The announcement of the charges were made on Friday by the Andrew Luger, the U.S. Attorney in Minnesota. Paul R. Hansmeier, 35, and John R. Steele, 45 have each been charged with 10 counts of wire fraud, five counts of mail fraud and one count each of conspiracy to commit perjury and suborn perjury, conspiracy to commit money laundering and conspiracy to commit mail fraud and wire fraud. Hansmeier has been suspended from practising law since September.
It is alleged they initially purchased pornographic material and uploaded it on file-sharing sites where they knew it would be downloaded by others. When someone would download the pornography, the lawyers would commence a lawsuit for copyright infringement. They initially only had IP addresses so the lawsuits would be filed against “John Does.” The lawyers used shell companies as plaintiffs in these proposed actions.
At one stage during the scam, Hansmeier and Steele went to a porn convention and arranged to produce their own pornography, In doing so they were able to cut out the middleman.
The lawyers, acting on behalf of these shell companies, would then go to court and get orders requiring Internet service providers to give them the names of those who downloaded the porn. Once the names were obtained, the alleged extortion began.
The lawyers would allegedly contact the people who downloaded the material and threatened the “John Does’ in the suits would be changed to their real names. The fact they downloaded pornography would then be publicly known. Unless of course they agreed to settle the case.
It is alleged the two attorneys extorted thousands of dollars from each person who downloaded the material. But if a person refused to settle the case, the lawyers had no intention of following through on a lawsuit. They could not go to trial because they would have to reveal they were the plaintiffs; the ones who uploaded the content to file-sharing sites.
The U.S. Attorney said the scheme netted the pair about $6 million. According to the indictment [PDF], the scheme ran from 2010 to 2014.
Eventually judges began to catch on to what was happening. In 2013, a California judge imposed monetary sanctions against Hansmeier and his then-firm, Prenda Law. The indictment alleges after Hansmeier and Steele were found out, they resorted to lies and deceit in order to attempt to cover up the scam. The lawyers then changed their tactics and used their shell companies to threaten to sue the defendants for hacking rather than copyright infringement.
Luger said this was nothing more than a shakedown. The lawyers were the clients and made up the facts to ensure there would be lawsuits. The U.S. attorney added this case deserves “special attention” because “it cast doubt on the integrity of our profession.”
