Minnesota Attorney Pleads Guilty To Federal Charges In Connection With Multi-Million Dollar Pornography Film Copyright Fraud Scheme
United States Attorney Erica MacDonald today announced the guilty plea of PAUL R. HANSMEIER, 37, for orchestrating a multi-million dollar fraud scheme to obtain payments from extortion victims to settle sham copyright infringement lawsuits by lying to state and federal courts throughout the country. HANSMEIER pleaded guilty to conspiracy to commit mail fraud and wire fraud and conspiracy to commit money laundering before Judge Joan N. Ericksen in U.S. District Court in Minneapolis, Minnesota. On March 6, 2017, HANSMEIER’S co-defendant JOHN L. STEELE pleaded guilty for his role in the scheme.
“This scheme, orchestrated by licensed attorneys, caused widespread damage throughout the United States and wasted judicial resources by causing litigation that should never have happened,” said U.S. Attorney MacDonald. “The defendants’ actions brought embarrassment to the legal profession and amounted to a shameful abuse of their law licenses, only to satisfy their greed. This office is and will always be dedicated to bringing such disgraceful conduct to the bar of justice.”
“Paul Hansmeier’s guilty plea today closes a sad chapter in the career of an attorney who abused his license to practice law and disgraced the bar,” said Special Agent in Charge of the Minneapolis Division Jill Sanborn. “Hansmeier’s role in a brazen multi-million dollar fraud scheme exploited victims by misusing his position of trust as an officer of the court. The FBI will continue to work closely with our law enforcement partners to detect crimes such as this and bring the perpetrators to justice.”
“The role of IRS Criminal Investigation becomes even more important in financial cases, including extortion and money laundering schemes, because of the complex financial transactions that take time to unravel,” said Gabriel Grchan, Acting Special Agent in Charge, St. Paul Field Office. “IRS Special Agents are skilled at investigating all types of financial crimes and today's guilty plea of Paul Hansmeier is a reminder that IRS Criminal Investigation is committed to following the money trail.”
According to his guilty plea and documents filed in court, between 2010 and 2014, HANSMEIER and STEELE, both practicing lawyers, executed a scheme to obtain millions of dollars by threatening copyright lawsuits against individuals who supposedly downloaded pornographic movies from file-sharing websites. HANSMEIER admitted in court today that he and STEELE created a series of sham entities, which and STEELE controlled, 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. The defendants 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 filing the lawsuits, HANSMEIER and STEELE gained authority from the courts to subpoena internet service providers (“ISPs”) for identification information of the subscriber who controlled the IP address used to download the movie. With that information, the defendants 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.
In November 2011, in order to distance themselves from the specious lawsuits and any potential fallout, HANSMEIER and STEELE admitted that they created and used Prenda Law, among other law firms, to pursue their fraudulent claims and proceeds of the scheme. HANSMEIER acknowledged in court today that he and STEELE exerted de facto control over Prenda Law throughout the scheme.
In October 2012, 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, HANSMEIER and STEELE recruited individuals who had been caught downloading pornography from a file-sharing website, to act as ruse “defendants” who were sued in exchange for HANSMEIER and STEELE waiving their settlement fees while pursuing claims against their supposed “co-conspirators.” In court today, HANSMEIER admitted that the allegations of “hacking” in these complaints were made up.
In total, HANSMEIER and STEELE obtained approximately $6 million from the fraudulent copyright lawsuits.
This case is the result of an investigation conducted by the FBI and the Criminal Investigation Division of the IRS. 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.
PAUL R. HANSMEIER, 37
- 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