John L. Steele, managing director Media Copyright Group LLC, photographed in Chicago, Illinois, October 11, 2010, has been granted permission from a federal judge to subpoena identities of people who are illegally downloading adult content off the internet. Steele's clients are the adult content makers. (Photo by Nancy Stone/Chicago Tribune/MCT via Getty Images)
Photograph by Chicago Tribune MCT via Getty Images
By Jeff John Roberts
December 19, 2016

Two Minnesota attorneys who allegedly ran an extortion racket, based on blackmailing people who downloaded pornography, have been indicted after federal prosecutors slapped them with a raft of charges, including fraud, money laundering, and conspiracy.

According to the indictment, the scam, run by Paul Hansmeier and John Steele, worked like this: the lawyers obtained the rights to X-rated video and then uploaded them to file-sharing sites like Pirate Bay. They waited for people to download the movies and then threatened, in letters and phone calls, to publicly name them in copyright lawsuits unless they paid settlements worth thousands of dollars.

Over the years, Hansmeier and Steele made over $6 million from the shakedowns, according to the indictment. In some cases, the complaint alleges that they paid adult performers to make short videos to further their scheme, which was exposed by the FBI and the IRS.

“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[…],” said U.S. Attorney Andrew Luger in a statement.

In many of the lawsuits, the lawyers used shell companies to sue hundreds of “John Does” at once, and then asked a court to force Internet service providers to provide the names of subscribers who downloaded a video, according to the indictment. The lawyers would then contact a subscriber and tell them they would replace “John Doe” in the lawsuit with his or her real name—unless they paid up.

The courts started to catch on and, in 2013, a judge sanctioned the lawyers for abusing copyright law and the legal process. In response, Hansmeier and Steele changed tactics by having their shell companies charge the defendants with hacking instead of copyright infringement. Meanwhile, they started a new sideline suing small businesses over alleged violations of the Americans with Disabilities Act (the Minnesota legislature then changed rules to limit the number of so-called “drive by” discrimination lawsuits).

According to the Star Tribune, Hansmeier’s wife took over some of the disability lawsuits in September after the state suspended his law license, while Hansmeier assisted her as a paralegal. Hansmeier’s father is currently the chair of the ethics committee of the Minnesota Bar Association’s 7th District.

Hansmeier’s attorney Joe Friedberg told the Star Tribune that he didn’t know enough about the case yet to comment.

This story was updated Dec. 19. It will be updated with comments from the defendants when it becomes available.

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