Chutzpah: John Steele To Court: What, You Think I Would Lie, Cheat And Break The Law? Come On!

from the get-crackin' dept

Having followed the saga of Prenda Law over the past few years, one thing has become clear: John Steele really loves the “I know you are, but what am I” form of legal argument, in which whatever he’s accused of, he aggressively accuses his accuser of being guilty of the same. It’s a sort of faux macho move, in which every attack on him is met with an equally or more aggressive attack. To date, the strategy has failed badly, but it seems that Steele just can’t let go of this kind of approach. In the latest round of the Anthony Smith case, Steele appears to be trying on a variant of that aggressive posture, taking on the very serious and direct accusations made against him (including those by multiple federal judges) and mocking them, by asking another court rhetorically, “what, do you really think I’m guilty of all these crazy things?” when the answer to that question may very well be yes.

At issue is the continuing fight over getting Steele and his collaborators, Paul Hansmeier and Paul Duffy, to actually pay up for their abuse of the legal process. Last we checked in on this particular case, the district court was finding them in contempt and piling more onto the money they would need to pay, while the appeals court does not appear to be impressed by Team Prenda’s arguments, clearly calling out the “shell games” that Prenda and associated entities were playing.

While aspects of the case have been stayed during the appeal, other aspects are moving forward, including Smith’s lawyer continuing to push for discovery on the actual assets of Steele, Hansmeier and Duffy. As you may recall, despite being required to provide such information, they did so in a questionable manner. As Judge David Herndon pointed out:

The Court finds that plaintiff’s counsel has not met its burden. They submitted incomplete, and to say the least suspicious, statements of financial condition. Attached to each statement was a letter from their certified public accountant (“CPA”). In these letters, the CPA indicates a departure from generally accepted accounting principles. He further notes that plaintiff’s counsel elected to omit substantially all of the disclosures required by generally accepted accounting principles. The Court finds these statements insufficient to establish plaintiff’s counsel’s inability to pay.

Since then, Smith’s lawyer, Jason Sweet of Booth & Sweet, has continued to push for determining the financial position of the three individuals here. There’s a sealed document which apparently hints at some shady financial dealings, but it appears to be making Steele very angry. While Paul Duffy filed a pretty empty opposition saying that he has no offshore accounts, Steele went into full on, ultra-aggressive “who me?” defensiveness in response, leading to some incredible statements, considering what multiple courts have already said about them. The classic part has to be this:

For this Court to find any act of Prenda should be attributed to Steele, the Court would have to believe that Steele lied to multiple federal judges without getting caught, committed massive tax fraud without the IRS finding out, and proactively broke into the Illinois Secretary of State’s corporate records database to hide his ownership of Prenda Law, all because of the remote chance that years later a federal judge might sanction Prenda Law for $261,000.

Except… of course, multiple judges have already claimed that Steele and the others have lied, including in this very case. In the original ruling in this case, Judge Patrick Murphy directly called out Steele for lying, saying: “These men have shown a relentless willingness to lie to the Court on paper and in person.” He furthermore highlighted how it was quite clear that Steele was directly involved in Prenda, which Steele is now denying yet again. And no one is claiming he hacked into the corporate records database (though, now that he’s denied it, it almost makes you wonder…), but that he was clearly in control of Prenda and received much of the money that went into Prenda.

As for the issue of the IRS, well, last we checked, at least one judge, Otis Wright, has referred their conduct to the IRS, and there are at least some indications that an investigation is ongoing. And while no one thinks they set up this shell game specifically to avoid this particular ruling, it’s not difficult to see that they did so to try to avoid a series of similar court rulings, after Prenda’s initial approach started getting regularly shot down in court.

Steele’s response also ratchets up the ridiculous rhetoric in describing the copyright trolling shakedown business, which they copied from a bunch of other firms:

Steele and his partner, Paul Hansmeier (”Hansmeier”) were early pioneers in catching thieves and hackers who engaged in stealing copyrighted works and other computer related misdeeds, including computer hacking and copyright infringement.

Except, of course, they were neither pioneers, nor were they catching “thieves” or “hackers.” Rather, by all accounts, they set up a honeypot site, uploaded their own content to it, shared it on file sharing sites, and then used the IP addresses of those who followed the release that they themselves put online, to shake them down with lawsuits and demands for settlement. The evidence on this is fairly overwhelming.

Steele tries to argue away the “oddities” the court noted in the filings made by the CPA they hired this way:

At the hearing, no reference was made to the GAAP, the Generally Accepted Accounting Rules, a set of standards designed for the financial reporting of corporations, not individuals. Steele submitted his financial statement as directed. Steele’s submissions were accurate, and no filing since has disproved any aspect of Steele’s statement

If he thinks that this will get him out of the fact that the CPA “elected to omit substantially all of the disclosures required” I would imagine he’s got another thing coming.

Steele, also tries to angrily argue away the infamous Brett Gibbs spreadsheet that revealed the revenue of Prenda Law, and how 70% of it went to both Steele and Hansmeier, who have long denied being associated with that firm. Steele argues that this spreadsheet was made by Gibbs, as opposed to (as Gibbs has noted) made by Prenda and shared with Gibbs via a shared Dropbox account.

It appears that Mr. Gibbs created some accounting sheet of Prenda Law finances for some period of time prior to this case, and thus is irrelevant. Steele has no personal knowledge of Mr. Gibbs’ accounting records, methodology, or how Mr. Gibbs created his documents. According to Mr. Gibbs himself, he doesn’t either, and claims he doesn’t even know how his document came into existence. Such a document hardly comports with the Federal Rules of Civil Procedure governing admissible evidence.

He focuses on the fact that the spreadsheet is not admissible. Of course, his partner, Hansmeier, having argued basically the same thing in the past, has also suggested that the facts of the document are accurate, noting (incorrectly) that the document supports Steele/Hansmeier’s position and that it was “stolen.”

Related to all of this, Steele appears to still be playing games. In a separate filing, Sweet details how Steele took it upon himself to (incorrectly) inform various parties that Sweet had subpoenaed, that the stay on one part of the case meant those subpoenas were withdrawn as well. Except that they’re part of a separate process, which is still ongoing. Sweet asked Steele to confirm that Steele had gone back to those third parties, and admitted that he was wrong in interfering with the discovery process. Steele did not do so, but rather sent one of his snarky emails about how he promises that he “will address your most recent round of subpoenas as appropriate.”

It’s been a while since Steele has done this kind of thing, but it’s the same old John Steele, cocky until the very end, even as all of the evidence is against him. It reminds you of a little kid who has been caught doing something wrong but figures if he just keeps denying it over and over again, buying himself time, there will be some way to get out of it all.

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Companies: af holdings, ingenuity 13, lightspeed, lightspeed media, prenda, prenda law

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Comments on “Chutzpah: John Steele To Court: What, You Think I Would Lie, Cheat And Break The Law? Come On!”

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That Anonymous Coward (profile) says:

Re: Leg irons

Because not a SINGLE criminal charge has been brought yet.

Judges can’t issue criminal charges, merely nudge those who are supposed to handle that part of the system into action.

These cases are all civil matters and the fallout from them, as such the solutions are limited and imperfect to deal with this sort of asshattery.

This entire episode highlights how out of date the legal system and the laws have become in the face of what is possible today, imagine in 10 years they might finally update the laws to cover today as technology still marches forward.

Anon E. Mous (profile) says:

The Team Prenda mantra has always been deny, deflect, delay in any functions with the court when they are in trouble whther it has been with a Judges order, defendant counsel requests and paying of any sanctions penalties or judgements that have wen’t against Prenda or any of the three clowns associated with it.

Steele’s ego knows no bounds. John is the true definition of a narcissist in my opinion. I truly think John Steele believes he is untouchable and too clever to have any ill effects hit him personally or professionally.

Steele will be revered though in Law classes around the country when Law Students get to the Ethics portion of their law classes and it will be titled “How t oknow when you have crossed the line Prenda 101”.

Steele and Duffy are smart, they found some unique ways to keep their copyright troll settlement scheme going in a variety of different way under a vary of different statutes.

The Problem Team Prenda had was pure greed, it’s when they decided to cut the pron film makers and studios out of the mix and have “their” own client in house to represent and thus cut out anyone else they had to share settlements with.

The goal for 100% return on investment is where they failed, where they thought they were too smart to have any notice any irregularities in their litigation.

It will be interesting to see how they fare if a RICO indictment comes from a Grand Jury. They also have to deal with a IRS Criminal Division investigation and the loss of their ability to practice.

The excuses and denials will still flow from Steele and Hansmeier for years to come to avoid prosecution, but they can only deny, deflect and delay for so long

The piper is starting to call and they are starting to have to pay.

Anon E. Mous (profile) says:

LMAO….So Steele went around the defense counsel and contacted people and companies that were subpoenaed by Sweet whose subpoena’s were granted by the Judge hearing this case and told them they need not provide information to Sweet via those subpoenas were stayed.

That maneuver ought to play well with the Judge hearing this case. In effect Steele violated the rules of court and his oath as an officer of the court to pervert access to the documents Sweet was seeking.

Wow. If you ever wonder how low Steele will go to keep from having to pay penalties or to avoid justice, well we have a new winner ~Ding Ding Ding~

I would have to be of the opinion the Judge will slam Steele for that move. To intentionally contact those who were subpoenaed by the court to disclose information by a court order and insinuate to them that the order was stayed and they didn’t need to provide the information any longer seems unfathomable to me in my opinion.

I highly doubt that the state ethics board looking at a lawyers mis-deeds would find it acceptable as well. If Steele has a license to catch rat’s after this I will be surprised.

There is no way Steele is going to be able to say “I didn’t understand the courts directive”, or “I didnt interpret it that way”, or “I thought it was no longer valid”

Steele is starting to make criminals look honest and make lawyers look like the real crooks. I can’t even imagine what Steele will do if RICO comes to find him.

The prosecution in a RICO case will just let John convince a jury he is guilty himself just with his actions.

sorrykb (profile) says:


If he thinks that this will get him out of the fact that the CPA “elected to omit substantially all of the disclosures required”…

We don’t have the letter, but Judge Herndon noted that it wasn’t the CPA who made that choice:

In these letters, the CPA indicates a departure from generally accepted accounting principles. He further notes that plaintiff?s counsel elected to omit substantially all of the disclosures required by generally accepted accounting principles.

I might be wrong, but I’d say those two sentences are about as close as the CPA could get (within the bounds of professionalism) to saying, “The financial statements provided by my client are complete BS.”

zip says:

the long slow flush

The never-ending chutzpah of John Steele, Paul Hansmeier and Paul Duffy, and their pathetic ‘kitchen-sink’ legal tactics, makes for quite a schadenfreude-filled spectator sport. I haven’t had this much fun since watching infamous copyright troll SCO getting flushed down the toilet, kicking and screaming the whole way.

Frankz (profile) says:

These Prenda court cases and their results have become too common place, pretty blase. Now, it takes a lot more to generate the same amount of excitement. I’m waiting for asset seizure or forfeiture or whatever it’s called, to satisfy these judgements. Next above that will be any of the multiple Bar associations cases and disbarments. Then the best parts of all will be criminal cases by the DOJ and IRS.
How many years till we get to see it all?

That One Guy (profile) says:

Re: Re:

I wouldn’t expect much from the various Bars or ‘Ethics committees’ they run, their first and primary drive is going to be to protect lawyers, any lawyers, and by that protect the profession, so the odds of them doing anything about Steele and co, like, say, revoking their licences, is probably pretty low, given how useless the Bar Associations are at protecting anyone but their own.

Now, a while back I did hear rumblings of the IRS looking into Prenda and co, and not the ‘nice’ part of that agency either, assuming that’s true, it may take a while, but when the hammer does fall… ooh, it’s going to be good.

zip says:

Re: Re: Re:

“I wouldn’t expect much from the various Bars or ‘Ethics committees’ they run, their first and primary drive is going to be to protect lawyers, any lawyers, and by that protect the profession, so the odds of them doing anything about Steele and co, like, say, revoking their licences, is probably pretty low, given how useless the Bar Associations are at protecting anyone but their own.”

That is exactly right. A State Bar Association is in essence no different from any other trade group; RIAA, MPAA, etc.

The MPAA, let’s not forget, was originally set up to “punish” film makers that didn’t adhere to its own internal “Hays Code” – which basically banned anything deemed a bad influence or subversive to good morals. This was not because Hollywood’s film industry wanted to serve as a roll model for society, but because they wanted to protect their business interests in an era when social taboos were more rigid, and churches and civic organizations had more clout.

Bar associations operate in a similar vein, maintaining the illusion of policing their members for society’s sake, while in reality protecting their own industry by practicing the minimum amount of occasionally wrist-slapping needed to counter negative publicity and try to discourage its members from descending into a level of audacious criminality (like Steele and Hansmeier) that might completely blacken the industry’s reputation in the eyes of the public .

Mike (profile) says:

Re: Re: Re:

I wouldn’t expect much from the various Bars or ‘Ethics committees’ they run, their first and primary drive is going to be to protect lawyers, any lawyers, and by that protect the profession, so the odds of them doing anything about Steele and co, like, say, revoking their licences, is probably pretty low, given how useless the Bar Associations are at protecting anyone but their own.

Not true. About 750-1000 attorneys get disbarred every year. An additional 2-3 times that amount are suspended from practicing law.

Anonymous Coward says:

The idea that Hansmeier and the others would have accessible cash to pay ANYBODY, was rendered moot several years ago. If the various judges had jumped on them immediately, and frozen all accounts, then MAYBE some would have been available. By now, any such funds are buried so deep, offshore, no one will ever see them, including the IRS. The longer the Justice system allows Prenda to drag this out, the deeper the money gets buried. When all is said and done, only jail time will have any effect.

Mike (profile) says:

Re: Re:

And the various judge’s legal authority to sua sponte freeze all Hansmeier/Steele/Prenda accounts derives from where?

Actually, this gnashing of teeth over where Prenda is hiding its money is really an overstated concern. Most of the sanction dollars doled out have either been paid or are bonded such that payment is guaranteed once the appeals are exhausted.

I would guess Prenda will end up paying a larger percentage than do most judgment debtors.

That Anonymous Coward (profile) says:

someone correct me if I get parts wrong.

Terms as defined by John Steele

“Hacking” – using a login and password published on a website by an “unknown” party, that magically became active after being shut down years ago. By downloading the content they forced the machines to work harder and causing damage.

“Stolen emails” – That idiot we hired off of Craigslist got his email account compromised and spammed everyone in his contact list. Must be the work of people who are against our noble quest to protect copyright.

“Lawyer” – He uses this word a lot, not sure he knows what it means.

“Valuable Copyrights” – Ignore my partner declared them worthless in a depo.

sophisticatedjanedoe (profile) says:

You missed yet another facepalm moment:

Steele has been the subject ofmultiple identity theft attempts, and numerous attempts by hackers and pirates tosteal personal information from Steele. Indeed, during the pendency of this lawsuitPrenda Law?s website was hacked into, presumably by Smith or one of hiscoconspirators (notwithstanding Smith?s unsigned declaration that was an innocentactor in this case). Indeed, as recently as yesterday Steele understands that the email account of an anti-piracy attorney was hacked into and his e-mails were stolen.

I’m 99% sure that it was about Nazaire ignoring digital hygiene: all his gmail contacts have been receiving spam yesterday. The silver lining is that yours truly is in Jacques’s contact list. It’s heartwarming.

That Anonymous Coward (profile) says:

Re: Re: Facepalm

You do remember that he is part of the braintrust that submitted the “ZOMG HACKERS & GAY MARRIAGE” motion to the GAND courts right?

They used Anonymous hacking paypal in 2009 (iirc) as evidence of some stupid idea.
They used CA passing gay marriage as a reason to ignore Judge Wrights findings.

IIRC there was also some kerfluffe where they claimed certain parties were stealing filings and posting them.

Pay no attention to the guy behind the curtain, look at those evil hacker kids with trendy avatars, they are the real bad guys. Sometimes it works.

Jack says:

Re: Re:

Generally Accepted Accounting Principles is exactly what it sounds like – it is basically a standard for accounting that the courts accept. For example, GAAP may say disclosures X, Y, and Z would be the standard for a Net Asset Value Statement. By saying Steele provided nearly none of the standard disclosures, it means he is claiming he is poor and refusing to give the accountant the documents that would prove it.

Basically, if a monthly bank statement is a standard disclosure for the balance of a bank account – it would be like an accountant saying “My client’s checking account has $26.37, however he has departed from the GAAP standard disclosures.”

DB (profile) says:

I wonder how the discovery spat will play out.
It appears to be a serious breech of ethics.

Steele could have passed it off as a mistake, then asked for a call to schedule a conference to discuss, then asked the court to schedule a hearing for clarification. All semi-legitimate when viewed in isolation. But he instead went for the “People call me Dick” email reply. It was intended to infuriate the recipient (which it clearly did — and that might be the only thing that saves Steele), but also risks infuriating a judge.

Unrelated: I’m a bit suspicious about the timing of the “email account hacking”. Superficially it appears that Nazaire’s machine got a virus and started sending out spam. This could be the reality, or just be an excuse for losing incriminating email. Only select (beneficial) emails will survive.

Anon E. Mous (profile) says:

Re: Re:

I will take Steele’s calim that he and or/even Nazaire were hacked with a grain of salt. Steele also used the claim in court cases saying Lightspeed was hacked and that was the basis for his torrent related lawsuit.

The hacked line was a way to get around and out of some of the courts that were seeing how bogus these lawsuits were. Steele is once again looking for someone else to blame for things.

Look at the spread sheet that Gibbs produced that shows Payments to Steele and Hansmeier for hundreds of thousands of dollars each.

First their claim was that this was made up, then they claimed even if it were true then Gibbs stole it andit is confidential information (so which is it John, stolen or not…pick one claim and go with it!)

Now the new story is that Gibbs fabricated this all up and the figures are made up because Gibbs is out to get Steele, Hansmeier and Duffy. I guess the fact that John tried to pin everything that was going wrong in their lawsuits all on Gibbs and tell Gibbs he has to be the fall guy didn’t work out to plan.

We all know the Prenda game plan is to deny, deflect and is their standard play when they are on the shit end of the stick and this is no different.

Steele will try and say it is the infringers out to get him, and that defense counsel is in on it and that anyone connected to Roswell must be plotting against him and those who protect copyrights are part of the conspiracy to destroy him and his valiant fight against the oppressive infringing machine that is chugging away to bring him down.

I would take any claims that Steele is making with a grain of salt. After all this is the guy who registered companies at his sisters address and seemingly named a trust after his sister boyfriends family name as well as made his caretaker allegedly as the CEO of a number of companies that the poor caretaker knew nothing about.

I would hate to be his pet cat or parrot or his garbage man, lord knows what you may own or be running without your knowledge.

This is all part of the Prenda strategy, it’s always everyone else and not any of the three stooges. If you don’t believe me, just ask John.

Anonymous Coward says:

Re: Re: Re:

Between you, me, and the nearest rock, dear Lady, I wouldn’t take anything John Steel & Co. had to say with anything less than a 50 pound barrel of salt. Those guys have proven themselves, IN COURT – ON THE RECORD, to be unmitigated pathological liars. They wouldn’t know the truth if it jumped up and bit them. I wonder how long they’d last in “Da Big House”? I’d sure like to find out. Too bad it’ll never happen. Ain’t lawyers fun?!?

Kyzer says:

As far as hoping that the IRS is going to come down on these guys – don’t forget that Paul Hansemeier’s brother Mark not only works for the IRS but he’s a CPA and a Certified Fraud Examiner. I have to assume that Mark Hansemeier has given plenty of advice to brother Paul and the Prenda boys. It certainly can’t suck having an “in” at the IRS.

In spite of that, I’m really hoping to see how they ran their finances as far as the offshore Nevis LLC shell companies, and particularly how they have their assets parked in one or more Nevis trusts. It looks like a pretty secure place to park your loot –

Finally, I’ve been following the Prenda saga for several years now and it amazes me what they’ve been able to get away with. Keeping my fingers crossed that current discovery turns up withheld accounting info and that the current judges don’t put up with their familiar song and dance routine.

Anon E. Mous (profile) says:

Re: Re:

I was not aware of the fact that Paul’s brother works for the IRS. I wouldn’t doubt that if his brother asked he would give an opinion on how to rectify thing’s.

I would hope that Mark wouldn’t do anything that would put him in a position of jeopardy (my opinion of course) But the fact that Paul has used his wife as a client if I recall correctly in the Class Action Objection settlements leads me to be of the opinion that it may not be so.

Considering that Pual’s other brother Peter was allegedly the investigator in Prenda cases and submitted affidavits attesting to such leads me to believe that the family sticks together.

That was very interesting to read, thanks for sharing the info.

Eminn (profile) says:

Does he think no one will notice?

Throughout the document, whenever Steele talks about the financial statement, he says things likes”

“Steele?s submissions were accurate, and no filing since has disproved any aspect of Steele?s statement.”

Note the absence of the “complete”.

He repeatedly argues that there is nothing false in what he submitted but never will he say that it is a “full” or “complete” accounting.

This is relevant because the judge who asked for that information complained not only that the accountant’s statement not only said that they did not conform to generally accepted accounting practices, but “[the CPA] further notes that plaintiff’s counsel elected to omit substantially all of the disclosures required by generally accepted accounting principles.”

It is mighty suspicious that Steele will only go on record as saying they are accurate but studiously avoids saying they are complete.

DB (profile) says:

A bit of background: when a CPA specifically notes that the report they prepared does not meet GAAP, that strongly suggests that the books are crooked. They have prepared them to the client’s specification, but won’t stand behind the number.

Public companies often report non-GAAP results alongside GAAP, but only when they believe that it better reflects their business. And the GAAP numbers are the ones that are legally binding on the accountants.

I can’t see a judge accepting Steele’s argument “You didn’t specifically ask for GAAP numbers”. If you submit a report from a CPA, that’s what is expected.

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