier appears to have earned every day of it.

Filed Under: copyright troll, doj, john steele, paul hansmeier, sentencing
Companies: prenda, prenda law

Minnesota Lawyers Board Asks State Supreme Court To Smack Paul Hansmeier Around A Bit

from the please-do dept

Grifters just keep grifting. Paul Hansmeier, former copyright troll and more recent ADA troll, is being referred to the Supreme Court of Minnesota for discipline. Last seen trying to weasel his way into bankruptcy to avoid several judgments against him, Hansmeier has had his law license suspended and is facing the possibility of more than a decade in prison.

Now there's this, which asks how much schadenfreude can one person possibly provide?

The board that disciplines lawyers in Minnesota filed a complaint Tuesday in the Minnesota Supreme Court against Paul Hansmeier, alleging that he had tried to defraud the U.S. Bankruptcy Court in Minnesota by hiding or misrepresenting his assets.

Hansmeier has 20 days to respond to the complaint.

The state Supreme Court is already familiar with Hansmeier's, um... work, having said this about him in 2016 when indefinitely suspending his bar license.

Hansmeier committed misconduct in the first matter by bringing a lawsuit for the sole purpose of conducting discovery to find the identity of others against whom claims could be made, making misrepresentations to the tribunal, filing articles of termination for a corporation that contained false statements. failing to comply with discovery requests, failing to pay attorney fees assessed against him, and transferring funds out of his law firm in order to avoid paying sanctions. In a second matter. Hansmeier committed misconduct by participating in the initiation of a lawsuit without a basis in law and fact, making false and misleading statements to the court, failing to pay attorney fees assessed against him by the court. and submitting to the court a financial statement that was false, misleading, and deceptive. In a third matter, Hansmeier committed misconduct by bringing a frivolous action for an improper purpose. And in a fourth matter. Hansmeier committed misconduct by testifying falsely during a deposition, bringing a frivolous claim, and perpetrating a fraud upon the court.

The petition [PDF] is a little longer and delves into Hansmeier's seedy history, starting with his years with Prenda, which is summed up pretty nicely by Minnesota's Office of Lawyers Professional Responsibility.

Before respondent was suspended, respondent, with other lawyers, purportedly on behalf of various entities that held the copyrights to various adult films, instituted hundreds of litigations in state and federal courts throughout the country alleging either copyright infringements via improper downloading of the films over the Internet or wrongful interception or hacking of usernames and passwords to gain access to the purported clients' websites.

Respondent was sanctioned in many of these matters.

Those sanctions were levied in four different lawsuits, racking up nearly $500,000 in fines and fees Hansmeier was supposed to pay. Rather than do that, Hansmeier tried to drum up a belated legal defense fund by engaging in ever more mass litigation, wielding the Americans with Disability Act (ADA) as a tool of extortion against a number of small Minnesota businesses -- a business model of his that's now being investigated by the FBI.

To dodge the sanctions, Hansmeier filed bankruptcy. This was as deceitful as any other litigation he's been involved in. Hansmeier shuffled assets around to keep them from creditors, sold his home without the bankruptcy court's permission, and failed to update the court when his cost of living expenses decreased dramatically.

The OLPR is asking for more fees to be assessed against Hansmeier, as well as possible disbarment. Hopefully, someone will inform the inmates he'll be rooming with that he's not a font of coherent legal strategy, despite his many years as a practicing lawyer.

Filed Under: disbarrment, minnesota, paul hansmeier
Companies: prenda, prenda law

Prenda Scam Boss, Paul Hansmeier, Pleads Guilty

from the welcome-to-the-big-leagues dept

After fighting for years, it appears that Paul Hansmeier realized he was cooked. On Friday, he pleaded guilty to various fraud and money laundering charges related to his copyright trolling under the Prenda name. Hansmeier, of course, was one of the two "masterminds" (and I use that term loosely) behind Prenda along with John Steele, who pleaded guilty last year, and was set to be a witness against Hansmeier, who came up with some colorfully ludicrous theories to try to talk his way out of these charges.

If you don't recall, Hansmeier and Steele started out as garden variety copyright trolls, suing tons of people and shaking them down for money, but they kept expanding the scam, to the point that they were setting up bogus honeypots with content they themselves uploaded to get IP addresses to shake down (with hilariously dumb attempts to cover up that it was them). They also set up fake shell companies as their own "clients" which didn't go over well in court. That's not even getting to the way that Steele and Hansmeier were clearly the beneficiaries of these shakedowns, or the fact that they tried to hide the money. And do we even mention the outright lying in court?

One of the most incredible things in watching the whole Prenda saga over the years was just how much Steele and Hansmeier seemed absolutely 100% convinced that they could talk their way out of everything. No matter how bad it was getting, they would scream to the heavens about how everyone was lying about them and that eventually they'd be shown to be innocent. Yet now they've both pleaded guilty. Hansmeier's plea agreement has him pleading guilty to mail fraud and wire fraud, along with conspiracy to commit money laundering. The "deal" is that prosecutors won't charge him with even more crimes that they've since uncovered "including conduct associated with the defendant's bankruptcy proceedings." The agreement lays out much of the scam in pretty clear terms (the P.H. in the agreement appears to be Paul's brother Peter Hansmeier who there are differing opinions about his level of involvement in the scam, P.D. is obviously Paul Duffy, who was another bumbling part of the scam, and who died a few years back of "chronic ethanolism" as all of this was unraveling):

Defendants Uploaded Clients' Movies to File-Sharing Websites

Beginning no later than in or about April 2011, HANSMEIER and Steele caused PH. to upload their clients' pornographic movies to BitTorrent file-sharing websites, including a website named the Pirate Bay in order to entice people to download the movies and make it easier to catch those who attempted to obtain the movies. As defendants knew, the BitTorrent websites to which they uploaded their clients' movies were specifically designed to aid copyright infringement by allowing users to share files, including movies, without paying any fees to the copyright holders.

Defendants Obscured Their Involvement in the Lawsuits

In or about November 2011, in order to distance themselves from the copyright infringement lawsuits and any potential fallout, defendants caused Prenda Law to be created. Although P.D.--an attorney located in Chicago--nominally owned Prenda Law, HANSMEIER and Steele exerted defacto control over Prenda Law, including the primary direction of its employees and dispensation of its finances.

Additionally, beginning in or about 2011, defendants created various entities they surreptitiously controlled, including AF Holdings LLC, Ingenuity 13 LLC, Guava LLC, and LW Systems LLC. 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.

Defendants Filmed Their Own Pornographic Movies and Uploaded Them to File-Sharing Websites

Beginning no later than in or about May 2012, defendants participated in filming pornographic movies. On at least three separate occasions in Chicago, Miami, and Las Vegas, HANSMEIER and Steele--at times assisted by P.D., M.L., and P.H.--contracted with adult film actresses and produced multiple short pornographic films. HANSMEIER and Steele then caused Ingenuity 13 to obtain copyrights to the films, which bore names such as "Five Fan Favorites" and "A Peek Behind the Scenes at the Show." Shortly after filming the movies, HANSMEIER instructed P.H. to upload the movies to file-sharing websitessuch as the Pirate Bay in order to catch, and filed lawsuits against, people who attempted to download the movies.

Defendants Concealed Actions from Courts

After uploading their clients' and their own pornographic movies to BitTorrent who purportedly downloaded the movies did so without "authorization" or "consent" from the copyright holder or its agents and that their client had suffered "damages." 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. 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.

The courts, relying on the defendants' lawsuits and motions, granted early discovery and thereby authorized the defendants to subpoena internet service providers for subscriber information associated with the IP Addresses set forth in the motions and/or civil complaints. After obtaining the subscriber information associated with the IP Addresses, the defendants sent letters and made phone calls to the subscribers seeking settlement payments in exchange for dismissing the lawsuit against those subscribers.

Then there's the discussion about the CFAA related scam that Prenda tried to pull:

Hacking Allegations

Beginning in or about October 2012, HANSMEIER and Steele caused lawsuits to be filed, generally on behalf of Guava LLC, falsely alleging that certain named defendants had "hacked" into their client's computer systems. In fact, and as the defendants knew, the defendants named in these lawsuits had been caught downloading one of HANSMEIER and Steele's clients' movies from a file-sharing website. These "defendants" had agreed that, in exchange for HANSMEIER and Steele waiving a settlement payment, the defendant would be sued and permit HANSMEIER and Steele to seek discovery about his/her alleged co-conspirators. HANSMEIER and Steele brought several lawsuits falsely alleging that these defendants had participated in hacking Guava's computers in order to attempt to obtain authority from the court to issue subpoenas to intemet service providers.

There's much more in there as well.

For what it's worth, kudos should be directed to the person behind the Fight Copyright Trolls website, who really was the first to not only call out Prenda's bad behavior, but who figured out many of the details of the scam way before anyone else did. I'll admit that some of that site's early reporting seemed so outlandish that I was initially skeptical that it could possibly be accurate. But as more and more evidence came to light, basically everything that FCT initially suggested turned out to be incredibly accurate. Also, many kudos to the various lawyers who helped bring Prenda down in court in a variety of different cases, which helped highlight the details of the scam. I know I'm forgetting some, but Morgan Pietz, Nick Ranallo, Dan Booth, Jason Sweet and Erin Russell put in quite a lot of effort in unraveling Prenda in court.

Filed Under: guilty plea, john steele, paul hansmeier
Companies: prenda, prenda law

Government Knocks Hansmeier's Attempt To Talk Court Out Of Federal Prosecution

from the a-fraudulent-scheme-is-made-of-small-interconnected-acts dept

Paul Hansmeier -- bankrupt both in moral and financial terms -- is facing the blackness awaiting him at the bottom of a hole he dug himself. After engaging in copyright trolling, fraud, Disability Act trolling, more fraud, and generally embodying everything anyone hates about lawyers, he's now facing a multi-charge federal indictment. Fortunately for him, his representation is far more competent than he is.

His public defender crafted a motion to dismiss masterpiece, epic in length and containing a multitude of creative assertions that culminated in a not-completely-wrong point: to convict Hansmeier for engaging in bad-faith litigation would create a chilling effect on the act of litigation. Not included in this analysis of the issues was the fact that Hansmeier's copyright trolling also involved fraudulent behavior, which is the sort of thing most vexatious litigants manage to avoid.

It was a fun read, as far as motions to dismiss go. One over-the-top argument followed another until everything, including the reader, was exhausted.

The government has responded to the motion to dismiss. [h/t Sophisticated Jane Doe] Fortunately, the government cuts to the chase. It goes after the "litigation chilling effect" argument raised by Hansmeier's lawyer. From the government's reply [PDF]:

Defendant Hansmeier moves the court to dismiss Counts 1-17 of the Indictment. Hansmeier argues the detailed allegations set forth in the Indictment do not state an offense, and asserts the charges brought by the government impermissibly infringe on his “constitutionally-protected” right to engage in frivolous civil litigation. Unfortunately for Hansmeier, no such right exists. There is no safe harbor for fraud simply because one of the tools of the fraud involved litigation.

The government goes on to point out Prenda did not just engage in speculative invoicing.

Moreover, Hansmeier and his co-defendant, John Steele, did not simply file dubious lawsuits. They constructed an elaborate ruse designed to deceive people—state and federal judges as well as numerous victims who paid settlement fees to them—and, for that reason, violated the mail and wire fraud statutes. Hansmeier’s attempt to confuse this issue, through a convoluted 64-page memorandum wherein he pretends to champion the rights of unethical litigators and thereby create a strawman to save himself, should be rejected.

It attacks the assertions of the motion to dismiss, noting that separating each and every aspect of Prenda's schemes in order to make them appear singularly non-criminal is pretty much like denying a forest exists because it's just a bunch of single trees standing in the same general area.

Defendant also attempts to isolate each part of the scheme, arguing that each facet standing alone cannot state a fraudulent offense. However, the defendant did not commit each act in isolation. He did not merely breach his ethical obligations to the court. He did not solely mislead the court about the nature of his copyright infringement claims, or conceal his surreptitious ownership of his clients and their pornographic content. The indictment charges a multi-faceted scheme designed to deceive various courts and internet subscribers, and when viewed in its totality clearly describes a scheme to defraud.

The rest of the government's opposition motion details Prenda's fraud in greater detail, linking up all of Hansmeier's (and Steele's) illegal activities, which went far beyond simply filing lawsuits they knew to be meritless. Hansmeier's attempt to use civil litigation as a shield against prosecution fails for all the reasons listed in the government's reply: mainly that engaging in fraud during civil litigation doesn't immunize you from prosecution. Nor does Hansmeier's attempt to portray this all as something no more serious than an ethical violation find any sympathy. Again, the government points to Prenda's long history of fraud, perjury, and concealment.

The government also has an issue with the motion's demand for a better explanation of the charges than what's contained in the rather voluminous indictment. GFY motion entered:

Hansmeier also seeks to have the government define and explain the boundary between fraud and legality. The government is not required to prepare a treatise for the defendant explaining why precisely his conduct constitutes fraud. The defendants used various methods—all of which are described in the Indictment—to deceive state and federal courts into allowing them to pursue early discovery, and then tricked numerous individuals into parting with their money. The indictment in this case is more than sufficiently detailed, and has been supplemented by voluminous governmental disclosures that have gone well beyond what the government is legally obligated to provide.

In other words, the government was just as exhausted by the end of Hansmeier's 64-page motion as the rest of us were. It's ready to prosecute and Hansmeier is trying to argue it all away as though the grand jury had returned a dozen single-count indictments over several months or years, rather than the multi-count indictment tying all of Prenda's bad behavior together.

Filed Under: doj, fraud, paul hansmeier
Companies: prenda, prenda law

Paul Hansmeier Argues Convicting Him Of Fraud Would Seriously Damage The Judicial System

from the he's-not-(completely)-wrong dept

It looks like Prenda's Paul Hansmeier isn't nearly as interested John Steele in striking a deal with the feds. Of course, Steele folded immediately, offering up Hansmeier as bus undercoating, which likely means Hansmeier isn't being feted by feds with plea deals.

The 17-count indictment relayed a story familiar to Techdirt readers, since we have covered nearly every part of the scam: a get-rich-quick scheme that paid off at first for Prenda, but quickly unraveled as courts (and many copyright troll fighters) uncovered fake defendants, shell companies, forged documents, and honeypot-as-business-model tactics.

Faced with numerous charges and seemingly no option to shift the culpability back to Steele, Hansmeier is arguing the entire justice system will collapse if he's convicted. I wish I could tell you I'm exaggerating the dismissal request's prose for the sake of levity, but I'm afraid that's exactly what the dense's 64-page filing [PDF] says (h/t Sophisticated Jane Doe):

The government has issued a lengthy, winding, and jumbled charging document, all grounded upon an unorthodox and unviable legal theory. Because it has opted to proceed in this way, this Memorandum is by necessity heftier than it might otherwise be. Augmented size demands greater organization, so this paper begins with a Table of Contents to give the Court an overview of where the exploration will go, which then leads into the full discussion. All of this requires a fair number of words, but in the end the resolution boils down to a relatively simple concept: Prosecutors ought not be allowed to ground criminal fraud or analogous charges upon someone’s exercise of constitutionally protected civil litigation activities. As will be seen, this core rule is immensely important. Not just in the case at hand, but to this nation’s system of civil justice as a whole. This prosecution is legally unviable, and thus must be dismissed.

The gist of Hansmeier's federal court longform piece is this: the federal government should not be prosecuting people for bad- or zero-faith litigation. There are several sub-gists. As gists go, however, this isn't a bad one. The judicial system has many tools to deploy against bad-faith litigation, including sanctions and outright dismissal. Defendants have some tools at their disposal as well, but no matter how much Hansmeier attempts to pretty this up, it still costs real money to defend against bogus litigation.

The toolset is limited and, sometimes, completely useless. Prenda faced these tools on multiple occasions before finally deciding to get out of the copyright trolling business. Unpaid sanctions remain unpaid. Hansmeier moved on to trolling of the ADA variety and presented the Minnesota court system with perhaps the best argument to date for the reestablishment of debtors prison during his bankruptcy proceedings.

But the overall point remains a good one: it shouldn't be illegal to engage in litigation, no matter how misguided or disingenuous. Allowing the government to literally make a federal case of it could chill legitimate litigation. This point should not be understated. However, the filing ignores that Hansmeier wasn't just engaged in bad faith litigation, but rather he was piling all sorts of illegal behavior on top of it: forgeries, perjuries, fake plaintiffs, defendants who had made a deal to be a defendant solely for revealing IP addresses, fake claims of "hacking" to make questionable CFAA claims and much much more.

By its legal theory propounded here, the federal government now proposes to: (a) arrogate authority unto itself; (b) to patrol the civil dockets of this and any other tribunal of its choosing; (c) searching for instances of what it views to be baseless or otherwise unethical or inappropriate civil litigation activities; (d) all with the aim of prosecuting, penalizing, and imprisoning those litigants or lawyers who it deems to have stepped out of line. Or more accurately, anyone who the government chooses to target at any given moment. Prosecutors could, as in the present case, charge someone who has instituted a civil action against a fellow citizen to redress a legally recognized grievance. But the government could just as easily train its sights on, say, a citizen who has brought a Bivens action against a federal law enforcement official. Or it could bring similar charges against a detainee pursuing a civil habeas corpus action. Or against a lawyer seeking a declaration that some statute enacted by the Legislative Branch violates the United States Constitution. Or against a litigant seeking to enjoin some unlawful action of the Executive Branch.

But Hansmeier is also arguing that engaging in copyright trolling should only be punishable by judicial sanctions and the like, no matter how ineffective those deterrents are, and, apparently, no matter how much fraudulent behavior the litigants engage in. In fact, Hansmeier tries to claim the fraudulent litigiation Prenda engaged in produced no victims. (From the Bill of Particulars [PDF] submitted with the dismissal motion, via SophisticatedJaneDoe)

We ask that the prosecution be directed to identify the victim(s) of the offenses alleged in the indictment, to explain how they were victimized, and to specify the loss amount(s). Is the alleged victim the computer users described above and below? Or civil courts? Or both? Or someone else? Is the government relying upon “fraud on the court” judicial opinions imposing civil sanctions? If so, by what reasoning?

The 64-page wall of text is worth reading, if only to admire the sheer number of words expended to tie Hansmeier's "honest" copyright trolling into the government's conspiracy charge. This may seem counterproductive, but Hansmeier's representation's angle has its own genius: if the conspiracy charges cannot be extricated from Prenda's "protected" litigation, the government's whole case falls apart.

The Court may thus wonder whether the present motion to dismiss is confined to the standalone Mail/Wire Fraud counts, (Counts 2-16), or if it encompasses the above conspiracy counts as well, (Counts 1, 17).

Because the government’s deficient prosecution theory pervades and fatally infects both the standalone and above conspiracy counts, all must fall. The reason stems from the law of conspiracy, which is an inchoate offense involving a mere agreement rather than actual accomplishment of the underlying alleged criminal objective.

The theory goes on for several pages, but the underlying theory is this: the 15 counts of wire fraud are actually just the fed's (apparently severely-misguided) interpretation of Prenda's non-criminal "copyright protection" litigation efforts.

Thus, since the standalone Mail/Wire Fraud counts (Counts 2-16) are grounded upon a legally and/or constitutionally invalid prosecution theory, each such deficient count must be dismissed. The government alleges this identical Mail/Wire Fraud theory as the sole objective of the Mail/Wire Fraud Conspiracy (Count 1), (ECF 1, ¶¶ 15-17), and the Money Laundering Conspiracy claim (Count 17), (ECF 1, ¶ 40). Under Griffin/Yates and the other opinions cited, these legally-deficient charged conspiracy objectives mean that that each of these conspiracy counts must fall away as well.

If Hansmeier can convince a judge the government intends to treat copyright litigation as wire fraud -- and thus cause damage to the judicial system as a whole -- he may get a dismissal of those charges. That takes care of most of them. Of course, that requires effectively ignoring all of the other activity that wasn't just bad-faith litigation. Alternatively, he can convince a judge the conspiracy charge is unfounded, which would wipe away the fraud charges as well. That's why we have a 64-page pretrial motion to dismiss on our hands, rather than a few more weeks of pre-trial plea bargaining.

The motion takes issue with the federal indictment -- both in its depiction of copyright trolling as a criminal enterprise as well as its use of "charged language" like "extortionate tactics" and "sham clients." Hansmeier says the government's wire fraud charges basically boil down to a recap of normal copyright trolling efforts.

According to the government, the accused lawyer Mr. Hansmeier is criminally liable for the federal offenses of Mail/Wire Fraud and money laundering due to his institution of “fraudulent copyright lawsuits,” which (it is claimed) qualify as such because—

(a). The defendant lawyers and others “uploaded the [protected works] to file sharing websites hoping to lure people into downloading” those same protected works;

(b). The defendant lawyers owned and/or controlled the statutory exclusive rights in protected works rather than the named plaintiff business organizations, thus giving the defendant lawyers a personal stake in the outcome of the litigation;

(c). The defendant lawyers were derelict in their professional ethics obligations, including a duty of candor to federal civil courts when invoking court-overseen discovery procedures to identify computer users who had downloaded the protected works at issue; and

(d). The defendant lawyers employed “extortionate tactics to garner quick settlements” from such identified computer users, who were “unaware of the defendants’ role in uploading the [protected works at issue], and often were either too embarrassed or could not afford to defend themselves.”

Hansmeier argues this is all perfectly legal litigation and that the government has made no showing that these lawsuits were so baseless they should be indicted for them. But that's an extremely generous interpretation of Prenda's practices, which included forged documents, honeypot uploads, shell corporations, faux defendants, and other instances of fraud upon the court. Prenda was on the receiving end of multiple sanctions by the time it fell apart (and showed no signs of wanting to stop or recognizing that it had done anything wrong) and all of this sprung out of its speculative invoicing process, which used federal courts and statutory damages as leverage in multiple baseless infringement lawsuits.

The motion claims the government's interpretation of wire fraud statutes would endanger a great deal of legitimate litigation (although citations of Malibu Media cases probably isn't the best argument for trolling's legal legitimacy). The conclusion reached is that this prosecution is some twisted fed vendetta, with the government going after a longtime internet punching bag:

[T]the government broadly disapproves of the lawyer-entrepreneurial activities described earlier, i.e., forming organizations to pursue civil enforcement of the Copyright Act, monitoring computer file-sharing platforms for that purpose, using civil court discovery mechanisms to identify violators, and so on. And its ire is directed with singular force toward Mr. Hansmeier—something of a cause célèbre and object of scorn in the news media and blogosphere and elsewhere—whose litigation tactics have already been penalized by civil courts and state licensing officials. By this prosecution, the government aims to heap yet more punishment on top of all that.

This is a rather amazing (and ambitious) filing. Hansmeier has scored a very good pair of public defenders, ones who are willing to hand the court something few judges are clamoring for: a 64-page, densely-worded pretrial motion to dismiss. It's certainly far more than Hansmeier should expect, given he's done about as much damage to the reputation of lawyering as one man can possibly do. Other copyright trolls* have to be applauding this motion, as it legitimizes their efforts and provides a template for their own defense against criminal charges, should it ever come to that.

*This term (troll) bothers Hansmeier and his defense. This memorable footnote appears in the filing during the motion's discussion of the government's use of trolling opponents' "charged language" in its indictment.

On the debate’s flip side, there are those who use pejorative terms like “pirates” to describe those accused of Copyright Act violations. In truth, none of these or other puerile terms are helpful to sober legal analysis. Quite the opposite. The terms are mentioned here only because they are sprinkled prolifically throughout the literature, and even some court opinions, on this topic. In all, the defense would discourage use of such invectives, as they are analytically unhelpful and unnecessarily inflammatory.

Filed Under: copyright trolling, doj, litigation, paul hansmeier, wire fraud
Companies: prenda, prenda law

Things Looking Even Worse For Prenda's Paul Hansmeier: Bankruptcy Fraud On Deck

from the welcome-to-the-big-leagues dept

So, let's just say that things probably haven't been looking very good for Prenda's Paul Hansmeier lately. Obviously, there was a long series of legal losses in the Prenda and Prenda-related cases, but those are in the distant past now. Back in September, he lost his law license for some of the Prenda copyright trolling activities (if you haven't been playing along, Prenda set up their own honeypots with their own films --which they pretended were some other company's, filed bogus CFAA charges to try to get IP addresses, demanded cash from people to drop lawsuits, lied in court multiple times and more...). Then, in December, the two main players: John Steele and Hansmeier were finally indicted and arrested. Then, just a couple weeks ago, Steele took a guilty plea, making it clear he's thrown Hansmeier under the bus and will testify against him (given the history of Steele throwing many others under rapidly approaching buses, this is no surprise).

So... that's not a really good position to be in. But it may be getting worse. As you may recall, in July of 2015, after a number of cases went against Prenda, and Steele and Hansmeier were told to pay large sums of money in opposing legal fees and sanctions, Hansmeier declared bankruptcy. Except, as with so much related to Hansmeier, that was a disaster too. It got so bad that Hansmeier's own lawyer admitted to the court that "he's a bad actor." As the bankruptcy process wore on, it became apparently worse. Turns out that he denied a certain trust fund was under his control, but that wasn't actually true. Oh and also more shell companies. Oh, and also $180,000 in cash hidden under his bed. As we noted all the way back in 2015, even before all of this came out, bankruptcy fraud is a bad idea.

And now, according to some of the latest filings in Hansmeir's bankruptcy case (also submitted in his criminal trial), Hansmeier admits that he's aware he's being investigated for bankruptcy fraud as well (ht: SJD):

Oh, and back in December it was reported that the FBI was also investigating his ADA trolling efforts. So that makes him indicted for Prenda and under investigation over more potential (serious) issues for doing more Prenda-like activities with the ADA and then also for bankruptcy fraud. As Paul Hansmeier himself once said in an angry threat letter: "welcome to the big leagues." Amusingly, that was in a letter to a critic threatening litigation for daring to suggest that Hansmeier had been involved in criminal activities.

Oh, and that's not all. Also via SJD, we find out that the trustee in the bankruptcy case, noting the indictment, has been asking Hansmeier to "waive his discharge" (effectively forcing Hansmeier to remain in bankruptcy, rather than being able to discharge his debts). The trustee (who is, somewhat amazingly, a former law school classmate of Hansmeier's) sent Hansmeier an email to this effect, noting that assuming Hansmeier would invoke the 5th Amendment in his criminal case, that will "allow the bankruptcty court to draw numerous adverse inferences against you."

Ouch. The document below, in which Hansmeier reveals the bankruptcy fraud investigation, is actually part of his effort to have the bankruptcy court to hold off on these proceedings while all this other stuff gets taken care of. But, even if he weren't facing criminal charges where his partner in crime has already admitted everything and agreed to testify against him, and even if he weren't also facing separate investigations over bankruptcy fraud and ADA trolling, it appears that Hansmeier's bankruptcy case is getting even worse than it was before. This is beyond big leagues. This is beyond the All-Star game. This is truly Hall of Fame material.

Filed Under: bankruptcy, bankruptcy fraud, doj, fbi, paul hansmeier
Companies: prenda, prenda law

Prenda's John Steele Pleads Guilty, Admits To Basically Everything

from the welcome-to-the-big-leagues dept

Remember all the bravado behind John Steele and his copyright porn trolling? I've noted in the past that Steele reminded me of some guys I knew in college who believed that they were so smart that they could do whatever they wanted, and talk their way out later if they got into trouble. And, for many years, it seemed that Steele was fairly successful in doing exactly that. Remember all his big talk right after Judge Otis Wright referred Steele and his partners to law enforcement over his copyright trolling efforts? At the time, he yelled and screamed about how it was unfair and unprecedented, and insisted loudly that he would prevail.

I—and others involved—have been in front of hundreds of judges. This is the first judge that has ever sanctioned anybody involved with Steele Hansmeier, Prenda Law, or whatever.

He also continued to insist that he barely had any role at all in the grand scheme, involving shell companies, forged documents, faked honeypots and more:

I work part-time with Livewire Holdings, one of the entities that Lutz owns. My role is on the business side. I acquire other adult content companies and deal with expanding the holding company. The main goal is to handle a lot of content and websites and to be involved in the adult space. For that, I'm paid a flat fee. I won't say how much, but it's a modest flat sum.

Anyway, fast forward a few years, and as you'll recall, Steele and his partner Paul Hansmeier were arrested late last year, and on Monday Steele pled guilty in court in a deal where he basically admits to everything that many of us covering the Prenda saga had suggested he was doing over the years. It's all in there. The summary (though even more is in the full document):

Beginning in about 2011 and continuing until about 2014, defendant John L. STEELE and co-defendant Paul Hansmeier executed a scheme to fraudulently obtain millions of dollars in copyright lawsuit settlements by deceiving state and federal courts throughout the country. The defendants--both lawyers--used sham entities they controlled to obtain copyrights to pornographic movies, some of which they filmed themselves. The defendants then uploaded the movies to file-sharing websites hoping to lure people into downloading their movies. When STEELE and Hansmeier ensnared someone in their trap, they filed false and deceptive copyright infringement lawsuits that concealed their role in distributing the movies, as well as their significant personal stake in the outcome of the litigation. After fraudulently inducing courts into giving them the power to subpoena internet service providers and thereby identify the subscriber who controlled the IP Address used to download the movie, the defendants used extortionate tactics to garner quick settlements from individuals who were unaware of the defendants' role in uploading the movie, and often were either too embarrassed or could not afford to defend themselves. When these individuals did fight back, the defendants dismissed the lawsuits rather than risk their scheme being unearthed. After courts began limiting the number of people STEELE and Hansmeier could sue in one lawsuit, they changed tactics and began filing lawsuits falsely alleging that computer systems belonging to certain of their sham clients had been "hacked" and recruited ruse defendants to fraudulently obtain authority from courts to subpoena internet service providers. Furthermore, when courts began questioning the defendants' tactics, the defendants repeatedly lied and caused others to lie to courts in order to conceal the true nature of the scheme. The defendants also caused interstate mailings and wire transmissions to be conducted in furtherance of the scheme to defraud.

All that and more are in the document that Steele has now signed, confessing to it all. Now, as I've discussed in the past, it does pay to be at least somewhat careful around believing what's in plea bargains, as the pressure put on people who've been indicted to sign such an agreement is massive -- usually involving an agreement to agree to less time in prison in exchange for an easy plea. However, as Ken "Popehat" White notes in his thorough write up of the case, in this case, it doesn't appear that the "plea bargain" is much of a bargain at all for Steele. He isn't agreeing to much of a "lesser" charge to get off easy. He's agreeing to all the key things, and then hoping maybe that the judge will go on easy on him later, because he's also agreed to roll over on Hansmeier:

Steele and the government have stipulated to factors yielding an anticipated guideline range of 97-121 months of imprisonment. Yes, up to ten years in federal prison. This is not a highly favorable plea agreement — Steele isn't getting any killer deal (yet) for pleading guilty. 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 Guideline enhancement I can think of, rather than leaving those enhancements open to argue. Steele has truly hurled himself on the sword here....

[....]

I've seen a lot of plea agreements in a lot of federal cases, and I don't recall another one that so clearly conveyed the defendant utterly surrendering and accepting everything the government demanded, all in hopes of talking his sentence down later. Trusting your ability to talk your way out of it later is typical of a sociopath and a con man, of course.

Ken, of course, has a bunch of more insightful thoughts on this as well, so go over and read it if you haven't already.

Of course, now this means that Hansmeier is in even deeper shit than Steele. The feds have no reason to cut a deal with him to roll over on Steele, and Steele has now agreed to testify against Hansmeier. They may still cut a deal, but it certainly appears that the final chapter concerning Prenda isn't ending well for either Steele or Hansmeier. Of course, in the meantime, after my last post, people noted that Hansmeier's wife has picked up on Hansmeier's "encore" act of doing ADA trolling -- a very similar legal scheme in which they find some sort of minor technical violation of the Americans with Disabilities Act, and then try to shake down small businesses into paying up. You'd think that maybe after seeing how the copyright trolling has ended up for her husband, Hansmeier's wife might reconsider doubling down on the family business. Remember, last we'd heard, the FBI was also looking into Hansmeier's ADA trolling activities. So we may not be able to retire the "Prenda" tag just yet...

Filed Under: ada trolling, copyright trolling, doj, john steele, money laundering, paul hansmeier, plea deal
Companies: prenda, prenda law