Prenda Law Principals Arrested For Fraud, Extortion

MINNEAPOLIS, Minn.—The prison doors may be about to swing shut on the principals of the now-defunct Prenda Law firm, as attorneys John L. Steele and Paul Hansmeier have now been arrested by federal marshals after having been charged by a federal grand jury with 18 counts of fraud, perjury, money laundering and extortion stemming in part from the pair's filing of allegedly hundreds of bogus porn copyright claims targeting ordinary citizens who may or may not have downloaded material created at the direction of the defendants and planted on pirate websites to attract just such legal breaches.

According to the Star Tribune's Stephen Montemayor, in 2013, "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 file-sharing websites 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.'"

Wright then placed sanctions on Hansmeier, Steele and their late partner Paul Duffy in the amount of $81,319.72 for "brazen misconduct and relentless fraud," "vexatious litigation," "[stealing] the identity of Alan Cooper" (a former groundskeeper for Steele whose name was fraudulently used as an officer of one of the Prenda shell companies) and "representations about their operations, relationships, and financial interests [that] varied from feigned ignorance to misstatements to outright lies." He also fined the trio and their companies an additional $1,000 per day until the sanctions were fully paid.

The Prenda attorneys (who later changed the name of their firm to the Anti-Piracy Law Group) filed an "emergency appeal" of Judge Wright's sanctions with the Ninth Circuit Court of Appeals, which rejected the motion on July 10, 2013.

After their loss, Hansmeier and Steele reportedly abandoned their attempts to sue porn downloaders and, according to Montgomery, Hansmeier inaugurated "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."

Minnesota U.S. Attorney Andrew Luger announced charges against Hansmeier and Steele Friday morning, shortly after they were arrested. It is not currently known when a trial date will be set.