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March 07, 2017

Guilty Plea Puts Nail in the Coffin of Prenda Law

MINNEAPOLIS—After years of litigation, the saga of the Prenda Law Group's practice of extorting porn fans with threats of prosecution for downloading supposedly copyrighted material unless they paid an average of $3,000 to make the "case" go away is finally coming to an end with the guilty plea of Prenda principal John L. Steele. "According to Steele’s admissions in the plea, between 2011 and 2014, Steele and co-defendant Paul Hansmeier, both practicing lawyers, executed a scheme to fraudulently obtain more than $6 million by threatening copyright lawsuits against individuals who supposedly downloaded pornographic movies from file-sharing websites," a U.S. Department of Justice press release stated. "Steele admitted that he and Hansmeier created a series of sham entities to obtain copyrights to pornographic movies—some of which they filmed themselves—and then uploaded those movies to file-sharing websites like The Pirate Bay in order to lure people to download the movies. Steele and Hansmeier then filed bogus copyright infringement lawsuits that concealed their role in distributing the movies, as well as their personal stake in the outcome of the litigation. After fraudulently inducing courts into giving him and co-defendants the power to subpoena Internet service providers and thereby identify the subscriber who controlled the IP address used to download the movie, Steele and Hansmeier used extortionate tactics such as letters and phone calls to threaten victims with enormous financial penalties and public embarrassment unless they agreed to pay a $3,000 settlement fee." Of course, that statement barely scratches the surface of the machinations Steele and other Prenda partners engaged in to promote their extortion scheme, which included finding compliant judges in jurisdictions like Texas and elsewhere to rubber-stamp the thousands of indictments the firm filed against the so-called "infringers," and it wasn't until they attempted to pull the same stunts in California that the scheme began to unravel. In December of 2012, even as dozens of cases brought in Illinois had been dismissed by courts in that jurisdiction, Prenda attorneys attempted to file an infringement case against Bay Area downloader Joe Navasca, then known in the lawsuit as "John Doe"—and sure enough, that case was thrown out as well—but not before his attorney Morgan Pietz filed a "Notice of Related Case," which turned out to be a bombshell for Prenda. In the notice, Pietz essentially laid out the Prenda group's entire scheme of filing false infringement cases—49 in California alone—then telling defendants that if they paid a few thousand bucks, the cases would be dismissed. Among Pietz's allegations, as summarized by attorney Ken White of Popehat.com, were that "(1) Prenda Law or its attorneys might themselves have undisclosed ownership interests in the entities like Ingenuity 13 LLC they purport to represent; (2) Prenda Law and its principal John Steele may have stolen the identity of a property caretaker named Alan Cooper to use as a figurehead officer of plaintiff entities," and indeed, Cooper later brought his own suit for identity theft. As that litigation proceeded, Pietz was granted "special discovery" to gain information about who Cooper actually was and about several other aspects of Prenda's legal strategy. The case caught the attention of L.A.-based U.S. District Judge Otis Wright II, who on December 20, 2012, ordered the entity known as "Ingenuity 13 LLC," which turned out to be another Prenda front, to provide him with information regarding "what steps it had taken already to identify defendants, and its basis for accusing those particular defendants of copyright violations." Legal sparring between the judge and various Prenda associates proceeded over several months—including an attempt to disqualify the judge and the dismissal of the John Doe case—until finally, Judge Wright ordered Steele, Hansmeier and another associate, Paul Duffy (now deceased) to appear in his courtroom to respond regarding why sanctions should not be levied against the firm. The sparring continued through at least one hearing, and finally, at a hearing on April 2, 2013, the Prenda attorneys took the unprecedented action of claiming their Fifth Amendment rights rather than respond to Judge Wright's questions. Finally, after yet more legal filings, Judge Wright slapped the Prenda attorneys with fines of more than $80,000 for their conduct, and at another hearing added even greater fines. Fast-forward to September of 2013, when United States Magistrate Judge Franklin L. Noel reopened several closed Prenda cases in the United States District Court for the District of Minnesota, and in an Order dated November 6, 2013, Judge Noel concluded that Prenda had indeed committed a fraud upon the court in bringing unsustainable infringement cases and ordered that Prenda repay any monies they had collected from the defendants in those cases, and to pay those defendants' legal fees—and then he sent his Order over to the U.S. Attorney’s Office for the District of Minnesota as well as the Attorney General of Minnesota for further investigation. Fast-forward once again to May of 2016, when White wrote that his sources had revealed that Prenda—that is, Steele, Hansmeier and associates—as well as various "front" entities that the attorneys had created to hide their involvement in various matters, were under active FBI investigation. It was that investigation that led to Steele and Hansmeier being arrested on December 16, 2016 following their indictment by a federal grand jury in Minnesota for "a raft of federal crimes: conspiracy to commit mail and wire fraud, mail fraud, wire fraud, money laundering, and conspiracy to suborn perjury in federal court." It was the first four of those charges listed to which Steele pled guilty on Monday, March 6. All in all, more than $6 million worth of bogus settlements had been collected under the Prenda umbrella of companies. "He admitted to the judge the mistakes that he made in the past and is currently doing all he can to assist the government," Steele's attorney, Mark Eiglarsh, wrote in an email. "He is eager to move past this challenging chapter of his life so he can devote his full energy towards supporting his young daughter, who he loves dearly." At this point, however, Hansmeier is maintaining his innocence, but how long that lasts is anyone's guess, since as part of the plea agreement, Steele will be required to testify at Hansmeier's trial—if there is one. But at least, finally, some justice has been served on that legal abomination known as Prenda Law.

 
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