Inside a $7.9m porn scam

Paul Hansmeier (L) and John L Steele (R) are currently in court for porn extortion. Picture: CBS
Paul Hansmeier (L) and John L Steele (R) are currently in court for porn extortion. Picture: CBS

IT was the cleverest of cons. All they needed was a bunch of X-rated videos and the threat to name and shame people who downloaded them. And the money rolled in.

The full details of the multi-million dollar plan to swindle copyright infringement settlements from people who downloaded pornographic movies have recently been made public, with one of the people involved pleading guilty with a full confession.

According to admissions in his plea, then-practising lawyer John L. Steele and his co-defendant Paul Hansmeier executed a scheme to fraudulently obtain more than $A7.9 million by threatening copyright lawsuits against individuals who used file-sharing websites to download pornographic movies between 2011 and 2014.

Steele explained the duo were running a firm called Prenda Law when they created a series of shell companies to obtain copyrights to pornographic movies - some of which they filmed themselves.

The videos were then uploaded to The Pirate Bay and other file-sharing websites, with the then-practising lawyers monitoring the downloads.

Concealing their role in distributing the movies and the personal gain they would receive from the outcome of the litigation, the two Minnesota lawyers filed bogus copyright infringement lawsuits allowing them to force ISPs to hand over the personal information of the downloaders.

With information in hand, the pair sent threatening cease-and-desist letters and made phone calls to users that downloaded the films, accusing them of copyright infringement.

As part of their extortion tactics, both lawyers threatened victims with enormous financial penalties or public embarrassment unless they paid a settlement fee of $4000.

According to the plea, once the defendants' ability to sue multiple individuals in the same copyright lawsuit was restricted by multiple courts, the lawyers had to change their tactic.

Steele said he and Hansmeier then filed lawsuits falsely alleging the computer systems of their shell companies had been hacked, which was corroborated by "ruse defendants".

The unscrupulous litigation tactics used by the lawyers became more obvious as time went on, with judges eventually dismissing their lawsuits and ISP subpoena requests.

In 2013, a federal judge in California sanctioned the lawyers when the full extent of the operation came to light.
These sanctions eventually led to the criminal case, with Steele and Hansmeier issued an 18-count indictment charge in December last year.

"The defendants in this case are charged with devising a scheme that casts doubt on the integrity of our profession," said Uinited States Attorney Andrew Luger in a statement.

"The conduct of these defendants was outrageous - they used deceptive lawsuits and unasuspecting judges to extort millions from vulnerable defendants."

Despite Mr Steele's guilty plea, Mr Hansmeier is yet to enter a plea.

Sentencing has not yet been scheduled.

News Corp Australia

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