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Minnesota Man Charged in Multimillion Dollar Pornography Scheme
Paul R. Hansmeier, 35, and John L. Steele, 45, have been charged with conspiring to fraudulently obtain millions of dollars by deceiving federal and state courts in a multibillion dollar scheme to extort money from victims who downloaded pornography. Hansmeier was suspended from the practice of law in the State of Minnesota on September 12, 2016.
The indictment states that between 2011 and 2014, the defendants orchestrated an elaborate scheme to steal millions of dollars by threatening copyright lawsuits against individuals who supposedly downloaded pornographic movies from file-sharing websites. The defendants created and used a series of sham entities to obtain copyrights to pornographic movies – some of which they filmed themselves – and then uploaded those movies to file-sharing websites like “The Pirate Bay” in order to lure people to download the movies.
According to the indictment, to learn the identities of their potential victims, the defendants filed bogus copyright infringement lawsuits, through which they got permission from courts to subpoena internet service providers for subscriber information associated with the IP addresses used to download their pornographic movies. After getting the subscriber information, the defendants used extortionate letters and phone calls to threaten the victims with enormous financial penalties and public embarrassment unless they agreed to pay a settlement of thousands of dollars.
The indictment also states that when courts began to restrict the defendants’ ability to sue multiple individuals in the same copyrights lawsuit, they changed their tactics and began to file lawsuits falsely alleging that computer systems belonging to their sham clients had been hacked. Hansmeier and Steele recruited ruse defendants to facilitate their phony “hacking” lawsuits. The ruse defendants were people who had been caught downloading pornography from a file-sharing website. The ruse defendants agreed to be sued in exchange for Hansmeier and Steele waiving a settlement fee.
The indictment alleges that the defendants began a long process of lies and deceit designed to conceal the truth and deflect responsibility from themselves. As courts began to uncover the defendants’ unscrupulous litigation tactics, judges began denying the defendants’ requests to subpoena ISPs, dismissing lawsuits, accusing the defendants of deceptive and fraudulent behavior, and imposing sanctions against the defendants and their associates.
U.S. Attorney Andrew M. Luger stated, “The defendants in this case are charged with devising a scheme that casts doubt on the integrity of our profession. The conduct of these defendants was outrageous – they used deceptive lawsuits and unsuspecting judges to extort millions from vulnerable defendants. Our courts are halls of justice where fairness and the rule of law triumph, and my office will use every available resource to stop corrupt lawyers from abusing our system of justice.”
Special Agent in Charge of the FBI Minneapolis Division Richard T. Thornton stated, “The charges announced today describe a fraud scheme perpetrated by lawyers and officers of the court who abused their positions of trust for personal enrichment. The FBI remains committed to uncovering fraud such as this to protect the integrity of our civil justice system.”
Special Agent in Charge Shea Jones, St. Paul Field Office, stated, “The role of IRS Criminal Investigation becomes even more important in complex financial investigations involving money laundering because of the time it takes to unravel. IRS Criminal Investigation is committed to working these types of difficult financial investigations and following the criminal’s money, wherever it leads.”
The indictment charges Hansmeier and Steele with conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349. If convicted, they face a maximum penalty of 20 years in prison and a $250,000 fine.
Key Facts
- State: Minnesota
- Category: Cybercrime
- Source: DOJ Press Release â†â€â€
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