On Friday, federal prosecutors unsealed an 18-count indictment charging Hansmeier and Steele with concealment money laundering, conspiracy to commit mail and wire fraud, and conspiracy to commit and suborn perjury.
Prosecutors allege the men netted some $6 million between 2011 and 2014 by threatening fraudulent copyright lawsuits against hundreds of unwitting victims. Hansmeier and Steele even victimized the court system itself, prosecutors said.
"Abusing one's position as a licensed attorney and using the courts and legal process to file false and abusive copyright claims that threaten individuals and encourage fraudulent settlements is wrong and will not be tolerated," Assistant U.S. Attorney General Caldwell said in a statement. "We will act to protect the integrity of judicial proceedings against attorneys and others who would seek to use them as a mechanism for their own illegal gains."
An attorney for Hansmeier did not immediately respond to a request for comment Monday. It was not immediately clear whether Steele had hired a defense attorney.
According to the indictment, Hansmeier, 35, and Steele, 45, used a network of "sham" companies to buy the rights to pornographic films with titles that included "Sexual Obsession," "Busty Beauty in Red Lingerie," and other names too risque to publish here, then they had their firm's employees upload the movies to BitTorrent sites. The attorneys would track down the IP addresses of people who downloaded the films by filing fraudulent copyright claims and securing subpoenas against Internet service providers, the indictment says.
After receiving user information, prosecutors allege, Hansmeier and Steele would call and send letters to people who allegedly downloaded the movies illegally, threatening to expose them publicly and hit them with hundreds of thousands of dollars in penalties if they did not settle copyright infringement claims. Settlements were typically about $4,000, according to prosecutors.
"When these individuals did fight back, the defendants dismissed the lawsuits rather than risk their scheme being unearthed," prosecutors said in the indictment. "Many of the individuals who received the defendants' letters and phone calls agreed to pay the settlement rather than incur the expense of defending the lawsuit-which would undoubtedly exceed the settlement amount-or risk being publicly shamed for allegedly downloading pornographic movies."
On at least three occasions, prosecutors allege, Hansmeier and Steele produced pornographic movies themselves. According to the indictment, the attorneys attended pornographic conventions in Chicago, Las Vegas and Miami, where they hired actors and "produced multiple short pornographic films." The movies were not distributed, the indictment says, but uploaded directly to websites such as Pirate Bay "in order to catch, and threaten to sue, people who attempted to download the movies."
The defendants filed their claims in courts throughout the country. After a while, judges started to catch on, among them Judge Wright from the U.S. District Court for the Central District of California. First, judges started limiting their ability to sue multiple defendants in the same suit. Later, they began denying requests for subpoenas and dismissing suits outright. Eventually, the attorneys were sanctioned.
"Plaintiffs do have a right to assert their intellectual-property rights, so long as they do it right," Wright said in his 2013 order. "But Plaintiffs' filing of cases using the same boilerplate complaint against dozens of defendants raised the Court's alert. It was when the Court realized Plaintiffs engaged their cloak of shell companies and fraud that the Court went to battle stations."
Hansmeier filed for bankruptcy last year, and in September 2016, the Minnesota Supreme Court suspended his law license over ethics violations related to the alleged scheme, the Minneapolis Star-Tribune reported.
Mitch Stoltz, senior staff attorney at the Electronic Frontier Foundation, told the Star-Tribune that suits filed in 2013 by Steele and Hansmeier represented a third of all copyright suits filed nationwide that year.
"For a time," Stoltz said, "Mr. Steele and Mr. Hansmeier and their counterparts were the most prolific group that were abusing the judicial system with completely false or poorly justified suits to make a quick buck."
