Appeals Court Affirms $1.5 Million Restitution Judgment Against Paul Hansmeier

from the kent,-i'd-be-lying-if-i-said-my-law-firm-wasn't-committing-crimes... dept

The long saga of Paul Hansmeier -- one of the Prenda Law Firm partners who turned the already-shady business of copyright infringement lawsuits into a rolling debacle composed of fraud, extortion, and catastrophic failures -- has produced another coda.

Hansmeier got into the copyright enforcement business thinking it would produce a steady stream of easy cash. He and his associates went after people who allegedly downloaded porn, thinking that people would pay anything asked to avoid having their sexual predilections exposed to friends, family, and the public at large.

When that didn't work as well as Hansmeier had hoped, he went further. He and his associates produced their own porn (but didn't star in it, thankfully) and served it up to piracy services in order to produce a steady stream of defendants. (These home productions were never made available for legal viewing. They only existed as lawsuit bait.) It all ended in a criminal indictment and a guilty plea by Hansmeier, who had recently branched out into ADA trolling in his home state of Minnesota.

That brings us to the Eighth Circuit Court of Appeals, which has affirmed everything Hansmeier wishes wasn't happening to him, like his 168-month prison sentence for fraud and money laundering and a $1.5 million restitution order.

The court recounts the sordid details of the long-running scam, including the numerous shell companies created to hide the origin of copyrighted films, as well as the profits (and losses) of the law firm supposedly representing a handful of porn-producing clients. It details the use of "ruse defendants" to avoid courts' limitation of discovery requests after judges started figuring out just how shady Hansmeier and Prenda Law were. What began as sanctions and subpoena denials slowly and steadily turned into disciplinary action from state bars and, finally, a criminal investigation that resulted in guilty pleas by both Hansmeier and his partner, John Steele.

Hansmeier doesn't want to be on the hook for $1.5 million in restitution. But the Appeals Court [PDF] doesn't see anything that warrants a reversal of the lower court's order. As it points out, Hansmeier still comes out ahead, even after being ordered to pay back $1.5 million of his illegal takings.

Based on his review of Hansmeier and Steele’s financial documents, Agent Kary estimated that, between 2010 and 2013, the alleged infringers Hansmeier and Steele targeted paid over $6 million total in settlements. Agent Kary then summarized a spreadsheet the FBI created to estimate the proper restitution amount. The spreadsheet did not include all of the settlement money that came in over this time period. Rather, it was limited to payments made after April 2011, which is when there was evidence that Hansmeier and Steele posted to file-sharing websites a movie to which they held the copyright—in other words, when, under the government’s theory, their fraud scheme began—and to payments that he could link to specific victims. Based on these parameters, he calculated a restitution figure of $1,541,527.37.

The Appeals Court notes Hansmeier's actions didn't just screw over internet users and defraud Prenda's clients and partners. The fraud also affected the courts handling Prenda's copyright cases. Had judges known what Hansmeier was engaged in, they would have rejected discovery requests and handed down sanctions even sooner than they already did.

It does, however, reject the government's argument that Hansmeier waived his right to appeal the judgment. The court says he can appeal. But it ultimately doesn't matter. The figure derived from the government's inspection of Hansmeier's criminal activity is as close to accurate as it gets without straying from the "actual loss" guidelines. As noted above, the government was able to find documentation for $6 million in possibly fraudulently obtained settlements. The court only ordered the return of a quarter of this amount. That's good enough for the Eighth Circuit, which says Hansmeier gets to keep serving his time and watch whatever assets he has left start getting liquidated to pay off this order.

Here, the government met its burden of showing by a preponderance of the evidence that the $1,541,527.37 loss total was attributable solely to settlement payments from the fraud scheme. [...] In coming to his final loss amount, Agent Kary included only settlement payments from April 2011 on, when Hansmeier and Steele directed an associate to upload a movie called Sexual Obsession, which they held the copyright to and which they used in their fraudulent lawsuits, to file sharing websites. Agent Kary explained that Sexual Obsession became the “go-to movie as far as gaining settlements from individuals.” He said that other movies were not a “significant” source of profit from that point on, constituting just “a few [payments] trickling in here and there.” Considering this information, the district court characterized potential payments from “legitimate” lawsuits over this period as making up no “more than potentially a negligible amount” of the money Hansmeier and Steele received.

Even more narrowing of the amount followed. But the smoking gun here is Hansmeier's own testimony, which is perhaps more damning than the results of the government's investigation. Even with this in play, Hansmeier is still only "out" half of what he took from others illegally.

Finally, Hansmeier himself acknowledged in his plea agreement that, between 2011 and 2014, he and Steele “received more than $3,000,000 in fraudulent proceeds” from their lawsuits.

The $1.5 million judgment stands. The man who helped ruin the lives of dozens of people will have to continue to deal with his multiple self-inflicted wounds. Hopefully, he'll be a cautionary tale that will dissuade future IP enforcement opportunists from engaging in litigation-adjacent get-rich-quick schemes that defraud the public and the court systems their tax dollars pay for.

Hide this

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: ada trolling, copyright trolling, extortion, john steele, paul hansmeier, scams
Companies: prenda, prenda law


Reader Comments

Subscribe: RSS

View by: Time | Thread


  1. icon
    That One Guy (profile), 18 Feb 2021 @ 11:36am

    Re:

    Yeah, I wouldn't trust claims of bankruptcy from Hansmeier as he's got a history of 'forgetting' about money he has and claiming to be broke in order to weasel out of paying what's been demanded of him.

    (To avoid tripping the spam filter I won't include the link, for more info search TD for 'Things Looking Even Worse For Prenda's Paul Hansmeier: Bankruptcy Fraud On Deck')


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here



Subscribe to the Techdirt Daily newsletter




Comment Options:

  • Use markdown. Use plain text.
  • Make this the First Word or Last Word. No thanks. (get credits or sign in to see balance)    
  • Remember name/email/url (set a cookie)

Follow Techdirt
Special Affiliate Offer

Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Chat
Recent Stories

This site, like most other sites on the web, uses cookies. For more information, see our privacy policy. Got it
Close

Email This

This feature is only available to registered users. Register or sign in to use it.