Attorney Pleads Guilty For Role In Multi-Million Dollar Scheme To Fraudulently Obtain Copyright Infringement Settlements From Victims Who Downloaded Pornographic Movies
United States Attorney Andrew M. Luger today announced the guilty plea of JOHN L. STEELE, 45, for his role in a multi-million dollar scheme to fraudulently obtain payments to settle sham copyright infringement lawsuits by lying to state and federal courts throughout the country. On March 6, 2017, STEELE pleaded guilty to conspiracy to commit mail fraud and wire fraud and conspiracy to commit money laundering before U.S. District Judge Joan N. Ericksen of the District of Minnesota. Sentencing has not yet been scheduled.
“John Steele and his co-defendant devised an egregious fraudulent scheme by abusing their positions of trust and exploiting our justice system,” said U.S. Attorney Andrew Luger. “My Office will continue working diligently to ensure that criminals who engage in corrupt and fraudulent behavior are held responsible for their actions, regardless of their position or profession.”
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. 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 both their role in distributing the movies, and their personal stake in the outcome of the litigation. After fraudulently inducing courts to give him and co-defendants the power to subpoena Internet service providers and to 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 that threatened victims with enormous financial penalties and public embarrassment unless they agreed to pay a $3,000 settlement fee.
To distance themselves from the specious lawsuits and any potential fallout, STEELE admitted that he and co-defendants created and used Prenda Law, among other law firms, to pursue their claims.
According to the plea, after various courts began to restrict the defendants’ ability to sue multiple individuals in the same copyright lawsuit, the defendants changed their tactics and began filing lawsuits falsely alleging that computer systems belonging to their sham clients had been hacked. To facilitate their phony “hacking” lawsuits, STEELE and HANSMEIER recruited “ruse defendants,” who had been caught downloading pornography from a file-sharing website, to be sued in exchange for STEELE and HANSMEIER waiving their settlement fees while pursuing claims against their supposed “co-conspirators.”
According to the plea, as courts began to uncover the defendants’ unscrupulous litigation tactics, judges began denying the defendants’ requests to subpoena ISPs, dismissing lawsuits, accusing STEELE and co-defendants of deceptive and fraudulent behavior and imposing sanctions against STEELE and his associates. For example, on May 6, 2013, the U.S. District Court for the Central District of California issued an order imposing sanctions against the defendants. In total, STEELE and co-defendants obtained approximately $6 million from the fraudulent copyright lawsuits.
PAUL R. HANSMEIER, of St. Paul, Minnesota, was charged as a co-defendant in an indictment filed on December 16, 2016. The charges contained in the indictment against him are merely accusations, and he is presumed innocent unless and until proven guilty.
FBI and IRS-CI are investigating the case. Assistant U.S. Attorneys Benjamin Langner and David Maclaughlin of the District of Minnesota and Senior Trial Counsel Brian Levine of the Criminal Division’s Computer Crime and Intellectual Property Section and are prosecuting the case.
JOHN L. STEELE, 45
- Conspiracy to commit mail fraud and wire fraud, 1 count
- Conspiracy to commit money laundering, 1 count
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United States Attorney’s Office, District of Minnesota: (612) 664-5600