Team Prenda Gets Hit Hard With Contempt Sanctions For Lying To Court

from the how-many-shoes-are-there-to-drop? dept

It looks like Team Prenda has been smacked around once again. This is in the Lightspeed case -- which is one of the rare earlier cases where they were actually representing a real third party, rather than a made up entity that they really owned themselves. This was the case where they tried to drag Comcast and AT&T into the lawsuit and it all failed terribly. If you don't recall, in late 2013, the district court smacked them around as judge Patrick Murphy clearly figured out what was going on: "The litigation smacked of bullying pretense." Yup, you got that right. The defendant, Anthony Sweet, represented by Prenda killers Booth Sweet, asked for attorneys' fees and got them at the end of 2013, with the court ordering Team Prenda to pay up $261k, saying that Team Prenda "flat-out lied" to the court.

In response, Team Prenda pleaded poverty, saying they couldn't pay up, but the court found them in contempt, arguing that even the financial statements they had filed with the court appeared to be submitted with the intent to deceive the court. Following that, Booth Sweet issued subpoenas trying to reveal more information on how Team Prenda had been hiding their money, leading Prenda mastermind John Steele to tell various banks that the subpoenas had been quashed when they had not been. That, as you may imagine, is not a good idea.

So it was somewhat surprising, last November, when the court failed to add more sanctions, saying that while it didn't trust Team Prenda, Booth Sweet hadn't presented enough evidence to make its case, despite all of the issues uncovered previously. However, late last week, the court changed its mind. After seeing more evidence, it believes that Team Prenda, once again, lied to the court and obstructed the discovery process. Steele and Paul Hansmeier tried to defend themselves, but the court doesn't buy it. Paul Duffy didn't even bother to respond to the court, so it assumes that he was "intentionally obstructive."

First up, we have the bogus claims by Steele that the subpoenas about his financial info had been quashed:
This new information demonstrates that, on January 29, 2014, Steele informed JP Morgan he intended to file a motion to quash subpoenas issued by Smith requesting Lightspeed’s counsel’s financial records. The following day, Steele sent a copy of said motion to JP Morgan without a file stamp. Several days later, JP Morgan requested a file stamped copy from Duffy. Duffy finally supplied a file stamped copy of the motion to quash on March 3, 2014 - two weeks after the Court had denied the motion and allowed discovery to proceed. Without any defense from Duffy, the Court takes his actions as intentionally obstructive, as he had reason to know the motion to quash had been denied at the time he relayed it to the bank.

Smith also points to communications in the record between Steele and Sabadell United Bank on April 16, 2014..., in which Steele said the subpoena matter was stayed on April 4, 2014. Just five days before, Steele acknowledged that the Court’s stay order did not pertain to the subpoenas, but rather a joint motion for contempt that had been filed by Smith weeks earlier. Steele agreed to resolve any misunderstandings about the subpoenas being withdrawn, but he clearly did not do so based on his April 16th email to Sabadell Bank. Despite Steele’s explicit knowledge that discovery of his financial records had not been stayed, he proceeded to inform the bank that a stay was in place. This demonstrates his knowing interference in Smith’s discovery efforts.

Based on the above, the Court finds that Duffy and Steele both engaged in unreasonable, willful obstruction of discovery in bad faith. As such, discovery sanctions are warranted as to Duffy and Steele.
Next up, a discussion of how Steele and Hansmeier insisted they had no assets at all and couldn't pay the sanctions... while at the same time Steele was doing tons of renovations on his home and claiming (in his divorce proceedings...) that he had assets of over $1 million.
Smith also provides the Court with newly discovered financial evidence to support his assertion that, despite their pleas of insolvency, Steele and Hansmeier had sufficient assets to satisfy the Fee Order. On January 29, 2014 Steele and Hansmeier both signed and filed memoranda claiming the Court’s sanction posed a “crippling financial liability” on them.... Similarly, at a hearing on February 13, 2014, they asked the Court for leave to show inability to pay....

With regard to Steele, new evidence reveals that, in the two months before he filed his memorandum on January 29, 2014, he deposited over $300,000 into a new bank account with Sabadell Bank.... Moreover, within a month of asking the Court for leave to show his insolvency, Steele wrote checks totaling nearly $200,000, some of which were written to himself, for expenses related to home renovations. Between April and September of that year, Steele had deposits in that account totaling over $100,000. Steele briefly held a second account with Sabadell between September and October, into which he deposited $50,000, most of which he paid out to himself. Smith additionally points out that the value of Steele’s home more than doubled from April 2013 (when he purchased it) to October 2014 (when it was on the market). Further, on November 12, 2014, Steele still pled insolvency. Yet, just one month later, he represented in his divorce proceeding that his assets approached $1.3 million
Then there's Hansmeyer. It appears that Booth Sweet figured out the shell company where he's been hiding his money as well:
As to Hansmeier, Smith presents evidence that, in the years leading up to the judgment against him, Hansmeier had transferred nearly half a million dollars to a company called Monyet LLC..., of which Hansmeier was the sole member, manager, and signatory for its accounts .... In a debtor’s exam of a related proceeding in June 2014, Hansmeier admitted that Monyet, LLC was set up as a trust for his son for purposes of estate planning .... However, documents from Scotttrade, Inc. reveal that Monyet, LLC was not solely associated with estate planning, as the bulk of its assets went towards expenses such as payment of appellate bonds and attorney’s fees, investments in Liverwire Holdings, LLC, and loans to his Class Justice LLC law firm .... Said expenditures occurred throughout the 2013 year and up to May 2014, demonstrating that Hansmeier had access to the Monyet funds both before and after he pled insolvency to the court.

In light of the above facts, the Court finds Steele and Hansmeier in contempt. The Court finds that the newly discovered evidence directly contradicts their claims of insolvency.
Yup. At the same time that Hansmeier was pleading insolvency to the court, he was using his own shell company to give himself money to set up his big ADA trolling operation, financed with the funds he was hiding from his copyright trolling operation.

Given all of this flat out deceit, it's actually a bit anti-climactic that the court then orders sanctions of just $65,263 against Steele and Hansmeier for contempt of court over the lies. As for the obstruction of discovery, the court orders Duffy and Steele to pay Booth Sweet's costs, which the lawyers are told to submit. Some people (including us...) are still reasonably wondering why none of this pattern of deceit, lying and abusing the court system still have not resulted in anything more serious. However, these court records are likely to be useful for those facing either Steele or Hansmeier in their new careers as ADA trolls...

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  • icon
    That One Guy (profile), 8 Jun 2015 @ 4:08pm

    Surely /this/ time they won't ignore it, right?

    So they ignored the order to pay legal fees, and knowingly lied to various banks to intentionally obstruct a legal order from being applied, and as punishment they get a laughably tiny additional fee tacked on?

    Hope neither the judge nor Sweet are expecting anything to actually happen other than the Prendateers to ignore yet another court order, as by this point it's clear the judges in these cases are either spineless or powerless to actually punish these parasites, and they clearly know it.

    reply to this | link to this | view in chronology ]

    • icon
      JoeCool (profile), 8 Jun 2015 @ 4:39pm

      Re: Surely /this/ time they won't ignore it, right?

      Prenda found the way out - recursive pleadings.

      1 - Plead insolvency.
      2 - Get caught lying.
      3 - Be found in contempt.
      4 - Go to 1.

      reply to this | link to this | view in chronology ]

      • identicon
        Michael, 9 Jun 2015 @ 4:47am

        Re: Re: Surely /this/ time they won't ignore it, right?

        I have a patent on infinite loops.

        reply to this | link to this | view in chronology ]

        • icon
          DannyB (profile), 9 Jun 2015 @ 6:06am

          Re: Re: Re: Surely /this/ time they won't ignore it, right?

          Recursive pleadings are only infinite loops if Prenda has tail call optimization. Otherwise the court will have a stack overflow and this will come to an end.

          reply to this | link to this | view in chronology ]

  • identicon
    Michael, 8 Jun 2015 @ 4:10pm

    Some people (including us...) are still reasonably wondering why none of this pattern of deceit, lying and abusing the court system still have not resulted in anything more serious

    I can't imagine why a group of lawyers and former lawyers don't want to create a precedent that holds lawyers accountable for their actions...

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 8 Jun 2015 @ 10:16pm

      Re:

      I'm henceforth referring to this as 'Drunk hippo' fallacy. Hippos are ponderous, but their presence is unmistably known when they get close.

      Now imagine one of them is drunk. So it's even more ponderous, but also much more dangerous.

      Hence, the 'drunk hippo' school of legal action; the wheels move ponderously, but their presence is unmistakable for anything else.

      reply to this | link to this | view in chronology ]

  • icon
    sophisticatedjanedoe (profile), 8 Jun 2015 @ 4:50pm

    While IARDC is going ahead with its plans to drop "D" from its name, Mr. Gordon Hansmeier was appointed Chair of the Seventh District Bar Association’s Ethics Committee. Apparently for his superior parenting skills.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 8 Jun 2015 @ 4:51pm

    Remember, judges are usually lawyers

    And just like cops, fellow lawyers, as with fellow cops, are innocent even if proven guilty.

    reply to this | link to this | view in chronology ]

  • identicon
    Jake, 8 Jun 2015 @ 5:02pm

    How have these sorry bastards not been lynched yet?

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 8 Jun 2015 @ 5:08pm

    If they go away popcorn sales go down :(

    reply to this | link to this | view in chronology ]

  • icon
    Nastybutler77 (profile), 8 Jun 2015 @ 5:21pm

    So if a poor person can't pay a traffic ticket they go to jail, and yet these asshats walk free?

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 8 Jun 2015 @ 5:28pm

      Re:

      If a poor person is accused of a crime, can't make bail, they go to jail and sometimes die there yes. If you don't know the magic phrases and rules, you are one of the oppressed.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 9 Jun 2015 @ 7:14am

        Re: Re:

        Well ... after all it is their own fault they are poor, why don't they just go out and get a job already???
        Damn takers don't care about the makers.
        /s

        reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 8 Jun 2015 @ 5:39pm

    As an attorney in multiple jurisdictions, and seeing the disciplinary issues in them, I have come to the conclusion that you can lie to the judge and get away with it, you can have sex with a minor, who happens also to be your client and get a short suspension. (Washington State) You can commit crimes, and retain your license. (Most states)
    The only two sure ways to get a permanent ban? Non -co-oporation in a disciplinary hearing, and co-mingling client funds with your own. (F. Lee baily)

    reply to this | link to this | view in chronology ]

  • This comment has been flagged by the community. Click here to show it
    identicon
    Anonymous Coward, 8 Jun 2015 @ 5:41pm

    Mike Masnick just hates it when copyright law is enforced. Don't you, Mikey? Bawk bawk bawk!

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 8 Jun 2015 @ 5:41pm

    http://arstechnica.com/tech-policy/2015/06/judge-finds-prenda-law-attorneys-in-contempt-says-they-hi d-assets/

    "[...] they also found records of payments to McCullough Sparks. The latter is an "asset protection law firm" that specializes in the "541 Trust," which "removes assets from your personal ownership and from any disclosure... It is a private document and it cannot be discovered through any public records."

    reply to this | link to this | view in chronology ]

    • icon
      That One Guy (profile), 8 Jun 2015 @ 10:11pm

      Re:

      That has got to be at the very least skirting the law. A service specifically designed to hide your assets from legal disclosure?

      reply to this | link to this | view in chronology ]

      • icon
        Khaim (profile), 9 Jun 2015 @ 8:19pm

        Re: Re:

        I know one way that would be completely legal. Here's how it works:

        1. You give the "541 Trust" your money.
        2. When subpoenaed, you can honestly say you have no money.
        3. The end.

        reply to this | link to this | view in chronology ]

        • icon
          That One Guy (profile), 10 Jun 2015 @ 12:53am

          Re: Re: Re:

          The only way I could see that being even remotely within the spirit of the law(because given who writes the laws, legal loopholes for schemes like this are probably in there already), is if the person receiving the court order has no legal or contractual connection to the money at all. It's not theirs anymore, and the recipient of the 'gift' is not obligated in any way to 'return' the money at any point in the future.

          If you can go to a company and make a withdrawal of funds, even if the funds aren't technically yours anymore, for all practical purposes those are your funds, and should therefor be counted as assets you own.

          reply to this | link to this | view in chronology ]

  • icon
    wazmo (profile), 8 Jun 2015 @ 5:46pm

    Meanwile, former Twitter troll Chuck C Johnson tries to figure out how he can sue Prenda for stealing his act.

    reply to this | link to this | view in chronology ]

  • icon
    That Anonymous Coward (profile), 8 Jun 2015 @ 6:08pm

    And the longest running soap opera continues.
    The wheels of Justice are slowly, very so fscking slowly, threatening to get up to speed...and yet no accused Doe has been made whole.

    We haven't even STARTED to have a hearing about this entire extortionate scheme, so that the courts can - in 4 or 5 years - finally reach that point where they notice that the emperor is naked. The money will not be found, it will not go back to the people who were ripped off with the court system being a willing cog in the shakedown. After the verdict, it will be another 4 or 5 years until the appeals are finally exhausted and they might finally pay something for their crimes. And the Does will be left exactly where they are today, out a bunch of cash wondering how the system could look the other way for so very long.

    With liberty and justice for some... but not you little people you aren't worthy of it.

    reply to this | link to this | view in chronology ]

  • identicon
    Pixelation, 8 Jun 2015 @ 6:14pm

    Seems like there should be a medication for this... Prendazone?

    reply to this | link to this | view in chronology ]

  • icon
    Spyder (profile), 8 Jun 2015 @ 8:18pm

    Prenda : "But judge, I can't afford the shovel I need to keep digging"!!

    reply to this | link to this | view in chronology ]

  • identicon
    avideogameplayer, 9 Jun 2015 @ 3:39am

    Wouldn't this be a good time to invoke those assest forfeiture laws?

    reply to this | link to this | view in chronology ]

  • identicon
    Edward Teach, 9 Jun 2015 @ 8:01am

    Lawyers don't get punished. Why?

    it's actually a bit anti-climactic that the court then orders sanctions of just $65,263 against Steele and Hansmeier for contempt of court over the lies.

    Just as cops don't get punished (part of the rewards of being in the enforcing class, is that you're immune from most enforcement yourself), lawyers don't ever really get punished.

    "Social Media" and having a movie camera in every pocket or purse seems to be changing the "cops don't get punished" thing. Since lawyer's misbehavior is a lot less photogenic, it might take awhile for text representation of crimes and gross misbehavior to catch fire (metaphorically). But maybe it will happen.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 9 Jun 2015 @ 8:07am

    Prenda's involvement in ADA scams (er, litigation) presents a clue to their future strategy: Soon, John Steele et al will assert that lying to the courts is a mental disability and that lawyers such as Booth Sweet are deliberating violating their rights.

    The Prenda crew will then put ducks on their heads and sue the entire planet.

    reply to this | link to this | view in chronology ]

  • icon
    MM_Dandy (profile), 9 Jun 2015 @ 9:01am

    Hit Hard?

    This doesn't qualify. But it's still good news, nonetheless.

    reply to this | link to this | view in chronology ]

  • icon
    DB (profile), 9 Jun 2015 @ 12:06pm

    Did they ever post a bond for the original amount?
    The judge found their argument of poverty unconvincing, but it doesn't mean they actually paid.

    They started making themselves 'judgement-proof' years ago. I expect that it will be difficult or impossible to access the money, even when it can be found.

    Would you move to Florida to hide ill-gotten gains? Divorce your wife, putting most of the money in her name? Set up trusts for children? Set up trusts for unborn (and not yet conceived) children? They have done all of that, and likely much more that we don't know about.

    These are lawyers that spent years learning about how to game the system. Combined with stalling for time and making every step as painful as possible, they are likely to get away with most of the money. (Well, Steele, and perhaps Hansmeier. Duffy appears to be just a sad sack lawyer that was played. He turned most of the early money over the S&H, thinking that he would get a slice of the revenue later.)

    reply to this | link to this | view in chronology ]

  • icon
    THE MIGHTY DORMAMMU (profile), 10 Jun 2015 @ 5:47pm

    The Sanctions Get Worse If They Foot Drag

    Those of you complaining about the small sanction probably didn't read the end of the order, where Judge Herndon makes it clear he will not tolerate any more foot dragging:

    The Court finds John Steele and Paul Hansmeier in contempt. Accordingly,
    the court awards sanctions against John Steele and Paul Hansmeier in the
    amount of $65,263.00. for their contemptuous statements in court. One might
    recognize that the amount of the sanction is twenty-five percent of Judge Murphy’s
    original sanction and that the last sanction from the undersigned was ten percent.
    A pattern is purposely developing whereby the contemnors could find their way
    back to the full sanction Judge Murphy ordered for their original wrongdoing if
    they continue their misdeeds before this Court. The current sanction, including
    the costs addressed above, shall be paid on or before July 15, 2015.

    reply to this | link to this | view in chronology ]


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