Minneapolis lawyer pleads guilty to federal fraud, money laundering charges in porn troll scheme
Paul Hansmeier, a Minneapolis lawyer who pioneered a lucrative scheme suing thousands of people for copyright violations after they downloaded pornography that he and a partner had planted on an internet file sharing server, pleaded guilty Friday to federal fraud and money laundering conspiracy charges.
Hansmeier had been scheduled for trial Sept. 5 in Minneapolis. His plea agreement allows him to withdraw the plea if he is successful in appealing the district courts denial of his earlier motion to dismiss the case.
The plea agreement allows Mr. Hansmeier to appeal the denial of his pretrial motion to dismiss the indictment. I think we came to a fair resolution and will see what happens at sentencing and the 8th circuit, said Manny Atwal, the federal defender representing Hansmeier.
According to the plea agreement, Hansmeier admits that he and John Steele formed a law firm known as Steele Hansmeier in September 2010 and began representing individuals and entities that owned copyrights to pornographic movies. They monitored websites and obtained the internet addresses of individuals who downloaded or tried to download the movies, then filed copyright infringement lawsuits against those John Doe individuals to find out their identities so they could sue them personally.
They offered to settle in exchange for a fee of about $3,000, and collected a total of at least $3 million.
In 2011, Hansmeiers brother Peter identified in the plea agreement by his initials, P.H. uploaded the movies to BitTorrent file-sharing websites, including Pirate Bay, to entice people to download the movies and make it easier to catch those who attempted to obtain the movies, the agreement says. These sites are specifically designed to aid copyright infringement, it says.
Hansmeier and Steele concealed their direct involvement in the scheme by causing the creation of another law firm in Illinois known as Prenda Law. That firm was nominally owned by the late Paul Duffy but it Hansmeier and Steele controlled it, the agreement says. They also created various entities to use as plaintiffs in their copyright lawsuits. Hansmeier and Steele eventually went into the porn production business themselves to get more material they could copyright and plant on the internet.
In October 2012, they filed lawsuits on behalf of one of those entities, Guava LLC, alleging that its servers had been hacked by the defendants and that they had shared one of the movies they found there. The defendants agreed that in exchange for Hansmeier and Steele waiving a settlement payment, they would be sued and permit the lawyers to seek discovery about their alleged co-conspirators.
Hansmeier and Steele concealed from the courts that they were behind the scheme and had personal stakes in the litigation. They obtained more than $3 million in fraudulent proceeds from their lawsuits, the plea agreement says. In 2012, they created a company called Under the Bridge Consulting that they used to fraudulently transfer $1 million from the scheme to Hansmeier and Steele.
Steele pleaded guilty in March 2017 and agreed to cooperate in the case.
Hansmeier faces a maximum of 20 years in prison and five years of supervised release on each of the fraud and money laundering charges. The agreement calls for enhanced penalties because of the loss, the number of victims, the sophisticated means that was employed, the fact that he was a leader or organizer of the scheme, his abuse of trust and what the government contends was his willful obstruction of justice. The agreement notes that full restitution to the victims is mandatory, and that it wont be limited to the counts of conviction.
In exchange for the plea, prosecutors agreed not to charge him with bankruptcy fraud or to seek a sentence exceeding 150 months in prison. The ultimate sentence is up to U.S. District Judge Joan N. Ericksen.
Star Tribune staff writer Stephen Montemayor contributed to this report.
Dan Browning 612-673-4493