Prenda’s massive trolling take revealed: $1.9 million in 2012
Steele and Hansmeier are said to have taken in 70 percent of that sum.
The spreadsheet detailing Prenda's finances was filed as evidence by former Prenda associate Brett Gibbs, a California lawyer who is desperately trying to distance himself from the two lawyers widely pointed to as the masterminds behind Prenda—John Steele and Paul Hansmeier.
Since 2010, Prenda has sued thousands of John Doe defendants for illegally downloading pornographic movies. But after a Los Angeles federal judge slapped the company with a tough sanctions order in May, its business has ground to a halt.
Yesterday, Gibbs filed a motion asking US District Judge Otis Wright to exempt him from that order. The sanctions have been appealed, and Steele has insisted they are illegal and misguided. Gibbs filed the new documents yesterday in Wright's court.
As part of his argument showing his relative distance from the scheme, Gibbs has evidence showing Steele and Hansmeier's firm links to Prenda. That includes a spreadsheet showing Prenda's income from the "pirates" as being more than $1.9 million in 2012. Steele and Hansmeier collected about $1.3 million of that, according to Gibbs.
The spreadsheet, which was e-mailed to Gibbs in January of this year, has a section labeled "payment to old owners." Steele and Hansmeier were paid directly and also through a company they jointly owned called "Under the Bridge Consulting," according to Gibbs. He claims he was told in a telephone call that Under the Bridge is owned by Steele and Hansmeier. "The name 'Under the Bridge' presumably refers to a place where trolls congregate," notes Gibbs in a footnote.
The spreadsheet doesn't include payments that may have come from other Prenda accounts, "or settlements that may have bypassed Prenda completely."
Steele and Hansmeier have stated repeatedly they had no ownership stake in the Prenda enterprise. Steele even filed a bar complaint against Gibbs specifically stating "I never had an ownership interest in Prenda Law Inc.," and that he never had an ownership interest in Prenda shells like AF Holdings and Ingenuity 13. Gibbs titled the section of the motion introducing the financial evidence, "New Evidence of Lies and Fraud by Steele and Hansmeier."
A secret interest
And the $1.3 million they were paid directly isn't all, notes Gibbs.Overall, Hansmeier received $645,821.29—$185,321.28 directly and $460,500.00 through Under the Bridge. Steele received $660,915.94, of which he got $200,415.94 directly and $460,500.00 via Under the Bridge.
Those sums don't include "tens of thousands of dollars in additional payments to or on behalf of Steele and Hansmeier for travel and entertainment, meals, credit card charges, and miscellaneous reimbursements, or payments to Steel’s wife, Kerry Eckenrode Steele," notes the motion. It also does not include payments totaling $37,069.56 to Prenda lawyer Paul Duffy or Duffy Law Group.
The spreadsheet doesn't show exactly how the money flowed into the accounts. It simply lists the money flowing in from the copyright settlements as coming from "pirates," not specifying which Prenda shell handled the money. The spreadsheet doesn't list the individual settlement sums collected by Prenda either, most of which were a few thousand dollars or less. The money transfers shown on the spreadsheet as coming from "pirates" are big lumps of money, in several cases $100,000 or more at a time.
"Steele and Hansmeier were the primary beneficiaries of settlement payments to Prenda Law, giving them a compelling, if secret, financial interest in all aspects of Prenda’s operations and litigation," concludes Gibbs.
Gibbs: I never thought this was unethical
Steele and Hansmeier, as well as official Prenda head Mark Lutz, have attacked Gibbs as a disgruntled ex-employee, culminating in "unsworn and virtually fact-free" bar complaints, states Gibbs, who fights that characterization here. He writes:[T]he Principals’ attempts to silence or discredit him are, in themselves, strong new evidence that Gibbs was truthful in his testimony. The Principals have not produced and cannot produce any evidence that Gibbs is lying, so their only hope of escaping sanctions in this and other courts is to destroy Gibbs’ credibility or otherwise find a way to prevent him from testifying truthfully about their conduct. It is understandable that, as courts move closer to discovering the truth about Prenda Law and the Principals, their attempts to “Blame Everything On Gibbs” grow ever louder, more far-fetched and desperate.Gibbs' motion goes on to highlight other elements of the Prenda fraud that have been alleged on the record by various defense attorneys, but weren't entirely clear at the time of Wright's May sanction order. For instance, he re-tells the story of how BitTorrent consultant Declan Neville found that Prenda had created a "honeypot," uploading its own files on Pirate Bay in order to induce downloading. As came out in a recent San Francisco hearing, Steele actually impersonated his former housekeeper, Alan Cooper, in phone calls to GoDaddy customer service, according to Gibbs, who identified his voice.
Cooper's name appears on several Prenda-related copyright assignments used by Prenda in litigation. The recorded phone calls make Steele's denial that he forged Cooper's name on those assignments "even less credible," asserts Gibbs.
Gibbs goes on to note that he testified extensively in San Francisco, helping defense lawyers in their attempt to win sanctions against Prenda in a separate case. While Gibbs was helpful, the supposed top guy at Prenda—Mark Lutz—couldn't even be bothered to show up. Gibbs writes:
Lutz... did not appear in court or telephone to explain his absence. Duffy did not attempt, in any meaningful way, to answer any of the specific questions posed by the court. When Lutz did not appear, Duffy called no other witnesses and presented almost no new evidence. Gibbs, on the other hand, voluntarily appeared and testified for over an hour answering every question posed to him by Defendant’s attorney, the Court, and Duffy. Gibbs again testified that Steele and Hansmeier were the decision-makers at Prenda Law. Gibbs provided phone records of calls with Steele and Hansmeier detailing hundreds of calls, including calls on dates that were specifically relevant to issues arising in the Navasca case.Gibbs didn't know about the allegedly forged documents, he emphasized. He thought that "clients" like AF Holdings were actual, independent entities, not shells set up for lawsuits. He took direction from Steele and Hansmeier and "never thought he was being directed to do anything illegal or unethical."
Finally, Gibbs notes that while he's asking for the court to toss out the sanctions order against him, he has no problem with being referred, along with Duffy, Steele, and Hansmeier, to the IRS, the state bar, and to criminal investigators. "Gibbs wants these investigations to proceed and will continue to cooperate fully with them," his motion concludes.
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