Prenda law judge says porno copyright trolls are frauds, identity thieves; $80K in fines and disbarment pending

Judge Wright has issued his long-awaited ruling in the case of Prenda Law, the notorious porno copyright trolls who used fraud and bullying to extort millions from Internet users by threatening to sue them for downloading pornography videos with embarrassing titles. Prenda used a combination of offshore shell companies, obfuscation, and even identity theft to disguise the ownership of their con, and when they landed before Judge Wright, it all started to unravel.

The judge has fined Prenda $80,000 ($40K in fees, doubled for punitive measure) and asked the FBI to investigate them for racketeering. He held that their operation was a fraud, that they had committed identity theft, and, importantly, identified Steele, Hansmeier, and Paul Duffy as the "de facto owners" of Prenda. He's asked the lawyers' bar associations to have them disbarred. And he made a lot of Star Trek references!

Nevertheless, it is clear that the Principals’ enterprise relies on deception. Part of that ploy requires cooperation from the courts, which could only be achieved through deception. In other words, if the Principals assigned the copyright to themselves, brought suit in their own names, and disclosed that they had the sole financial interest in the suit, a court would scrutinize their conduct from the outset. But by being less than forthcoming, they defrauded the Court. They anticipated that the Court would blindly approve their early-discovery requests, thereby opening the door to more settlement proceeds.

As for penalties, they begin with attorneys' fees. Prenda will have to pay these to the two defense lawyers who have been instrumental in this case: Morgan Pietz and Nicholas Ranallo. Wright awards $36,150 in fees to Pietz, $1,950 in fees to Ranallo, as well as legal costs (copying and filing fees, for example) to both. He then doubles the amount "as a punitive measure," arriving at $81,319.72. In a footnote, Wright says that the sum "is calculated to be just below the cost of an effective appeal"—a final dig at the Prenda business model of settlement offers just below the cost of defense. The Prenda folks have 14 days to pay up.

The harshest penalties are saved for last. First, Judge Wright suggests the Prenda lawyers should be disbarred, writing "there is little doubt that Steele, Hansmeier, Duffy, [and] Gibbs suffer from a form of moral turpitude unbecoming an officer of the court." In many states, including California, crimes reaching the standard of "moral turpitude" lead to automatic disbarment. Wright will be referring the four lawyers to every state bar in which they are admitted to practice...

Third, though Plaintiffs boldly probe the outskirts of law, the only enterprise they resemble is RICO. The federal agency eleven decks up is familiar with their prime directive and will gladly refit them for their next voyage. The Court will refer this matter to the United States Attorney for the Central District of California. The [court] will also refer this matter to the Criminal Investigation Division of the Internal Revenue Service and will notify all judges before whom these attorneys have pending cases.

Prenda hammered: Judge sends porn-trolling lawyers to criminal investigators [Joe Mullin/Ars Technica]

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  1. This is great news. Which reminds me, what ever happened to those copyright trolls? Did they get disbarred? Or is what the do not rise to the level of “moral turpitude.”

    1. Nobody knows yet.  The judge only ruled yesterday.

      The thing that worries me is that (IANAL) but it seems possible that disbarrment might not even slow these guys down.  Is there anything in their “business model” that a layman such as myself couldn’t emulate? Send scary letter – offer to settle.

      Also, the fine (so far) might be a fraction of the take.

      1. Apparently, having the IRS CID sniffing around is a distinctly career limiting move, if commenters are to be believed.

        1. Based on my reading from this morning, that may actually be the most brutal part of this ruling.

          If they made as much as they claim, paying $90,000 in fees and penalties ain’t no thing and while disbarment is no joke, it probably wouldn’t slow them down from trying other cons in the future.

          But the CID can drop some serious weight on people they believe haven’t paid taxes on millions of dollars. 

          Add that to the potential for a Grand Jury investigation from the US Attorney’s office… i think everyone’s appetite for schad^M^M^M^M^M justice is gonna get a lot more fodder over the next few weeks / months.

        2.  I do taxes for a living. IRS CID? Those are the guys who show up armed and seize every scrap of paper and computer. CID is VERY serious.

          1. I liked Ken’s comment on IRS CID; he compared them to Romulans except he says Romulans have a better grasp of due process.

    2. Its a matter for referral.

      The judge has put into motion the following:

      1) Immediate fees and punitive damages of $80,000 in the case in front of his own court.
      2) Established fraud and intent to defraud as a legal fact and has published that to all other cases in the US by Prenda. (ie, any lawsuit they are involved in is also likely to end to end up with Prenda paying legal fees and sanctions. The greatest risk to Prenda right now is the lawsuit in Chicago where it appears the defendant and plaintiff are acting in collusion. If this hits there, they could have another round of potential claims/sanctions/criminal conspiracy charges). 
      3) Brought RICO claims to the attention of the US Attorney’s Office. 
             a) The US attorney can immediately seize and hold any assets deemed to be at risk for transfer out of jurisdiction. (Given that Lutz has already tried to skip to Mexico, this is pretty much a given)
             b) Under RICO, any penalties follow the triple rule for damages.
             c) Jail time in criminal proceedings – which this is.
      4) Notified the IRS
             a) Can immediately seize all assets of the people listed as well as *any* assets of anyone who they have transferred money to on the presumption that transfers were done to evade taxes.
             b) Criminal charges on the named individuals.
      5) Least troublesome. Disbarrment and sanctions from the Bar.

      The judge was very careful in this ruling. He could have just as easily have claimed criminal conspiracy charges, fraud, or any of a hundred different things. He strictly stayed within what he could prove based on what was presented. If the US attorney picks this up (and they will given how deliberately high-profile the ruling was), the US attorney could easily charge stack this thing to what Prenda will never get a parole hearing before the universe ends.

      Judge Wright went for the kill and did it in such a way as to minimize any chance Prenda has for survival while maximizing damage.

      1. Pissing off a Federal judge is never wise.  Pissing off a Federal judge who is a former Marine is excruciatingly unwise.

  2. Wright awards $36,150 in fees to Pietz, $1,950 in fees to Ranallo, as well as legal costs (copying and filing fees, for example) to both. He then doubles the amount “as a punitive measure,” arriving at $81,319.72. In a footnote, Wright says that the sum “is calculated to be just below the cost of an effective appeal”—a final dig at the Prenda business model of settlement offers just below the cost of defense.

    I had to laugh at that one. Prenda seriously pissed off the wrong judge.

  3. That was well-worth the wait.  I get tickled finding total geeks in the least expected places.  Judge Wright just made my day.

  4. I first read that as “dismemberment pending” now the punitive steps recommended by the judge seem far too lax by comparison.

  5. I CANNOT BELIEVE THIS.
    AM I DREAMING?
    THE GOOD GUYS WON.
    THE BAD GUYS LOST.
    EXCELSIOR!

    This is like a Grimms fairy tale, except with litigation.

  6. OHAI Cory!

    If you thought the fun was over kids, you were mistaken.
    Steele did an interview with Xbiz where he talks about the Judge just hates children and puppies… or was it porn… and they are going to appeal.
    If the name is to be believed Steele also showed up on Ars spouting more bile.

    Now this is a good thing, we can stop expending effort on Pretenda.  But there are many more trolls out there, some nearly as bad as Prenda… some you might think are worse.  There are many baby trolls just cutting their teeth on trying to turn box office disasters into cold hard cash…  now we can focus more on them.  We can always use more help.  Report to fightcopyrighttrolls.com or dietrolldie.com for duty.

    Oh and somewhere on indiegogo is a fund to build a statue of Judge Wright…
    The interwebs… gotta love it.

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