MINNEAPOLIS _ A Minnesota lawyer who has drawn scorn for his tactics in filing hundreds of porn copyright lawsuits and disability litigation has been indicted alongside a longtime partner in a multimillion-fraud and extortion conspiracy that counted as its victims hundreds of people nationwide and the federal court system itself.
Authorities arrested Paul Hansmeier, 35, of Woodbury, and John L. Steele, 45, an attorney in Illinois who was a former classmate of Hansmeier's at the University of Minnesota School of Law, shortly before U.S. Attorney Andrew Luger announced charges Friday morning. Hansmeier was arrested in the Twin Cities; Steele, who has lived off and on in Florida, was arrested in Fort Lauderdale.
They were charged Wednesday in an 18-count indictment with orchestrating a multimillion-dollar extortion fraud scheme between 2011 and 2014. The charges, unsealed Friday, include conspiracy to commit fraud, conspiracy to perjure and conspiracy to launder money.
"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 says.
Judges nationwide openly criticized Hansmeier's tactics, including a federal judge in California who ordered stiff monetary sanctions against him and his associates at the defunct Chicago law firm, Prenda Law, in 2013.
Luger called a news conference to underscore the gravity of the case.
"The defendants in this case are charged with devising a scheme that casts doubt on the integrity of our profession," Luger said in prepared remarks. "The conduct of these defendants was outrageous _ they used deceptive lawsuits and unsuspecting judges to extort millions from vulnerable defendants. Our courts are halls of justice where fairness and the rule of law triumph, and my office will use every available resource to stop corrupt lawyers from abusing our system of justice."
Hansmeier and Steele collected about $6 million from hundreds of legal settlements in copyright-infringement lawsuits they had filed against people who allegedly downloaded copyrighted pornographic movies online _ films to which the men's companies had ostensibly purchased copyrights, the indictment says.
In an order awarding attorneys' fees, bonds and a punitive multiplier against Hansmeier and associates, U.S. District Judge Otis D. Wright in Los Angeles found that Prenda Law began its "copyright-enforcement crusade" in about 2010. It set up shell companies that bought copyrights to pornographic movies and made them available on online through file-sharing protocols like BitTorrent. Prenda Law, or a local attorney it hired, would then file federal lawsuits against the "John Doe" internet addresses captured during the downloads of the films and sought to subpoena the internet Service Providers for the identity of the users. They sent cease-and-desist letters to subscribers and offered to "settle" the lawsuits if the subscribers would pay them settlements that averaged roughly $4,000.
Wright said the lawsuits were filed using "boilerplate complaints based on a modicum of evidence, calculated to maximize settlement profits by minimizing costs and effort." Prenda Law and its associated firms would generally dismiss lawsuits against defendants determined to fight them.
The 9th U.S. Circuit Court of Appeals upheld Wright's order in June, writing that it was not an abuse of discretion for Wright to identify Steele, Hansmeier and the late Paul Duffy of Chicago as responsible for the abusive litigation, and that they possibly committed identity theft and fraud on the court system.
Wright had found that the men stole the identity of a man from Isle, Minn., using a forged signature to hold him out to be an officer for one of the shell companies. The man, Alan Cooper, was a groundskeeper on Steele's cabin in Aitkin County. Cooper sued in Hennepin County District Court in January 2013 claiming that he knew nothing about the scheme. Duffy and Prenda Law later sued Cooper and his lawyer, Paul Godfread of St. Paul, for libel in Illinois. Cooper and Godfread prevailed in that lawsuit and were awarded attorneys' fees.
The controversies surrounding the porn trolling cases led Hansmeier to take up a new business strategy of suing mostly small businesses for allegedly failing to comply with the Americans with Disabilities Act accessibility rules. He filed more than 100 such lawsuits in Minnesota, reaping minor settlements from defendants who said it would cost too much to fight him in court. The practice led the Legislature last year to modify the laws authorizing what's come to be known as "drive-by" disability lawsuits.
The Minnesota Supreme Court suspended Hansmeier's law license in September over ethics violations related to the porn trolling scheme and his attempts to deceive the courts in some of those cases. His wife, Padraigin Browne, picked up his pending disability access lawsuits and has since filed a number of her own using his former clients as plaintiffs.
Hansmeier filed for personal bankruptcy protection in Minneapolis in July 2015 and sought to reorganize his debts, but the bankruptcy trustee accused Hansmeier of attempted fraud and the court converted the case to an involuntary liquidation, which remains pending.
The indictment resulted from an investigation by the FBI and the Criminal Investigation Division of the IRS. It's being prosecuted by Assistant U.S. Attorneys Benjamin Langner and David MacLaughlin, and Brian Levine, senior counsel with the Computer Crime and Intellectual Property Section of the U.S. Department of Justice.
