from the couldn't-happen-to-a-more-deserving-person dept
Well, well. In August, we saw that the Illinois Attorney Discipline Board finally decided to file a complaint against Team Prenda front man, John Steele. The complaint made it quite clear that the board had been spending a lot of time going through the fairly long list of questionable activities by Team Prenda in a variety of lawsuits across the country. If you somehow missed the Prenda saga, it was a group of copyright trolls who were shaking down lots and lots of individuals, to the point that they apparently decided to cut out the middleman, set up their own fake company, seed porn films themselves and then hide behind various “trusts” and offshore corporations. It was also pretty clear from the Illinois complaint that the board was planning to file a similar thing against the only “official” partner in Prenda, Paul Duffy… but Duffy had passed away just about a week before the complaint came out.
That left the third of the Prenda triumvirate, Paul Hansmeier, who had taken his skills for copyright trolling into a new business: ADA trolling of small businesses. Hansmeier would go around to small retail businesses in Minnesota and sue them for minor ADA violations, and just like with the Prenda scam, would demand a payout to drop the lawsuit. The whole thing was super scammy, leading small businesses who were just making ends meet to shut down in some cases. At the same time, Hansmeier has still been dealing with the aftermath of the various Prenda lawsuits where multiple judges around the country have demanded that he and Steele pay attorneys’ fees for the people they sued on false pretenses. Hansmeier has been trying to avoid all of this by declaring bankruptcy. That hasn’t been going all that well (more on that in a minute), but now he also has to deal with the possibility of being disbarred in Minnesota.
Yes, it looks like a similar disciplinary board to the one that went after Steele in Illinois, is now targeting Hansmeier in Minnesota. The Office of Lawyers Professional Responsibility has filed to take disciplinary action against Hansmeier, including the possibility of having him disbarred. The complaint goes through a number of reasons that Hansmeier deserves discipline and kicks off with the Spencer Merkel affair. If you don’t recall, Merkel was one of the people sued by Team Prenda, who then revealed that he had originally agreed to take a dive in a Prenda lawsuit. Specifically, he had been caught in a Prenda trolling operation, and agreed to be sued and that he would cough up details (i.e., IP addresses/log files) as part of “discovery” in the lawsuit against him, and then the lawsuit would be dropped. It was a fairly transparent way for Prenda to get around the fact that courts had been blocking its discovery efforts in other cases. Just find a willing patsy who doesn’t fight it, and get a new list of IP addresses to shake down. Except that Prenda screwed up, and sued him from a different company than promised and then went after him again later, leading him to reveal the whole thing.
Now, in the disciplinary action, the Minnesota Lawyers Professional Responsibility board reveals some more details of how Hansmeier actually recruited Merkel’s lawyer, promising to get her another paying client in a different matter down the road as payment, and then setting up the whole operation. In other words, they have pretty detailed confirmation that the Merkel and his attorney had agreed to this deal… and then Hansmeier flat out lied in court after Merkel told the court about the deal:
At the January 25 hearing, respondent falsely state that there was no agreement with Merkel to settle the claims against him, stating:
I think it’s very natural for a Defendant to want to say that this case is settled and there’s no reason for it to continue. But again, if there’s an agreement that he’s going to be exonerated from liability, I would expect to see something in writing. I don’t think I would — well our client is [sic] not agreed to settle the matter I guess is the bottom line.
The filing against Hansmeier is filled with examples of him moving money around and misrepresenting finances over and over again. For example, as the Merkel case went south, Hansmeier first transferred $65,970 from his current firm “Alpha Law” to his new firm “Class Action Justice Institute” (which he later used for another similar type of sketchy shakedown game involving bogus class action lawsuits. Then he transferred another $80,000 from Alpha law to his personal bank account… and then shut down Alpha, telling the state that “there are no pending legal, administrative or arbitration proceedings by or against the limited liability company…” completely ignoring that Alpha was on the hook for attorneys’ fees in the Merkel case.
Then there’s the whole Monyet, LLC saga, that has been discussed before. Monyet was a trust set up by and controlled by Hansmeier, though he continually insisted he had no control over it or gave just weird nonsensical answers about it. It appears that he even lied about Monyet under oath:
On June 30, 2014, respondent testified under oath at a judgment debtor’s examination before the district court. When asked about a May 3, 2011, $75,000 check from Alpha Law Firm to Monyet, LLC, respondent testified as follows:
Q. Do you know what Monyet, LLC, is?
A. It’s presumably a limited liability company.
Q. I see you’re the signatory to the check and you’re also the signatory on the back of the check. You don’t know what Monyet, LLC is?
A. To the best of my recollection, the Monyet, LLC entity is simply an account associated with estate planning but I don’t know — the reason. I can’t tell you how it operates within the whole estate planning scheme is because I did not set up the estate planning myself that’s something that’s well beyond my expertise.
* * *
A. I mean yeah and that’s my testimony that Monyet distributions were made for estate planning purposes not for Alpha Law Firm.
Q. Whose estate planning then?
A. It’s just setting up a trust for well now my son I guess he would be the beneficiary of it.
On July 2, 2014, respondent again testified under oath at a judgment debtor’s examination regarding Monyet, LLC, as follows:
Q. And it’s [Monyet, LLC] a limited liability company organized in the State of Delaware, is that correct?
A. I don’t know where it’s organized. I don’t know if that’s correct or incorrect.
Q. Well who set up Monyet, LLC?
A. An attorney.
Q. On whose behalf?
A. It — I’m not aware of the circumstances of on whose behalf it was.
Q. Was it at your direction?
A. I’m trying to be precise here because I’ve botched this once before. The way I would describe it to be most precise and hopefully most accurate, is that it was set up as a part of the trust and estates planning and that’s how I describe it.
Q. Trust and estates planning for whom?
A. I guess I would describe it as my family.
Q. And who makes up your family?
* * *
A. Okay. Well my family consists of me, my wife and my baby son.
Q. Do you know where this money is located?
A. I do not.
Q. Well how would you ever as benficiary of this money ever get any of it?
A. I don’t think I could get any of it.
That last line is kind of important. Because, the board notes, Hansmeier himself is identified as the manager of Monyet, LLC on the operating agreement for the trust. Later, Hansmeier himself set up a brokerage trading account at Scottrade for Monyet, listing himself as the manager. He later did the same with TCF Bank. And then there’s the fact that not long before the hearing where he stated all of the above, Hansmeier was actively moving money around with Monyet.
On June 28, 2013, respondent transferred $10,000 from Monyet to Livewire Holdings, LLC, a company in which he was an investor.
From May 2013 through at least May 2014, respondent signed at least 19 authorizations directing Scottrade to make wire transfers from the Monyet, LLC account to various entities totaling $590,033.50.
It then lists out those transfers, including a bunch to his other firm listed above “Class Justice” and a bunch to his wife, including the largest single transfer of $175,000 on November 22, 2013. It’s pretty incredible to argue that you barely even know what the trust is for, where it’s set up, or who’s in charge of it when you’re the one managing it and shifting money around with it all the time. It’s especially incredible to do that multiple times while under oath. But, that’s Paul Hansmeier for you.
From there, the complaint discusses more sketchy behavior by Hansmeier in the Lightspeed case. Once again, it involves Hansmeier trying to dance out of being in trouble by lying under oath. In this case, it involved the efforts seeking attorneys fees against him in the Lightspeed case, where Hansmeier insisted that he had not been notified of the motions against him, claiming that he was working for Alpha Law Firm rather than Prenda. The judge called him on it, noting that it was clear that he worked with Prenda, and Hansmeier insisted that he did not and had never made an appearance for Prenda. The complaint then goes on to list a whole bunch of documents that Hansmeier had signed, claiming to work for Prenda Law.
Also: “From December 2011 through February 2012, respondent issued and signed checks drawn totaling more than $41,000 on the Alpha account that were used to pay Prenda’s payroll obligations.” So, yeah.
From December 2011 through June 2012, Prenda paid at least $350,107.20 directly to respondent. From March 2012 through November 2012, Prenda paid at least $1,011,000 to Under the Bridge Consulting, a company in which respondent had a 50% ownership interest. Under the Bridge Consulting, in turn, paid to respondent at least $480,000 of funds paid to them by Prenda.
So, yeah. The claim that Hansmeier has nothing to do with Prenda… and claiming so under oath… perhaps not so smart. Later in the filing, in discussing another case, it notes similar games concerning Hansmeier pretending to have no role with Prenda.
Q. Did you ever work for Prenda Law, Inc.?
Q. You were never attorney of record with Prenda Law, Inc.? You were never of counsel there?
A. I guess I’d have to go back over the various appearances that I filed. I don’t recall anything specifically. Does that mean that there’s not one on record somewhere, I can’t say with exact certainty.
* * *
Q. So Steele Hansmeier was formally dissolved and then as soon as you dissolved Steele Hansmeier, did you at that point work for Prenda Law at all?
A. Not as an employee, no.
Q. In what capacity?
A. Part of my role — I guess I had no formal affiliation with Prenda Law. I don’t believe I can point to any specific affiliation. Part of it we wanted to aid Prenda Law in transitioning from, you know, Steele Hansmeier operating the cases and whatnot. Prenda Law was appearing in a lot of the cases, so there’s a natural, you know, kind of aid them, help them facilitate the transfer.
Q. So who was responsible for handling the financial aspect of the transition?
A. I believe Mr. Steele would have been in charge of managing — the handling of funds.
As the filing notes, this was “false and misleading.”
Meanwhile, the Minneapolis Star Tribune, who first publicized this new development, also reports on the fact that Hansmeier’s attempt to hide in bankruptcy isn’t going so well either:
As Hansmeier?s creditors closed in, he filed for bankruptcy protection seeking to reorganize more than $1.5 million in debts, taxes and court sanctions. He has asked the federal bankruptcy court to let him restructure his debts so that he can move on with his life.
Neither his creditors nor the bankruptcy trustee think that should happen. They filed more than 500 pages of documents late last week objecting to his plan, arguing that Hansmeier filed for bankruptcy protection ?in bad faith.?
U.S. Bankruptcy Trustee Daniel McDermott characterizes Hansemeier?s financial disclosures as incomplete and misleading. McDermott alleges that Hansmeier made fraudulent transfers of assets to his wife, Padraigin Browne, and that they?re selling their condo in The Carlyle, a downtown Minneapolis luxury high rise, without court approval.
A few years ago, concerning Hansmeier’s partner in crime, John Steele, I noted that he reminded me of people who incorrectly think that they’re smarter than everyone else, and that they can just talk their way out of their own actions when they’re caught trying to “outsmart the system.” It would appear that Hansmeier is in that same camp. No wonder they paired up.
Filed Under: discipline, john steele, minnesota, minnesota bar, paul duffy, paul hansmeier, spencer merkel
Companies: alpha law, alpha law firm, class action justice institute, lightspeed, prenda, prenda law