Prenda

Steele and Hansmeier have been finally indicted on fraud, money laundering charges

 

Sweet holiday gift. The masterminds of a porn extortion outfit PrendaJohn Steele and Paul Hansmeier — are finally indicted (USA v. Hansmeier et al, MND 16-cr-00334). Congratulations to everyone who made it happen. Slow wheels of justice do grind.

Paul HansmeierPaul Hansmeier

Twin Cities’ Star Tribune was the first who broke the story:

Authorities arrested Paul Hansmeier, of Woodbury, and John L. Steele, an attorney in Illinois who was a former classmate of Hansmeier’s at the University of Minnesota, shortly before U.S. Attorney Andrew Luger announced charges Friday morning.

They were charged Wednesday in an 18-count indictment with orchestrating a multimillion-dollar extortion fraud. The charges, unsealed Friday, include conspiracy to commit fraud, conspiracy to perjure and conspiracy to launder money.

The indictment refers to other Prenda parties by initials:

  • P.H. = Peter Hansmeier, Paul’s brother: I believe that his role in the scheme is under reported. It may very well be that his participation as a racket mastermind was even bigger that his brother’s
  • M.L. = Mark Lutz, a paralegal, faux owner of fake corporations and trusts
  • P.D. = Paul Duffy. De mortuis nil nisi bonum
  • B.G. = Brett Gibbs

Although the indictment names only Steele and Hansmeier, the language used to describe the scheme can be easily applied to the ongoing extortion racket perpetuated by other outfits: Malibu Media, Voltage Pictures, CEG-TEK, Rightscorp. Today’s event resurrects my hopes that this judicial plague is curable.

John SteeleJohn Steele

Interestingly (according to Wall Street Journal’s story linked below), Steele is up in arms to all the Prenda watchers’ amusement:

An attorney for Mr. Steele said he plans to plead not guilty. “My client has known about this investigation for over a year and, with my assistance, has thoroughly cooperated with the federal government throughout,” attorney Mark Eiglarsh said. “He passionately maintains his innocence and intends to vigorously contest the charges.”

Paul Hansmeier retained attorney Joe Friedberg (it didn’t happen: see update).

Coverage

Updates and Documents

12/29/2016

When it rains, it pours. Star Tribune reported yesterday:

Paul Hansmeier, the Minnesota lawyer indicted this month for allegedly operating a fraudulent multimillion-dollar porn-trolling scheme, is also under investigation by the FBI in relation to his practice of filing scores of disability-access lawsuits, according to documents filed Wednesday in federal court.

An attorney representing Hansmeier’s former client Eric Wong, of Minneapolis, revealed the new allegations in a motion to oppose a legal settlement in a disability-access case. Wong, through his attorney, alleged that his fellow plaintiff and one-time finance director of the nonprofit Disability Support Alliance (DSA), Scott Smith, had cut him out of negotiations in a 2015 lawsuit that Smith had settled with CCRE, which runs Cedar Cliff Shopping Center in Eagan.

Disability Support Alliance is a Hansmeier’s brainchild – this organization was created exclusively to abuse ADA law in order to enrich parasites, so I can’t take seriously the claim that anyone who willingly participated in this racket is a victim. However, if this approach provides an easy way for the feds to throw another book at Hansmeier, so be it: I won’t complain.

Disability Support Alliance et al v. CCRE, LLC (MND 15-cv-03713).

1/4/2017

It turned out that Hansmeier wouldn’t retain Friedberg: instead, Paul will be represented by a public federal defendants, Andrew H. Mohring and Manvir K. Atwal:

1/5/2017

New documents were filed yesterday:

1/9/2017

New documents were filed today:

The trial is initially scheduled (“if no pretrial motions filed by Defendant,” which is unlikely) for March 13, 2017, at 9:30 a.m. before District Judge Joan N. Ericksen in Courtroom 12W, U.S. Courthouse, 300 South Fourth Street, Minneapolis, Minnesota

1/19/2017
1/30/2017

Two Government’s motions for discovery pursuant to F.R.C.P 16(b), 12.1, 12.2, 12.3 AND 26.2 (boilerplate):

2/2/2017

Steele is set to change his plea (text-only docket entry):

2/16/2016

Hansmeier requested to designate the case as “complex” for pretrial time exclusions pursuant to the Speedy Trial Act. He also asked to bifurcate pretrial motions – to challenge the legality of the indictment first. The judge agreed with the former, but not the latter. A new schedule was set:

  1. The government must make all disclosures required by Federal Rule of Criminal Procedure 16(a) by February 22, 2017.
  2. Defendant must make all disclosures required by Federal Rule of Criminal Procedure 16(b) by March 1, 2017.
  3. All motions in the above-entitled case must be filed and served consistent with Federal Rules of Criminal Procedure 12(b) and 47 on or before April 24, 2017.
  4. Counsel must electronically file a letter on or before April 24, 2017, if no motions will be filed and there is no need for hearing.
  5. All responses to motions must be filed on or before May 15, 2017.
  6. All replies to motions must be filed on or before May 30, 2017.
  7. Any Notice of Intent to Call Witnesses must be filed by May 15, 2017.
  8. Any Responsive Notice of Intent to Call Witnesses must be filed by May 22, 2017.
  9. A motions hearing will be held pursuant to Federal Rules of Criminal Procedure 12(c) where:
    • a. The government makes timely disclosures and Defendant identifies in the motions particularized matters for which an evidentiary hearing is necessary; or
    • b. Oral argument is requested by either party in its motion, objection or response pleadings.
  10. The motions hearing will be heard before Magistrate Judge Katherine Menendez on June 6, 2017, at 10:00 a.m., in Courtroom 8E, U.S. Courthouse, 300 South Fourth Street, Minneapolis, Minnesota.
  11. TRIAL:
    • a. All voir dire questions and jury instructions and trial related motions (including motions in limine) must be submitted to District Judge Joan N. Ericksen on or before September 1, 2017.
    • b. This case will commence trial on September 11, 2017, at 9:30 a.m. before District Judge Joan N. Ericksen in Courtroom
2/27/2017
  • 40. Order Modifying Conditions of Steele’s Release:

    Due to the fact that the above-named defendant has requested and moved to Pennsylvania,

    IT IS HEREBY ORDERED that the following be added to the defendant’s conditions of release:

    Abide by the following restrictions on personal association, place of abode, or travel: Travel shall be restricted to Minnesota and Pennsylvania unless approved by the supervising officer.

3/6/2016

Today John Lawrence Steele pleaded guilty to counts 1 (Conspiracy to Commit Mail Fraud and Wire Fraud) and 17 (Conspiracy to Commit Money Laundering) of the indictment.

Paul Hansmeier

Dr. Vandalia’s comment:

The most important sentence: “The parties are to keep the Court apprised of when sentencing may be suitable, given the Defendant’s anticipated cooperation in a related case.”

Translation: Hansmeier is screwed. There is a reason they call the Federal criminal justice system “first come, first served” justice.

Update: Note that the document linked above was quickly sealed (“entry restricted to case participants only”), and an amended version was filed instead. It is nearly identical, with one exception: the phrase

given the Defendant’s anticipated cooperation in a related case.

was removed.

16:44 Update: Dan Browning, who attended today’s hearing, reported (via the Star Tribune):

  • U of M law grad admits guilt in porn-troll scheme:

    Steele, a former Chicago lawyer who now lives in Pennsylvania, pleaded guilty to conspiracy to commit mail fraud and wire fraud, and conspiracy to launder money. He cut a deal that calls for him to cooperate in the prosecution of others involved, presumably his only co-defendant, Minneapolis lawyer Paul Hansmeier.

    Hansmeier, who is suspended from practicing law, has denied the charges and awaits trial in Minneapolis.

    In exchange for Steele’s plea, the government agreed that it will dismiss 16 other charges against him, including mail fraud, wire fraud and conspiracy to commit and suborn perjury. The agreement contemplates a sentence of 8 to 10 years in prison if approved by U.S. District Judge Joan Ericksen, though Steele could win a reduction by providing substantial help.

Here is the plea agreement:

Ken White (via a popular hacker’s blog Pope Hat):

  • Prenda Saga Update: John Steele Pleads Guilty, Admits Entire Scheme

    […] Steele and the government have stipulated to factors yielding an anticipated guideline range of 97-121 months of imprisonment. Yes, up to ten years in federal prison. This is not a highly favorable plea agreement — Steele isn’t getting any killer deal (yet) for pleading guilty. The feds made him plead to both mail fraud and money laundering — a “good deal” would drop the money laundering. In addition, the feds made Steele agree to just about every Guideline enhancement I can think of, rather than leaving those enhancements open to argue. Steele has truly hurled himself on the sword here.

Mike Masnick’s take (Techdirt):

  • Prenda’s John Steele Pleads Guilty, Admits To Basically Everything

    Of course, now this means that Hansmeier is in even deeper shit than Steele. The feds have no reason to cut a deal with him to roll over on Steele, and Steele has now agreed to testify against Hansmeier. They may still cut a deal, but it certainly appears that the final chapter concerning Prenda isn’t ending well for either Steele or Hansmeier. […]

And here is the official DOJ press release:

03/07/2017
  • 44. Hansmeier orders the transcript of Steele’s 3/6/17 change of plea hearing
03/20/2017

As Techdirt reports, there are indicators that Hansmeier is being pursued for bankruptcy fraud.

04/24/2017

Today was the deadline for Hansmeier’s pretrial motions deadline. So he filed 8 documents. The most jaw-dropping is a 64-page-long document #49, in which Hansmeier, via his lawyers, claims that the government case against him should be dismissed because

[…] In short, this prosecution is not just peculiar, but it is contrary to law, and presents a clear danger to this nation’s system of civil justice. […]

No less.

A good insight from the comment section below (DB):

He states his theory up front: “Prosecutors ought not be allowed to ground criminal fraud or analogous charges upon someone’s exercise of constitutionally protected civil litigation activities.”

To mis-quote Nixon, “If a lawyer does, that means it is not illegal”.

I think that this sums up his viewpoint and actions. Lawyers are above the law. They get to use the power of the court, but are never bound by the law. If they are clever enough, keep up motion practice, and appeal any loss, they can ultimately avoid repercussions for their actions.

4/25/2017

Techdirt about yesterday’s filing:

5/17/2017

On 5/12/2017 the government moved for extension of time to reply/respond.

Today the motion was granted via the following text-only order:

TEXT ONLY ENTRY: Oral ORDER in case as to Paul R Hansmeier. The Court has received and reviewed the government’s Motion for Extension of Time. ECF No. 55. After consulting with counsel for both the government and Mr. Hansmeier, the Court will reset the hearing and schedule as detailed in this order. Accordingly, the government’s motion is GRANTED. It is HEREBY ORDERED that: 1. The government’s response to Mr. Hansmeier’s pretrial motions is due on or before June 2, 2017. 2. Mr. Hansmeier’s reply brief is due on or before June 16, 2017. 3. Any notice of intent to call witnesses must be filed on or before June 2, 2017. 4. Any responsive notice of intent to call witnesses is due on or before June 16, 2017. 5. The motions hearing currently set for June 6, 2017 is CANCELED and RESCHEDULED for June 23, 2017 at 9:00 AM in Courtroom 8E (Mpls) before Magistrate Judge Katherine M. Menendez. Signed by Magistrate Judge Katherine M. Menendez on 5/17/17. (MG) (Entered: 05/17/2017)

In other news: Hansmeier’s adversarial bankruptcy case (MNB 16-04035) was stayed today after a hearing:

The defendant appeared pro se and Colin Kreuziger appeared on behalf of the plaintiff. Proceeding stayed until September 30, 2017. Trial to be set in November. No further continuances will be allowed.

5/19/2017

John Steele has been disbarred.

6/2/2017

The Government responded to Hansmeier’s pre-trial motion today, including his apoplectic motion to dismiss (see the 4/24 update above):

Defendant Hansmeier moves the court to dismiss Counts 1-17 of the Indictment. Hansmeier argues the detailed allegations set forth in the Indictment do not state an offense, and asserts the charges brought by the government impermissibly infringe on his “constitutionally-protected” right to engage in frivolous civil litigation. Unfortunately for Hansmeier, no such right exists. There is no safe harbor for fraud simply because one of the tools of the fraud involved litigation. Moreover, Hansmeier and his co-defendant, John Steele, did not simply file dubious lawsuits. They constructed an elaborate ruse designed to deceive people—state and federal judges as well as numerous victims who paid settlement fees to them—and, for that reason, violated the mail and wire fraud statutes. Hansmeier’s attempt to confuse this issue, through a convoluted 64-page memorandum wherein he pretends to champion the rights of unethical litigators and thereby create a strawman to save himself, should be rejected.

6/9/2017

Techdirt on the government’s response (6/2 update above):

6/17/2017

Yesterday Hansmeier replied to the government’s response. Oh, boy. His public defendant’s aggressive defense is admirable, but arguing that if Hansmeier’s frauds were prosecuted, the government would be able to criminally charge any plaintiff and its lawyers in any civil action against it? Seriously?

The question becomes, if the government’s theory of prosecution in the present case is viable, what is to stop the DOJ-Criminal Division from bypassing the civil process entirely and just bring criminal charges against these civil plaintiffs and their lawyers? As in the case at hand, the government could merely say there exist a number of undisclosed defenses to the asserted civil claims, and thus the civil litigation activities amount to fraud or extortion or some other creatively-chosen criminal statute. That approach has many advantages over making arguments in civil courts: the civil-plaintiffs-turned-criminal-defendants would suddenly be at a great tactical disadvantage; and the prospect of criminal prosecution and imprisonment would chill many from challenging the government through the civil courts.

Raul adds:

Hansmeier’s attorney conveniently neglects to mention that there have been countless prosecutions against cabals of attorneys, physicians and claims adjusters who conspire to use the court system to pursue fraudulent personal injury lawsuits. Workers Compensation fraud also comes to mind. I’m sure the list goes on but the obvious point is that a judge, in the midst of a civil lawsuit, referred Hansmeier for criminal investigation. This is not selective prosecution.

6/19/2017

The transcript of the 3/6/2017 John Steele’s change of plea hearing is now available.

7/27/2017

A hearing on miscellaneous both sides’ motions was held on 6/23/2017, and yesterday the judge issued her order, denying Hansmeier’s motion for a Bill of Particulars and granting/partially granting the other motions. Defendant’s motion to dismiss (#49, the subject of the recent updates above) is still under advisement.

I was amused by the word “current” in the following paragraph (emphasis is mine):

The government indicated at the hearing that it has already provided discovery regarding two potential areas of Rule 404(b) evidence: allegations related to Mr. Hansmeier’s bankruptcy filings and evidence of claimed misconduct related to Mr. Hansmeier’s involvement in Americans with Disabilities Act litigation. However, counsel for the government has not yet decided whether or to what extent they will seek to introduce such evidence at Mr. Hansmeier’s trial on the current indictment. The thirty day notice requirement will give counsel for Mr. Hansmeier adequate time to prepare any necessary motions in limine to the District Court regarding the admissibility of such evidence.

7/25/2017

Yesterday Magistrate Katherine Menendez recommended denying Hansmeier’s motion to dismiss (#49, the subject of the 6/17 update above):

If the indictment against Mr. Hansmeier read as he described in his briefing—and did nothing more than attempt to criminalize an aggressive approach to civil litigation—the Court would recommend that his motion to dismiss be granted. However, the indictment alleges far more than creative lawyering on the part of Mr. Hansmeier and his co-defendant, John Steele. The indictment describes a fraudulent scheme that, if proven, would violate the law and Mr. Hansmeier’s arguments to the contrary do not persuade the Court that the indictment is fatally flawed. Therefore, the Court recommends denial of the motion to dismiss.

[…]

Mr. Hansmeier’s motion to dismiss purports to raise interesting questions about how far the government can go to criminalize aggressive civil litigation tactics. But the indictment against him alleges clearly fraudulent behavior that goes far beyond creative lawyering, so the novel questions he has raised need not be answered in this case at this stage. Ultimately, the indictment contains sufficient allegations to establish conspiracy to commit mail and wire fraud, mail fraud, wire fraud, and money laundering if those allegations are proven beyond a reasonable doubt at trial.

8/04/2017

On 8/2/2017 Hansmeier moved to postpone the trial till after 4/23/2018, arguing that

Counsel for Mr. Hansmeier needs additional time to investigate and prepare for trial. The discovery is voluminous and as such requires more time to review. Further, the government attorneys have upcoming trials […].

(Hansmeier’s statement.)

According to the motion, the government doesn’t oppose, so expect the motion to be granted. Looks like a prolific law abuser continues to game the system even in the criminal defendant capacity. It is not clear how this postponement affects the sentencing of John Steele, which was purportedly contingent on his trial testimony against Paul.

One of the two Hansmeier’s counsel – Andrew H. Mohring — is no longer with the Office of the Federal Defender for the District of Minnesota, only Manny K. Atwal remains on the record.

8/14/2017

No surprise: the judge granted the continuance, excluding the period from the date of the order through April 23, 2018 from the Speedy Trial Act computations.

Today Hansmeier objected to Magistrate Katherine Menendez’s Report & Recommendations (on 7/26 she recommended to deny defendant’s “civil litigation sky is falling” motion to dismiss).

Interestingly (or not), the document metadata shows Eric Reinsche, a Minnesota federal public defender who is not on this case, as an author.

8/28/2017

Today the government responded to Hansmeier’s objections. Sweet and short.

The defendant’s objections alternately ignore and mischaracterize the Magistrate’s report and recommendation. To be clear, Judge Menendez did not “prune,” “cabin,” “strip away,” or “boil down” the allegations comprising the charged scheme to defraud. Quite the opposite, she unequivocally held that each of the allegations in the Indictment form an integral part of the scheme, and specifically rejected the reductive approach the defendant once again attempts to foist upon the court […]

[…]

In his objections, the defendant also attempts to relitigate the question of whether there exists a categorical bar to prosecutions arising from civil litigation. For the reasons set forth in the Magistrate Judge’s report and recommendation, as well as the government’s response to the defendant’s motion to dismiss, no such bar exists. The defendant presents no new arguments, and the government therefore relies on its previous response.

9/10/2017

On 9/8/2017 Judge Ericksen thoroughly rejected each and every Hansmeier’s argument and adopted magistrate’s Report and Recommendation, i.e.denied defendant’s motion for summary judgment. See you at trial, Paul. I’ll do my best to travel to Minnesota – to personally witness a long awaited moment when the jury announces the guilty verdict.

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Discussion

91 responses to ‘Steele and Hansmeier have been finally indicted on fraud, money laundering charges

  1. Hansmeier’s attorney conveniently neglects to mention that there have been countless prosecutions against cabals of attorneys, physicians and claims adjusters who conspire to use the court system to pursue fraudulent personal injury lawsuits. Workers Compensation fraud also comes to mind. I’m sure the list goes on but the obvious point is that a judge, in the midst of a civil lawsuit, referred Hansmeier for criminal investigation. This is not selective prosecution.

  2. Two minute goverment reply to defense motion:

    Going to court is not a crime. Fabricating evidence, inducing someone to act, and then taking them to court under false pretenses is a crime.
    ***
    The longer answer is that while I certainly think Hansmeier belongs in jail, the government does need to be required to act “by the book”, and carefully distinguish what is extortionate from the mere act of asking the courts for something. Having to act “by the book” protects all of us; cutting corners on the worst cases erodes protections for the innocent.
    ***
    Thanks for the Steele transcript!

  3. So let me get this straight, Hans public defender is pretty much saying that it is the government and courts fault that they allowed Hans and Steele to fleece thousands of people and that Hans isn’t really responsible for his crimes because he’s a product of the system? Really.. like f*ck off.

    Honestly Hans and Steele had actual clients that owned and had copyrights to films they sued over ( Yes I still believe they seeded their clients movies to sue over much like they did with their own films) But Hans and Steele loathed having to give up money to the porn companies who they enlisted as clients because they did all the work and didnt feel their clients deserved it and then they decided to do it all be the producer, be the client, be the lawyers, and be the recipient of all settlements and thus developed their own scheme to defraud the courts and commit the crimes alleged.

    For Hans to sit and whine that he is a product of the system and shouldnt be held responsible is laughable. Hans and Steele got greedy, they just couldnt resist that they were making all this easy settlement cash and were loathe to have to share it.

    The only people responsible for Hans and Steele ending up facing the wrath of the law is themselves.

  4. re: 7/25/17 update, the whole Magistrate recommendation is a fun read. Not Star Trek reference fun, but “Paul, you are in deep do-do” fun.

  5. “See you at trial, Paul. I’ll do my best to travel to Minnesota – to personally witness a long awaited moment when the jury announces the guilty verdict.”

    Careful not to out yourself, SJD. Hopefully the jury will see the truth you have brought to light for others. Take care!

  6. They need to look into David Lowe of Seattle for this. He does the same thing., Im sure he personally seeds movies to get lawsuites. Hes suing like 150 people at any given time. The seattle court needs to smarten up and put an end to this. They deserve like $200 per offender and maybe $100 per offender for lawyer fees, if they can win in court.

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