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The two lawyers said to be the masterminds behind Prenda Law, Paul Hansmeier and John Steele, have been arrested and charged with a multimillion-dollar extortion scheme.
US Attorney Andrew Luger of Minnesota announced charges against them in Minneapolis this morning shortly after both men were arrested. Hansmeier was arrested in the Twin Cities, while Steele was arrested in Ft. Lauderdale, Florida.
The charges were first reported by the Minneapolis Star-Tribune.
The two lawyers were charges Wednesday with an 18-count indictment (PDF), describing allegations of fraud, perjury, and money laundering perpetrated between 2011 and 2014.
“In order to carry out the scheme, the defendants used sham entities to obtain copyrights to pornographic movies—some of which they filmed themselves—and then uploaded those movies to file-sharing websites in order to lure people to download the movies,” the indictment reads.
Prenda Law sued hundreds of people for copyright infringement, accusing them of illegally downloading pornographic movies.
In 2013, US District Judge Otis Wright sanctioned the firm, along with Steele and Hansmeier, saying they had perpetrated a fraud on the court. Wright also referred the case to criminal investigators.
Wright’s damning order set off a domino effect, with Prenda and its affiliated lawyers facing a long series of judicial sanctions and fee orders in courts around the country.
Steele and Hansmeier fought many of the sanctions, but earlier this year, panels of appellate judges at both the 7th Circuit and 9th Circuit ruled against them, and said they must pay for hundreds of thousands of dollars in attorneys’ fees to defense lawyers who fought their claims.
State Bar investigators took action as well, filing complaints that ended this year with both lawyers having their licenses to practice law suspended. Hansmeier, who built a new legal practice suing small businesses over violations of the Americans With Disabilities Act, filed for bankruptcy last year.
Forgery and identity theft
The basic scheme worked like this: Prenda Law, or one of several attorneys who worked with the firm, would file a copyright lawsuit over illegal downloads against a “John Doe” defendant they knew only by an IP address.
Then they’d use the discovery process to find out subscriber names from the various ISPs around the country. Once they got it, they’d send out letters and phone calls demanding a settlement payment, typically around $3,000 to $5,000, warning the defendant that if they didn’t pay quickly, they would face public allegations over downloading porn.
While mass-copyright lawsuits over mainstream media have been a decidedly mixed bag, Prenda’s fast-and-loose porn litigation campaign worked well, at least for a few years.
In one interview, John Steele said he’d raked in $15 million.
That might have been an exaggeration.
A spreadsheet revealed in court showed that Prenda made $1.9 million in 2012 alone, and it isn’t clear that included all the accounts.
Once a few of those defendants dug in, lawyered up, and investigated Prenda, the lawsuits started to look questionable.
Some key documents in Prenda lawsuits were signed by Steele’s former housekeeper, Alan Cooper—but Cooper denied it, saying his signature had been forged.
As for the porn movies that were the subject of the lawsuits, they weren’t exactly big hits.
In fact, forensic analysts found that they may have been uploaded to Pirate Bay by Prenda lawyers themselves, as a kind of “honeypot” that could produce the profitable lawsuits they wanted.
This is a developing story, and we’ll update this post as more information becomes available.