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Home / All News / Paul Hansmeier pleads guilty to two fraud counts

Paul Hansmeier pleads guilty to two fraud counts

When it comes to financial criminal behavior, Paul Hansmeier may well be Minnesota’s biggest and best lawyer.

On Aug. 17, Hansmeier pleaded guilty to conspiracy to commit wire fraud and conspiracy to commit money laundering, two out of 18 counts charged out after Hansmeier’s multimillion-dollar fraud scheme to obtain payments from extortion victims to settle sham copyright infringement lawsuits imploded. John Steele, Hansmeier’s partner in crime and in law, pleaded guilty last year.

The plea deal calls for a guidelines sentence but the prosecution agreed not to ask for more than 150 months. The prosecution also agreed not to charge out any other crimes known to it, including conduct associated with Hansmeier’s bankruptcy.

Hansmeier retains the right to appeal the District Court’s denial of his motion to dismiss the charges in the indictment against him. If he wins the appeal, he has the right to withdraw his guilty plea.

Trolling for clients

In September 2010, the law firm Steele Hansmeier PLLC began representing clients that owned copyrights to pornographic movies. They monitored file-sharing websites to obtain the IP addresses of individuals who downloaded the movies. They then filed copyright infringement lawsuits against the John Does and got judges to authorize subpoenas to obtain the identities of the subscribers to the IP addresses. They then threatened the subscribers with lawsuits which they would settle for about $3,000.

Their next move was to upload their clients’ movies to BitTorrent file sharing websites so they could catch those who attempted to obtain the movies. They then created another law firm, Prenda Law, with an attorney in Chicago. They also created other entities that they used as plaintiffs in copyright infringement cases.

It gets worse. In about May 2012 Hansmeier and Steele began making their own porn, which they then uploaded to file sharing sites to sue those who attempted to download them.

Of course, they concealed all this from the judges from whom they requested permission for early discovery so they could contact the subscribers and extort money from them.

They also filed lawsuits in the name of one of their companies accusing the downloaders of hacking into their client’s computers. In reality, those downloaders had agreed to be sued to allow Hansmeier and Steele to seek discovery about their alleged “co-conspirators.”

They subsequently created a company called Under the Bridge Consulting to receive money from Steele Hansmeier and remit it to the two individuals.

Hansmeier’s guilty plea says they made more than $3 million from these copyright troll schemes, although a press release from the U.S. Attorney’s Office says they obtained about twice that amount.

Sanctions start piling up

Many found Prenda et al.’s copyright-enforcement business model problematic, to put it mildly. One of those was California U.S. District Judge Otis Wright, who referred Hansmeier and several associates for investigation on criminal, tax and professional-standards charges, concluding that they perpetrated a fraud on the court in their handling of the lawsuits and ordering them to pay defense costs and penalties of $81,300.

Wright wrote that the attorneys had “discovered the nexus of antiquated copyright laws, paralyzing social stigma, and unaffordable defense costs.”

Other consequences, for the alleged trolls and others, continued. Minnesota attorney Paul Godfread and his client Alan Cooper sued Steele, Prenda, and others for falsely using Cooper’s name. Hansmeier and others countered with defamation suits. Their suits were dismissed and Prenda got hit with $674,206.94 in punitive damages and sanctions in 2016.

Another copyright trolling suit went awry in Hennepin County, and Judge Tanya Bransford sanctioned Alpha Law Firm, of which Paul Hansmeier was a managing member, and others more than $63,000 in attorney fees and costs. The Minnesota Court of Appeals found that Hansmeier was personally responsible for the debt.

The Office of Lawyers Professional Responsibility then sought to suspend Hansmeier. Illinois had taken the same step against Steele. Among other things, the OLPR petition accused Hansmeier of lying about his personal finances and his involvement with Prenda; transferring more than half a million dollars in assets to an estate planning account for his son as a means to avoid paying sanctions; failing to pay sanctions; failing to pay attorney fees; bringing lawsuits in bad faith; and failing to appear in court for a hearing. Hansmeier accepted a suspension in 2016.

With sanctions mounting, Hansmeier filed for a bankruptcy reorganization, claiming about $2.4 million in debt. Judge Kathleen Sanberg granted the trustee’s motion to convert it to a Chapter 7 liquidation. In a subsequent order, Sanberg said that Hansmeier’s postpetition misconduct included failure to disclose significant transfers of assets, failure to disclose assets, failure to disclose living expenses, failure to file a § 363 motion to sell his residence for $1.2 million in cash until caught by the Chapter 13 Trustee, and failure to disclose significant general unsecured claims. There were rumors of cash hidden in shoeboxes or under the bed, but those apparently were just rumors.

The 8th Circuit affirmed Sanberg’s order.

ADA violations prove lucrative

Meanwhile, Hansmeier found a new source of revenue – suing small businesses for violations of the Americans with Disabilities Act. Those who disapproved of Hansmeier and/or his suits called them “drive-by” suits because the plaintiff or lawyer would, in some cases, literally drive by the business and spot a violation.

In one notable victory, he succeeded before Hennepin County District Court Judge Charles Porter when he sued the Chatterbox Pub over a gap in the patio threshold. The Court of Appeals upheld Porter’s award of $25,862 in fees, although Hansmeier has requested about $77,000.

Hansmeier represented the Disability Support Alliance in suits over the violations and it brought over 100 such suits. The alliance also came up in the bankruptcy proceedings against Hansmeier when the trustee claimed he lied about his ownership.

Perhaps the most significant effect of the ADA lawsuits was at the Legislature, where the law was changed to require notice and a safe-harbor period for remedial measures before a suit could be filed, although the law could only affect state claims.

But after Hansmeier lost his license, his wife, Padraigin Browne, took over the ADA practice. She is listed on the Minnesota District Court’s PACER site in 163 cases, most closed. The last filing was on June 12. The plaintiff is a Burnsville man with cerebral palsy who says that a multitenant commercial building in Crystal has inadequate parking for handicapped persons. A settlement conference is scheduled in November.

Indicted

Several months after his suspension, Hansmeier was indicted. At the time, then U.S. Attorney Andy Luger said that the “massive extortion scheme” perpetrated by the pair had brought in about $6 million. “Every once in a while I’m asked about frauds and con artists,” he said then. “I’m often tempted to say I’ve seen it all. But then something like this comes along.”

Steele was indicted at the same time and moved quickly, apparently to throw Hansmeier under the bus. His cooperation may have made life even more difficult for Hansmeier, but Hansmeier did not agree to provide any cooperation to authorities.

The phone number for Class Justice, the firm Hansmeier used for ADA suits, is disconnected. His attorney, federal public defender Manny Atwal, was out of the office and could not be reached for comment.

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About Barbara L. Jones

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