A Chicago lawyer, already accused by Illinois legal regulators of running a “shakedown” scheme, and his former partner have been criminally charged for their work, purportedly on behalf of businesses holding the rights to pornographic videos, to collect millions of dollars in settlements from people across the country they accused of illegally downloading the porn content.
On Friday, Dec. 16, federal prosecutors in Minneapolis announced a grand jury had indicted attorneys John L. Steele, of Chicago, and Paul Hansmeier, of Minnesota, over their alleged actions through their firms Steele Hansmeier PLLC, Prenda Law and other associated business entities to use the courts to allegedly orchestrate “an elaborate scheme to fraudulently obtain millions of dollars in copyright lawsuit settlements by deceiving state and federal courts throughout the country.”
“The defendants in this case are charged with devising a scheme that casts doubt on the integrity of our profession,” said Minnesota U.S. Attorney Andrew M. Luger in a statement released to accompany the indictment announcements. “The conduct of these defendants was outrageous – they used deceptive lawsuits and unsuspecting judges to extort millions from vulnerable defendants.”
John L. Steele
The indictments were filed Dec. 14, but the documents were made public Friday. Published reports indicated both Hansmeier and Steele were arrested by authorities before the charges were released.
According to the release, the FBI and IRS assisted in the criminal investigation that resulted in the indictments.
The charges center on the lawyers’ alleged conduct, beginning in 2011, to amass relatively small settlements - typically amounting to a few thousand dollars per settlement – from an array of individuals around the country accused of illegally downloading copyrighted online porn.
According to the indictments, the scheme began when Steele and Hansmeier created “sham” business entities – which, according to Illinois attorney disciplinary documents, were incorporated in St. Kitts and Nevis, West Indies – to obtain the rights to the porn content. Illinois regulatory complaints noted the involvement of former law partner Paul Duffy in the scheme, as well. He died in 2015.
The indictment said Steele and Hansmeier had also created some of the content themselves.
According to the indictment, the men then allegedly uploaded the content to “file-sharing websites … to lure people to download the movies.”
The indictment said the lawyers then allegedly filed “bogus copyright lawsuits” to secure court subpoena powers to learn the names of individuals to whom they could direct “extortionate letters and phone calls” with the aim of securing the relatively small settlements to avoid “enormous financial penalties and public embarrassment.”
When courts moved in 2012 to limit the lawyers’ ability to use its authority to uncover individuals to threaten, the indictment said the lawyers then shifted tactics, alleging their “client’s computer systems had been ‘hacked’” as unidentified people sought to use “hacked usernames/passwords” to access the “member’s section” of the porn sites.
“The entirety of defendants’ hacking lawsuits was a lie,” the indictment said.
To maintain the illusion, prosecutors said Steele and Hansmeier also “recruited ruse defendants,” who “had been caught downloading one of Hansmeier and Steele’s clients’ movies from a file-sharing website.” The ruse defendants would then strike deals under which the lawyers would agree not to demand a settlement payment in exchange for letting them sue the defendant, enabling them to “seek discovery about his/her supposed ‘co-conspirators.’”
The lawyers would then file suit, alleging the “fictitious defendants … had participated and/or benefitted from a non-existent cabal of hackers in order to attempt to obtain authority from the court to issue subpoenas to internet service providers to find additional people who they could extort.”
The lawyers’ actions consistently drew the ire of courts. Federal judges had imposed sanctions on Steele, Hansmeier and Duffy. In East St. Louis, for instance, a judge ordered the men to pay a discovery obstruction sanction.
The indictment further accused them of pressuring others to lie to protect them and their ventures.
The indictment included multiple formal counts of mail fraud, conspiracy to commit money laundering and conspiracy to commit and suborn perjury.
The indictment alleged Steele and Hansmeier had together raked in more than $6 million in settlements.
The criminal complaint comes about 18 months since Illinois state regulators brought seven disciplinary charges against Steele over his conduct in courts in northern and southern Illinois, as well as Minnesota and California.
The August 2015 Illinois Attorney Registration and Disciplinary Commission complaint accused Steele of identity theft, suing under the names of fictional entities, discovery abuses and other acts of contempt and deception.
Despite the pending disciplinary action, Steele had most recently practiced through his latest business venture, the Accessibility Law Group, in Chicago. Through that practice, he had obtained relatively small settlements from businesses, such as flower shops in Chicago, he had sued for allegedly not maintaining properly accessible storefronts and bathrooms, as required under the Americans with Disabilities Act.