This is the latest post in the Prenda Law saga.
From the start, the perpetrators of the nationwide fraud scheme frequently known as "Prenda Law" have obeyed the most basic rules of sociopaths and con artists: admit nothing, deny everything, aggressively accuse the victims of misconduct. In fact, that's how I got interested in the story three years ago now — Prenda Law, through its lead perpetrator John Steele, attacked one of their victims, suing a hapless dude for defamation after he complained that they had stolen his identity as a front for their porn-trolling scheme. At every step, the Prenda Law team — especially lead miscreants John Steele and Paul Hansmeier — have defied all evidence and the rising tide of adverse judicial decisions, claiming it was all a mistake and they were innocent.
Until now.
Back in December the feds charged Steele and Hansmeier with an array of federal crimes arising from a scheme that has now been identified and decried by federal courts across the country. And today John Steele pleaded guilty in federal court to two counts of that indictment — mail fraud in violation of 18 USC 1341 and money laundering in violation of 18 USC 1956(h). Upon entry of judgment after his sentencing, John Steele will be a convicted felon with a federal fraud conviction. His career as a lawyer — or, more generally, as a gainfully employed person — is over.
Steele's plea agreement with the government is extensive even by federal standards. (State pleas are frequently completed with a few mumbled words on the record; federal pleas are wordy, impenetrable creatures that can be torture to explain to a client.) The factual basis section — which Steele admits is true (as to facts he knows) or that the government can prove (as to facts he doesn't know directly) — is a startling 16 pages long and lavishly documents the entire scheme, complete with many details that accusers have been pointing out for years. In short, Steele admits that he and Hansmeier used sham entities to obtain the copyright to (or in some cases film) porn, uploaded it to file-sharing websites, and then filed "false and deceptive" copyright suits against downloaders designed to conceal their role in distributing the films and their stake in the outcomes. They lied to courts themselves, sent others to court to lie, lied at depositions, lied in sworn affidavits, created sham entities as plaintiffs, created fraudulent hacking allegations to try to obtain discovery into the identity of downloaders, used "ruse defendants" (strawmen, in effect) to get courts to approve broad discovery into IP addresses. Steele, through the plea, admits to — and implicates Hansmeier in — a nationwide scheme to defraud many courts.
Based on his plea Steele faces a statutory maximum sentence of 40 years — the number that will get reported in some media — but Popehat readers know that number bears no relation to his probable sentence. The judge — guided (but no longer constrained) by the U.S. Sentencing Guidelines — will have broad discretion to frame a sentence. The judge's determination will begin with a calculation of a Guideline sentence. Steele and the government have stipulated to factors yielding an anticipated guideline range of 97-121 months of imprisonment. Yes, up to ten years in federal prison. This is not a highly favorable plea agreement — Steele isn't getting any killer deal (yet) for pleading guilty. The feds made him plead to both mail fraud and money laundering — a "good deal" would drop the money laundering. In addition, the feds made Steele agree to just about every Guideline enhancement I can think of, rather than leaving those enhancements open to argue. Steele has truly hurled himself on the sword here.
Why? Well, the deal also contemplates that Steele will cooperate — become a rat, if you want to be unkind. That means being available to testify against Hansmeier and, perhaps, actually doing so. If he cooperates truthfully, the government will consider asking the court to reduce that rather formidable sentence, and the court will have discretion to reduce the sentence even more than the government requests. Steele appears to have pinned all of his hopes on that option, betting that the court will reduce his sentence by an extraordinary amount. I note that he's waived his right to appeal the sentence unless the court sentences him to more than 60 months, perhaps signalling his hope (misplaced, I think) that the court will go that low.
I've seen a lot of plea agreements in a lot of federal cases, and I don't recall another one that so clearly conveyed the defendant utterly surrendering and accepting everything the government demanded, all in hopes of talking his sentence down later. Trusting your ability to talk your way out of it later is typical of a sociopath and a con man, of course.
The heat's on Hansmeier now. He's, at best, second in the door, and can't hope to get much credit for cooperation unless he starts giving up third parties.
The wheels grind slowly, my friends, but they do grind.
Last 5 posts by Ken White
- Prenda Saga Update: John Steele Pleads Guilty, Admits Entire Scheme - March 6th, 2017
- No, The Grand Junction Daily Sentinel Shouldn't Sue Over "Fake News" - February 20th, 2017
- Lawsplainer: The Eleventh Circuit Protects Doctors' Right To Ask About Guns - February 17th, 2017
- Eleventh Circuit Revisits Florida Law Banning Doctors From Asking About Guns, And I Can't Even - February 16th, 2017
- Erdoğan and the European View of Free Speech - February 10th, 2017
My heart… it bleeds for them.
For all those, in the early days, who swore no lawyer would do what I claimed was happening… how do you like your crow? Rare or well-done?
Far to long and requiring far to many people to lead them by the nose to the giant pile of excrement flooding the dockets.
One can only hope that all of the other firms still doing porn cases or using the 'germans' understand that the powers that be are finally paying attention, and bad things happen to bad people.
I'll be curious to see the restitution work out, as I doubt they'll ever manage to make the Does whole again. Maybe autographed photos of Steele in his dress orange with each check might make them feel better.
So how far past screwed is Hans considering there isn't anyone to throw under the bus?
As I am want to do…
Bye Felecia.
This article is missing one very important question…And answer.
What about the money?
Was this part of the agreement? That the government will not go after all of his assets, and any assets he put in others' names in order to "protect?"
Scroll down to the portion about restitution in the plea agreement.
@Asher Precisely my first reaction as well. I'm not a lawyer, and I do not even play one on TV, so I have no freaking clue what sort of mechanism there is towards ceasing the ill gotten gains. But my schadenfreude glad is inflamed and itching for this guy to have it all taken away, every last cent and then some.
Damn, now what am I going to do with all this popcorn? Let alone my popcorn futures.
"I note that he's waived his right to appeal the sentence unless the court sentences him to less than 60 months, perhaps signalling his hope (misplaced, I think) that the court will go that low."
Did you get that backwards? If I'm reading the document correctly, he can only appeal his sentence if he's sentenced to more than 60 months.
Didn't he only plea to charges 1 and 16 (or 1 and 17), thus not pleaing to all the others?
So, basically everything that Morgan Pietz argued in front of Judge Wright was correct. It's nice to see a taintsnorter like Steele get what he deserves. Next up: Hansmeier
@Asher:
(Any errors in that are because the document is a scan, so I had to type that quote.)
@MatthewCline:
He only pled to two of the charges. But whether it was two or twelve, it had very little impact on the sentence. Under the concept of "relevant conduct" (everything in the case gets considered at sentencing, no matter what you pled to), once he pleads to one mail fraud and one money laundering, his sentence is going to be pretty much the same no matter how many counts he does.
Ken-
Am I correct in understanding the statement that the plea "does not bind any other USAO or any other federal or state agency" to mean that Steele could still be prosecuted for tax evasion here? So his Guidelines sentence of 8-10 years might well be an appetizer with more to come?
@NG: In theory, he could be prosecuted by another USAO, or by a state. Practically, given scant resources, that's extremely unlikely.
How sweet it is.
Don't worry folks. It says right in the first paragraph that "That this agreement does not bind any other United States Attorney's Office or any other federal or state agency". If anyone else wants to take a crack at him, they can.
I was hoping the dumbass would fight it out until the end, but I guess he didn't want to get the maximum for delaying the obvious.
Judge Wright gets a mention on pages 11 and 12. Based on the information in the Statutory Penalties section on page 19, that sanction Judge Wright hit them with is going to be eclipsed. Plus they get to give the money back.
60 month and a day, bare minimum. And I hope he appeals and they double it.
Hubris, thy name is Steele.
Could the IRS still be queued up to come after these guys? Or is that unlikely, too?
Argh. There's an edit feature and I still didn't get the "s" on the end of "month" in time.
Bravo, and thank you. I confess I had been thinking bad thoughts about all lawyers at the height of this saga. It's nice to see something resembling justice.
The calendar says March 6th, but I'm having a hard time believing it's not April 1st.
My guess is that the money laundering charge is still there because that is exactly what happened.
Steele and Hansmeier obviously did extensive study of offshore corporate havens, as demonstrated by creating AF Holdings, owned by a trust in Nevis. Nevis uniquely allows creating undefined beneficiary trusts — an exotic and little-known way of hiding control. What is the chance that they didn't also do the much more common thing of creating offshore tax-sheltering and asset-hiding accounts?
I'm sure they were careful to hide their tracks from defendants, and make themselves judgment-proof against normal discovery. But the feds get to look at every bank transaction, and can trace money far more effectively than a private lawyer fighting in court to enforce every discovery request.
And there is the minor issue that everyone forgets: how did AF Holdings get the copyright? How did something of substantial value (the copyright to the videos) move from the U.S. to an overseas trust with no taxes being paid? That trivial step is, by itself, illegal.
I still wonder: were they really planning on having Lutz adopt Steele and Hansmeier so they could qualify as his children? Or can a the purpose of a Nevis undefined beneficiary trust be changed after being formed, and they were planning on changing it once no one was looking?
@Matthew Cline – I don't think we ever saw the documents for the trust benefiting Lutz's unborn children, so we have to go off of the word of 'lawyers' who were found to freely lie to courts repeatedly. They invented clients, hacks, people, trusts… no ones ever verified the Nevis Trusts exist (or that any money was paid to such entities).
I know shortly after the 'unborn children' thing was used that I was mentioning we should be watching for adult adoptions.
I know there was some sort of paperless untraceable entity they were looking at paying into as well as investments in an Eastern European nation that conferred citizenship.
In all honesty I expected that when Lutz went MIA for a while that he was going to turn up in a morgue because blaming the dead guy is one way out of trouble.
@Every Time – There is a problem with tracking some of the money, one can find withdrawals but not know where they ended up. A shoebox stuffed with like $750K (iirc) wouldn't be shocking at this point. They played numerous games creating and closing accounts sometimes on the same days, it was very complex for those of us who aren't accountants. Luckily I am guessing that IRS CID is very qualified to follow the trails.
At what point will the Salt Marsh identity be clarified??
Does he have use immunity for what he admitted to, or is that admissible if they choose to prosecute him on the other charges?
If I read the plea correctly (and I only skimmed), there's no admission of perjury. Or is that implicit in the admitted counts?
Also, what's the rationale for only admitting two counts? Are those the iron-clad ones for the DA and they don't care about the rest?
Dear Your Honor,
i am very very sorry and i promise i wont ever do it again if you let me go
signed
¯\_(ツ)_/¯