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

Legal Issues

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…

Filed Under: contempt, john steele, paul duffy, paul hansmeyer
Companies: lightspeed, prenda, prenda law