IRS High-Tech Tools Track Your Digital Footprints

http://stratrisks.com/geostrat/11743

Source: USNews
The Internal Revenue Service is collecting a lot more than taxes this year—it’s also acquiring a huge volume of personal information on taxpayers’ digital activities, from eBay auctions to Facebook posts and, for the first time ever, credit card and e-payment transaction records, as it expands its search for tax cheats to places it’s never gone before.
The IRS, under heavy pressure to help Washington out of its budget quagmire by chasing down an estimated $300 billion in revenue lost to evasions and errors each year, will start using “robo-audits” of tax forms and third-party data the IRS hopes will help close this so-called “tax gap.” But the agency reveals little about how it will employ its vast, new network scanning powers.
Tax lawyers and watchdogs are concerned about the sweeping changes being implemented with little public discussion or clear guidelines, and Congressional staff sources say the IRS use of “big data” will be a key issue when the next IRS chief comes to the Senate for approval. Acting commissioner Steven T. Miller replaced Douglas Shulman last November.

“It’s well-known in the tax community, but not many people outside of it are aware of this big expansion of data and computer use,” says Edward Zelinsky, a tax law expert and professor at Benjamin N. Cardozo School of Law and Yale Law School. “I am sure people will be concerned about the use of personal information on databases in government, and those concerns are well-taken. It’s appropriate to watch it carefully. There should be safeguards.” He adds that taxpayers should know that whatever people do and say electronically can and will be used against them in IRS enforcement.
IRS’s big data tracking. Consumers are already familiar with Internet “cookies” that track their movements and send them targeted ads that follow them to different websites. The IRS has brought in private industry experts to employ similar digital tracking—but with the added advantage of access to Social Security numbers, health records, credit card transactions and many other privileged forms of information that marketers don’t see.
“Private industry would be envious if they knew what our models are,” boasted Dean Silverman, the agency’s high-tech top gun who heads a group recruited from the private sector to update the IRS, in a comment reported in trade publications. The IRS did not respond to a request for an interview.
In trade presentations and public documents, the agency has said it will use a massively parallel computer system that can analyze data from different networks to find irregularities and suspicious activities.
Much of the work already has been automated to process and analyze electronic tax returns in current “robo-audits” that flag unusual behavior patterns. With IRS audit staff reduced by budget cuts this year, the agency will be forced to rely on computer-generated audits more than ever.
The agency declined to comment on how it will use its new technology. But agency officials have been outlining plans at industry conferences, working with IBM, EMC and other private-sector specialists. In presentations, officials have said they may use the big data for:
• Charting and analyzing social media such as Facebook
• Targeting audits by matching tax filings to social media or electronic payments
• Tracking individual Internet addresses and emailing patterns
• Sorting data in 32,000 categories of metadata and 1 million unique “attributes”
• Machine learning across “neural” networks
• Statistical and agent-based modeling
• Relationship analysis based on Social Security numbers and other personal identifiers
Officials have said much of the data will be used only for research. The agency’s economic forecasts and data are a key part of Washington’s budget infrastructure. Former commissioner Douglas Shulman said in an IRS statement that the technology will employ “billions of pieces of data” to target enforcement and to “detect and combat noncompliance.”

U.S. Tax Court records show that information gathered from Facebook and eBay postings have been used by the IRS in defending tax challenges. Under a Freedom of Information Act disclosure obtained by privacy advocates at the Electronic Frontier Foundation, the group published the IRS’s 38-page manual used to train auditors to search Internet addresses, Facebook postings and other social media to back audit enforcements.
In practice, the third-party data has been used only if the irregular returns merit more attention. In one much-cited example, IRS officials talk about prisoners who were filing false claims for energy tax credits for window replacements.
The agency, wary of public opinion about invasive audit practices, has pulled back from using so-called “social audits,” which, for example, might single out horse-racing enthusiasts or sailboaters for special attention. But by screening existing data for one million unique attributes, the agency can quietly create a DNA-like code to understand the economic behavior of any individual.
The IRS last year used a profiling test model to study 1,500 tax preparers with histories of reporting deficiencies and managed to recover $200 million. It cited the experience as proof that its data analysis works. Early this year, however, a new set of rules it developed for tax preparers was thrown out by a federal court who said the agency had overstepped its mandate. The IRS would not comment on whether the rules were based on its new screening tools.
Lots of computing power, for what? The agency’s computers can now load all U.S. tax returns in just 10 hours, compared with the four months it took just eight years ago, Jeff Butler, IRS director of research databases told the IBM TechAmerica conference last November. That leaves a lot of time for other uses. The IRS says it expects 80 percent of its tax returns to be filed electronically this year. That makes a total of 250 million returns filed, with $2 trillion in revenue.
But processing those returns uses only a fraction of the agency’s computing power. An entire year of tax returns amounts to 15 terabytes, or just 1.5 percent of the IRS storage of 1.2 petabytes (one quadrillion bits of information), based on public data from IRS presentations. The agency has expanded its data capacity by 1,000 percent in the past six years.
It also recently assembled $350 million in high-tech tools to do a lot of auditing, tracking and analyzing what people do on the Internet. The agency has used social media and other third-party sources in the past, but it has now increased its capability to so from its own growing database of networks.
Congressional staffers on the House Ways and Means Committee and the Joint Committee on Taxation, both of which oversee the IRS, say they have been occupied by more pressing issues related to the budget crisis, and Congress gave the tax officials leeway to use technology to solve the growing problem of identity theft. But they said they will look at the possibility of errors in robo-audits as well as the storage of data on millions of taxpayers.
The IRS is guarded about how its audits are triggered, tax experts say, because too much information on what they do might help tax cheats. Major accounting firms have been given little information on the changes and were reluctant to comment, although some said privately that they are aware of the new IRS tools but it is too early to tell how they will be used. Taxpayer advocacy groups also say they are waiting to see how the IRS manages its technology upgrade, and are holding out hope that it will make taxes more fair and efficient and force tax evaders to pay their share of the overall burden.

While many applaud the effort to update government technology with private-sector tools, they say the agency needs to conform to higher standards.
“I don’t really see strong legal regulation in place to manage something of this magnitude,” says Paul Schwartz, University of California law professor and co-director of the Berkeley Center for Law & Technology. The IRS is working with the same kind of oversight and rules that were developed in the paper tax-return era, says Schwartz. But with the technology it now has, the agency can “see into people’s lives” as never before.
Tax returns are like narratives of how people spent their money, and tax audits have been guided by “reasonable” interpretations of allowable credits and deductions by the IRS agents who manage audits. “Social media can make people testify against themselves,” Schwartz says. “They provide a counter-narrative.” He cites as an example a businessperson going to Florida for five meetings over a week who also visits family in Miami. A casual Google+ posting to friends online about “visiting my mother in Florida” could paint a different picture than the deduction taken on the tax form.
“It will be interesting to see what the IRS does with all of their new tools. They will have to be very careful,” says Schwartz. So, too, will taxpayers.

Japan deploys Patriot antimissile system in downtown Tokyo

http://stratrisks.com/geostrat/11746

Source: NewsAU

JAPAN has announced it is deploying Patriot missile interceptors around Tokyo as a precaution against North Korea’s nuclear threats.

The Patriot missiles - an advanced version of the interceptor of Gulf War fame – are being moved to key locations around Japan’s capital city, including the defense ministry headquarters.
Other key military bases on the Japanese mainland are also taking similar precautionary measures, reports indicate.
Japan’s defense minister has also reportedly put destroyers with missile interception systems on alert in the Sea of Japan.
Japan purchased the PAC-3 version of the Patriot missile launchers from the United States during the past decade to face just such a threat.
While it has never attempted to shoot down North Korean ballistic missile tests which passed over its territory in the past, the military deployment suggests Japan is not taking any risks ahead of a possible missile launch by the rogue state.
Two medium-range Musudan missiles have reportedly been loaded on to mobile launchers and deployed to undisclosed locations on North Korea’s east coast on the Sea of Japan.

The Japan Maritime Self-Defense Force (JMSDF) destroyer Kurama leads other vessels during a fleet review in Sagami Bay, south of Tokyo. Japan has deployed anti-aircraft/missile destroyers in the Sea of Japan to defend against North Korean missile launches.

There has been speculation that Pyongyang might schedule a missile launch to coincide with the birthday of the North’s late founder Kim Il-Sung in mid-April.
Though it remains a highly unlikely scenario, Japanese officials have long feared that if North Korea ever decides to play its nuclear card it has not only the means but several potential motives for launching an attack on Tokyo or major US military installations on Japan’s main island. And while a conventional missile attack is far more likely, Tokyo is taking North Korea’s nuclear rhetoric seriously.
THE TWO FACES OF KIM JONG-UN.
ANALYSIS: THIS IS A WAR WITHOUT END.
Japan has taken similar measures before,.
“We are doing all we can to protect the safety of our nation,” chief Cabinet spokesman Yoshihide Suga said Monday, though he and Ministry of Defense officials refused to confirm the reports about the naval alert, saying they do not want to “show their cards” to North Korea.

Japan Self-Defense Force members work near a unit of PAC-3 deployed at Defense Ministry in Tokyo.

North Korea, meanwhile, issued a new threat against Japan.
“We once again warn Japan against blindly toeing the US policy,” said an editorial in theRodong Sinmun, the official newspaper of its ruling party. “It will have to pay a dear price for its imprudent behavior.”
Following North Korea’s third nuclear test in February, Japanese experts have increasingly voiced concerns that North Korea may already be able to hit – or at least target – US bases and major population centers with nuclear warheads loaded onto its medium-range Rodong missiles.
“The threat level has jumped” following the nuclear test, said Narushige Michishita, a former Ministry of Defense official and director of the Security and International Studies Program at Tokyo’s National Graduate Institute for Policy Studies.
SERIOUS THREAT OR A JOKE?
KIM A CLEAR AND PRESENT DANGER.

Unlike North Korea’s still-under-construction intercontinental ballistic missile, or ICBM, program, its arsenal of about 300 deployed Rodong missiles has been flight tested and is thought to have a range of about 1300 kilometers.
That is good enough to reach Tokyo and key US military bases – including Yokota Air Base, which is the headquarters of the US 5th Air Force; Yokosuka Naval Base, where theUSS George Washington aircraft carrier and its battle group are home-based; and Misawa Air Base, a key launching point for US F-16 fighters.
Michishita, in an analysis published late last year, said a Rodong missile launched from North Korea would reach Japan within five to 10 minutes and, if aimed at the center of Tokyo, would have a 50 per cent probability of falling somewhere within the perimeter of Tokyo’s main subway system.
He said Japan would be a particularly tempting target because it is close enough to feasibly reach with a conventionally or nuclear-armed missile, and the persistent animosity and distrust dating back to Japan’s colonization of the Korean Peninsula in 1910 provides an ideological motive.
Also, a threat against Japan could be used to drive a wedge between Tokyo and Washington. North Korea could, for example, fire one or more Rodong missiles toward Tokyo but have them fall short to frighten Japan’s leaders into making concessions, stay out of a conflict on the peninsula or oppose moves by the US forces in Japan to assist the South Koreans, lest Tokyo suffer a real attack.
GALLERY: KOREAN TENSIONS INTENSIFY.

A soldier of the Ground Self-Defense Force (SDF) stands guard in front of Japan’s missile launcher in preparation for wherever the North Korean rocket is directed at.

MISSILE THREAT TO AUSTRALIA IS REAL.
“Given North Korea’s past adventurism, this scenario is within the range of its rational choices,” Michishita wrote.
Officials stress that simply having the ability to launch an attack does not mean it would be a success. They also say North Korea is not known to have actually deployed any nuclear-tipped missiles.
Tokyo and Washington have invested billions of dollars in what is probably the world’s most sophisticated ballistic missile defense shield since North Korea sent a long-range Taepodong missile over Japan’s main island in 1998.
Japan now has its own land- and sea-based interceptors and began launching spy satellites after the “Taepodong shock” to keep its own tabs on military activities inside North Korea.
For the time being, most experts believe, North Korea cannot attack the United States with a nuclear warhead because it can’t yet fashion one light enough to mount atop a long-range ICBM. But Japanese analysts are not alone in believing North Korea has cleared the “miniaturization” problem for its medium-range weapons.

This file photo released by Korean Central News Agency, North Korea’s Unha-3 rocket lifts off from the Sohae launch pad in Tongchang-ri, North Korea.

In April 2005, Lowell Jacoby, director of the Defense Intelligence Agency, told the Senate Armed Services Committee that North Korea had the capability to arm a missile with a nuclear device. In 2011, the same intelligence agency said North Korea “may now have” plutonium-based nuclear warheads that it can deliver by ballistic missiles, aircraft or “unconventional means.”
The Pentagon has since backtracked, saying it isn’t clear how small a nuclear warhead the North can produce.
But David Albright, a physicist at the Institute for Science and International Security think tank, said in an email he believes the North can arm Rodong missiles with nuclear warheads weighing as much as several hundred kilograms (pounds) and packing a yield in the low kilotons.
That is far smaller than the bombs dropped on Hiroshima or Nagasaki but big enough to cause significant casualties in an urban area.
Japan also is a better target than traditional enemy South Korea because striking so close to home with a nuclear weapon would blanket a good part of its own population with the fallout.
Regardless of whom North Korea strikes – with a nuclear or conventional weapon – it can be assured of one thing: a counterattack by the United States.

Why has China built a ghost town in Africa?

http://www.veteranstoday.com/2013/04/09/why-has-china-built-a-ghost-town-in-africa/

Eerie footage shows brand new  Angolan city designed for 500,000 lying empty

—

• Nova Cidade de Kilamba has 750 eight-storey  blocks of apartments
• But it has no residents, and the £75,000  cost is too much for slum-dwellers
• Fears the £2.2billion project, built in  three years, could lay empty for years
• Just a fraction of the billions China has  poured into Africa in recent years

 —

By  Daily Mail Reporter

—
It was supposed to be a state-of-the-art city  for 500,000 – but eerie footage shows how a Chinese-built urbanisation is at  risk of becoming Africa’s first ‘ghost town’.
Constructed on the outskirts of Angola’s  capital city Luanda, Nova Cidade de Kilamba has 750 eight-storey blocks of  flats, a dozen schools and more than 100 shop units.
But, crucially, it has no residents, and many  of the nearby slum-dwellers cannot afford the £75,000 price-tag to move  in.
Scroll down  for video…

Empty: It was supposed to be a state-of-the-art city for  500,000 – but eery footage shows how a Chinese-built urbanisation is at risk of  becoming Africa’s first ‘ghost town’

Huge: Kilamba is the largest of several ‘satellite  cities’ being built by Chinese firms in Angola, and believed to be one of the  biggest new-build projects in Africa

Slum: The new development is a world away from the slums  of Luanda

This has sparked fears the £2.2billion  project, a fraction of the cash China has poured into Africa in recent years,  could lay abandoned for years to  come.
It has also highlighted the increasing  ‘colonisation’ of Africa by China, seen to be wanting the resource-rich  continent as a ‘satellite state’, in recent years.
It is said to be reminiscent of the West’s imperial push  in  the 18th and 19th centuries, with critics pointing to trade deals with more than  40 countries.

They also flag up the provision of billions  each year in loans to states on the  continent, which extends China’s political  as well as its economic influence.

It is seeing local black workers either paid  a pittance or pushed out completely in favour of Chinese labourers. And African  shops are now flooded with cheap Chinese products.
Sebastiao Antonio, 17, who travels on a bus  from an outlying area for three hours a day to get to one of the  opened  schools, told the BBC: ‘I really like this place.

       Handful: Chinese workers were the only people seen on  the streets of the city

        Heralded: The new flats were supposed to mark a new era  for Angola, but many have failed to sell

WHY IS CHINA BUYING UP  AFRICA?

Chinese influence has grown massively in  recent years across Africa, fuelled by natural resources such as oil, iron and  copper.
These are shipped to China and then end up  back in Africa in the form of vehicles or footwear.
Trade between Beijing and Africa was worth  £70billion by the turn of this decade. It was worth £4billion ten years before. 
Trade deals with more than 40 countries have  been signed, including Uganda, Kenya and Algeria.
The communists also provide billions each  year in loans to states on the continent, extending their political as well as  economic influence.
It is estimated that more than a million  Chinese have moved to Africa since trade started booming.
It led British Prime Minister David Cameron  to criticise the ‘authoritation capitalism’ of  China last year, by saying it  was unsustainable in the long term.
In comments about China’s growing  global  influence, he admitted the West was increasingly alarmed by  Beijing’s leading  role in the new ‘scramble for Africa’.
He said he was keen to counter the ‘Chinese  invasion’ of Africa and urged the continent to introduce democratic  reforms.
He also said Britain needed to forge a new  relationship with the continent now that the ‘shadow ‘of colonialism had been  lifted.
‘It’s got car parking, places for us to have  games like football, basketball  and handball. It’s very quiet, much calmer than  the other city, there’s  no criminality.’

But when asked if his family would move  there, he said: ‘No way, we can’t afford this. It’s impossible. And  there is  no work for my parents here.’
Kilamba street sweeper Jack Franciso, 32,  added: ‘Yes, it’s a nice place for sure but to live here you need a lot of  money. People like us don’t have money like that.’
He has a point. How can someone who earns an  average £1.30 per day afford luxury flats that range from £75,000 to  £130,000.
It seems it’s a question state-owned China  International Trust and Investment Corporation, which built the 12,355 acres  development in three years in exchange for oil, has not asked.
And it now means the city is at risk of  turning into the European ghost towns seen across Ireland and Spain.
Built during the property boom, they were  meant for people who never move in – leaving those who did with a worthless  property they cannot sell.
Kilamba is the largest of several  ‘satellite  cities’ being built by Chinese firms in Angola, and believed  to be one of the  biggest new-build projects in Africa.
Real estate adverts show its citizens  enjoying a stylish lifestyle away from the dust of the capital’s slums. But the  promotional material is  misleading, as almost 12 months since the first batch  of 2,800 flats  went on sale, only 220 have been sold.
Hardly anyone has moved in, there are few  shops and the only place to buy food is a supermarket at one entrance. A handful  of Chinese labourers, who live in containers next to the site,  seem to be the  only people walking the deserted streets.
But despite the perception that flat  prices  were too high, real estate agency Delta Imobiliaria, in charge of selling the  flats, said the real problem was in accessing bank credit.

                           Hopeful: But the sellers remain optimistic that sales  will pick up

Loneliness of the long-distance ruuner: A jogger in the  shadows runs past empty  apartment blocks in Sesena, a 45-minute drive south of  Madrid, Spain, where  30,000 people were due to live but is still almost  empty

Barren plains: Landscaped areas, which were due to be  built on, lie  vacant on the outskirts of ghost town Sesena as the Spanish  housing  crisis continues to take its hold

Enlarge       Chaos: Ireland also has its fair share of ghost estates,  this one featuring beautiful thatched cottages

Paulo Cascao, general manager, told the BBC:  ‘The prices are correct for the quality of the apartments and for all the  conditions that the city can offer.
‘The sales are going slowly due to the  difficulty in obtaining mortgages.’ He also revealed a section of the flats  would be designated social housing, for people on low incomes to pay rent at low  prices.
This is seen as a response to critics who say  the government needs to focus on building  low-cost housing for the ‘majority of the population’ who live in shacks with no  water, electricity or sanitation.

China’s push into Africa is ‘reminiscent of  the West in the 18th and 19th centuries’

Kilamba,  the vacant satellite city for 500,000 on the outskirts of Angola’s capital  Luanda, is just one of many China is building across the country – and across  the entire continent.
Over  the last decade, China has pumped billions of pounds into Africa, and is showing  no signs of slowing down. ANDREW MALONE writes why this means the West should be VERY worried.

         Risky: Locals dig through mountains of mining waste  looking for scraps of metal ore in The Congo

China’s push into Africa is said to be  reminiscent of the West’s imperial move  in the 18th and 19th centuries – but on  a much more dramatic, determined scale.
China’s rulers believe Africa can  become a  ‘satellite’ state, solving its own problems of over-population  and shortage of  natural resources at a stroke.
With little fanfare, a staggering  750,000  Chinese have settled in Africa over the past decade. And more  are believed to  be on their way.
The strategy has been carefully devised by  officials in Beijing, where one expert has estimated that China will eventually  need to send 300million people to Africa to solve the problems of  over-population and pollution.
The plans appear on track. Across  Africa,  the red flag of China is flying. Lucrative deals are being  struck to buy its  commodities – oil, platinum, gold and minerals.
New embassies and air routes are  opening up.  The continent’s new Chinese elite can be seen everywhere,  shopping at their own  expensive boutiques, driving Mercedes and BMW  limousines, sending their  children to exclusive private schools.
The pot-holed roads are cluttered  with  Chinese buses, taking people to markets filled with cheap Chinese  goods. More  than a thousand miles of new Chinese railroads are  crisscrossing the continent,  carrying billions of tons of  illegally-logged timber, diamonds and  gold.
The trains are linked to ports dotted around  the coast, waiting to carry the goods back to Beijing after  unloading cargoes  of cheap toys made in China.
Confucius Institutes (state-funded  Chinese  ‘cultural centres’) have sprung up throughout Africa, as far  afield as the tiny  land-locked countries of Burundi and Rwanda, teaching baffled local people how  to do business in Mandarin and Cantonese.
Massive dams are being built,  flooding  nature reserves. The land is scarred with giant Chinese mines,  with ‘slave’  labourers paid less than £1 a day to extract ore and  minerals.
Pristine forests are being destroyed, with China taking up to 70 per cent of all timber from Africa. All over this great continent, the Chinese presence is swelling into a flood. Angola has its own ‘Chinatown’, as do great African cities such as Dar es Salaam and Nairobi.
Exclusive, gated compounds, serving  only  Chinese food, and where no blacks are allowed, are being built all  over the  continent. ‘African cloths’ sold in markets on the continent  are now almost  always imported, bearing the legend: ‘Made in China’.

              Never far away: The influence of the Chinese is always  close at hand in Africa

From Nigeria in the north, to  Equatorial  Guinea, Gabon and Angola in the west, across Chad and Sudan  in the east, and  south through Zambia, Zimbabwe and Mozambique, China  has seized a vice-like  grip on a continent which officials have decided  is crucial to the superpower’s  long-term survival.
‘The Chinese are all over the place,’ says  Trevor Ncube, a prominent African businessman with publishing  interests around  the continent. ‘If the British were our masters  yesterday, the Chinese have  taken their place.’
Likened to one race deciding to adopt a new  home on another planet, Beijing has launched its so-called ‘One  China In  Africa’ policy because of crippling pressure on its own natural resources in a  country where the population has almost trebled from 500 million to 1.3 billion  in 50 years.
China is hungry – for land, food and  energy.  While accounting for a fifth of the world’s population, its oil  consumption has  risen 35-fold in the past decade and Africa is now  providing a third of it;  imports of steel, copper and aluminium have  also shot up, with Beijing  devouring 80 per cent of world supplies.

                                                      On the job: A Chinese building worker in  Zambia

Fuelling its own boom at home, China  is also  desperate for new markets to sell goods. And Africa, with  non-existent health  and safety rules to protect against shoddy and  dangerous goods, is the perfect  destination.
The result of China’s demand for raw  materials and its sales of products to Africa is that turnover in trade  between Africa and China has risen expoentially.
However, there is a lethal price to  pay.  There is a sinister aspect to this invasion. Chinese-made war  planes roar  through the African sky, bombing opponents.
Chinese-made assault rifles and  grenades are  being used to fuel countless murderous civil wars, often  over the materials the  Chinese are desperate to buy.
After battling for years against the  white  colonial powers of Britain, France, Belgium and Germany,  post-independence  African leaders are happy to do business with China  for a straightforward  reason: cash.
With western loans linked to an  insistence  on democratic reforms and the need for ‘transparency’ in  using the money  (diplomatic language for rules to ensure dictators do  not pocket millions), the 
Chinese have proved much more relaxed about  what their billions are used for. Certainly, little of it reaches the continent’s impoverished 800  million  people. Much of it goes straight into the pockets of dictators.  In Africa,  corruption is a multi-billion pound industry and many experts believe that China  is fuelling the cancer.
The Chinese are contemptuous of such  criticism. To them, Africa is about pragmatism, not human rights. While  the  bounty has, not surprisingly, been welcomed by African dictators,  the people of  Africa are less impressed.
There have also been riots in Zambia, Angola  and Congo over the flood of Chinese immigrant workers. The  Chinese do not use  African labour where possible, saying black Africans  are lazy and  unskilled.
In Angola, the government has agreed  that 70  per cent of tendered public works must go to Chinese firms, most of which do not  employ Angolans. As well as enticing hundreds of  thousands to settle in Africa,  they have even shipped Chinese prisoners  to produce the goods  cheaply.
Where will it all end? As far as  Beijing is  concerned, it will stop only when Africa no longer has any  minerals or oil to  be extracted from the continent.
The people of this bewitching,  beautiful  continent, where humankind first emerged from the Great Rift  Valley,  desperately need progress. The Chinese are not here for that.
They are here for plunder. After centuries of  pain and war, Africa deserves better.

Prenda lawyer to judge: don’t judge me for not talking

Paul Hansmeier says he wasn't in charge of Prenda suits. Who was? Who knows.

by Joe Mullin - Apr 9 2013, 8:50pm EDT

• Copyright
• Lawsuits

http://arstechnica.com/tech-policy/2013/04/prenda-lawyer-to-judge-dont-judge-me-for-not-talking/

Lourdes Nightingale / flickr

Who's behind Prenda Law?

• Prenda Law says identity theft accuser is crazy and off his meds
• Judge smash: Prenda’s porn-trolling days are over
• Prenda lawyers take Fifth Amendment; judge storms out: “We’re done”
• Ars Q&A: Prenda Law’s Paul Hansmeier speaks—just not about copyright
• Prenda lawyer has a history of unusual class action clients

View all…

Last week, all the lawyers involved in the Prenda Law debacle showed up to federal court in Los Angeles—and said nothing. Instead, they choose to plead the Fifth. The judge ended the hearing in less than 20 minutes, storming off and saying he would draw his own conclusions about the lawyers involved in the copyright-trolling operation.
Prenda is a legal firm that has used questionable tactics in suing people they allege to have illegally downloaded porn titles and it has found itself under scrutiny over the past few months for its potentially extortionate practices. That scrutiny has intensified since it was discovered that two of Prenda's clients, AF Holdings and Ingenuity 13, could not confirm the existence of one man that appeared to lead both companies: Alan Cooper.
Key Prenda lawyer Paul Hansmeier, like his colleague John Steele, lawyered up and refused to talk at the April 2 hearing. Today Hansmeier filed his response on paper, attempting to explain why he shouldn't be sanctioned despite the fact that he's not willing to shed much light on the whole situation Prenda Law finds itself in.
"Hansmeier's invocation of the Fifth Amendment may not be use[d] to formulate presumptions against him," because the court has "raised questions of fraud and potential incarceration," states Hansmeier's lawyer in the response.
When US District Judge Otis Wright chose to focus his attention in the "Ingenuity 13" case on attorney misconduct rather than intellectual property rights, the matter became more similar to a criminal proceeding rather than a civil one, Hansmeier argues.
The brief directly takes on Wright's assertion that he'll assume the worst based on the non-answers coming from Team Prenda. And there's no justification for sanctions, argues Hansmeier's lawyer, Philip Baker.

What was Brett Gibbs up to? No idea.

"There is simply no tie between Hansmeier and the issues raised within the court's order to show cause," writes Baker. As for Gibbs, the lawyer who was on-record as representing Ingenuity 13, he "was neither employed nor supervised by Hansmeier in connection with this matter."
That means that Wright shouldn't sanction Hansmeier, either under Rule 11 (the section of the federal litigation rules related to attorney misconduct) or under his "inherent powers" as a federal judge. Sanctions would be "inappropriate" since Hansmeier wasn't supervising Gibbs in any way, and never "had any malicious intent or otherwise acted in bad faith" regarding any of the activities in Judge Wright's order.

Who's Alan Cooper? Who owns AF Holdings? No idea.

One of the key points in Judge Wright's order is that he wants more information about the allegations of identity theft related to Alan Cooper. In another remarkable recent filing in the Ingenuity 13 case, Prenda lawyers have accused Cooper of being mentally ill.
Hansmeier says he's had no contact with Alan Cooper and "played no role in the acquisition of Cooper's signatures" on the corporate documents. And "there is no evidence that Hansmeier obtained or represented that the signatures on the assignments over the name Alan Cooper were those of John Steele's former caretaker, who bears that same name and provided testimony to the court."
But that doesn't answer one of Judge Wright's key questions, which is whether or not there is more than one Alan Cooper.
Hansmeier also dodges the question of who has any financial interest in AF Holdings or Ingenuity 13. He cheekily states that "the duty to disclose a financial interest is necessary for a single purpose, to allow the court to determine whether it is necessary to disqualify or recuse itself."
"The only evidence given regarding the financial interests to AF Holdings is that it is a limited liability company formed by Aisha Sargeant in May 2011 and is wholly owned by a trust with no defined beneficiaries. There is no evidence that Hansmeier has an ownership interest in either AF Holdings or Ingenuity 13."
Of course, the reason there is no evidence about who owns AF Holdings is because Hansmeier himself won't cough up the information. In his deposition, he called it an "undefined beneficiary trust" and said he couldn't name a single owner of it—despite the fact that, according to AF Holdings, Paul Hansmeier is the most qualified person to discuss the business of AF Holdings.
Hansmeier similarly dodges other key questions in the response he filed today. Why didn't he notify the court about related cases? There's "no evidence [he] participated in the decision"—it was all Gibbs. Why didn't he show up to the March 11 hearing? He didn't get enough time. He was served on March 7, "less than two business days before the hearing."

Investigation Into Illegal Spying On Kim Doctom Reveals NZ Intelligence Illegally Spied On 85 People

from the oops dept

Remember how the New Zealand intelligence organization GCSB (Government Communications Security Bureau) had to admit that it had illegally spied on Kim Dotcom? That kicked off an investigation that has now revealed that the GCSB illegally spied on somewhere around 85 people.

GCSB director Ian Fletcher said in February that his agency did not illegally spy on anyone else on behalf of law enforcement agencies.

But the Kitteridge report contradicts this - questioning the lawfulness of GCSB surveillance involving 85 New Zealanders. The agency is forbidden from spying on anyone with citizenship or permanent residence here.

The illegal spying was conducted between April 2003 and September last year and done on behalf of the Security Intelligence Service, the domestic spy agency.

But wait... there's more. The report also found that it's likely GCSB violated other laws as well, including the Privacy Act and the Defence Act. Not surprisingly, the report also finds a mess of an agency with terrible management, poor record-keeping and little oversight. Shocking, isn't it, that such conditions would lead to abuse of power and illegal surveillance, huh?

Paul Hansmeier: Who Me? I Did Nothing... Everything You're Accusing Prenda Of Was Done By Someone Else

from the leave-me-out-of-this dept

Paul Hansmeier has now filed his response in the big Prenda showdown case, and the short version might simply be described as "You've got nothing on me, judge!" Basically, he explains that each of the things the judge has complained about has nothing to do with himself, and more or less throws Brett Gibbs under the bus, saying that Gibbs was the attorney on the case, and thus anything that went wrong was Gibbs' deal.

Respondent Hansmeier was not a party to proceedings outside of the April 2, 2013 proceeding, where no evidence was presented. There is simply no tie between Hansmeier and the issues raised within the court’s order to show case. And the court should limit the inferences that it draws about Hansmeier’s culpability for the actions of a third-party attorney, like Gibbs, who was neither employed nor supervised by Hansmeier in connection with this matter

He further tries to get out of the whole Alan Cooper issue by again noting that he, Paul Hansmeier, had nothing to do with Alan Cooper or in getting Alan Cooper to sign on as a representative of the various shell companies. This is a little bit of throwing Steele under the bus, though not as far as he throws Gibbs. Also, he tiptoes around the question of whether or not the Alan Cooper who showed up in court is "Alan Cooper" who was a corporate representative of the shells. Such tapdancing is unlikely to go over well with an angry judge who already thinks you're bullshitting him.

Basically, Hansmeier tries to present himself as just some random guy whom the court dragged into this case based on nothing. Given how much evidence has been presented suggesting that Hansmeier was deeply involved in these cases, including statements from Gibbs about how he was something of a puppet for Steele and Hansmeier, this isn't likely to go over well. Because Hansmeier insists that he had nothing to do with Gibbs, it might be helpful to go back to Gibbs' testimony from March 11th.

Q And who did you understand were the decision makers of Steele Hansmeier?

A John Steele and Paul Hansmeier.

Q When you were an of counsel to Steele Hansmeier, who supervised you?

A John Steele and Paul Hansmeier.

Q Did you have periodic meetings while at Steele Hansmeier to discuss cases?

A Yes, we did.

Q And were those weekly meetings?

A Yes. Sometimes they would be sending the schedule, but, yes, mostly weekly meetings.

Q Who participated in those meetings?

A John and Paul would call me, and they would hold a weekly meeting.

[....]

Q And were you supervised at Prenda Law?

A Yes, I was.

Q Who were you supervised by?

A Paul Hansmeier and John Steele.

Q Were you supervised by Paul Duffy?

A No.

Q And when you say supervised, could you just describe what you mean by that? How did they supervise you?

A Sure. You know, they essentially were the ones that would initiate cases. By that, I mean, they would tell me they wanted to file certain cases in California, for instance, and they would instruct me to go ahead and file those. And they would give me the authority to do so. I would be told what cases we are looking at and how many cases we are talking about, and then I would file the cases. And they would give me general guidelines on what to do and sometimes the cases would be settled by John as was pointed out earlier, and sometimes they gave me certain parameters which I could settle the case myself.

Q Did you ever talk to anybody that you understood to be the client, AF Holdings?

A No. The communications were solely through Paul Hansmeier and John Steele.

Q Did you ever talk to anybody who said they were affiliated with Ingenuity 13?

A Well, I mean, aside from Mark Lutz who is the CEO of Ingenuity 13, but aside from that, no. All my communications were straight through Paul Hansmeier and John Steele.

[....]

And whose decision was it to dismiss those cases?

A Ultimately, it was John Steele and Paul Hansmeier's decisions. We had talked about it. As counsel of record here, I just kind of broke down like a cost benefit analysis of those cases. And they said, basically, go ahead and dismiss them because -- they said go ahead and dismiss them.

Q When the cases were filed, did you have a discussion with anybody about whether notice of interested parties should be filed?

A I did. Yeah.

Q And who did you have discussions with?

A Mostly Paul Hansmeier. Yes. Mostly Paul Hansmeier but sometimes John Steele, I guess. I don't know. It was a while ago I guess.

Given that, Hansmeier's filing here is less than believable. Either way, it looks clear that Hansmeier is trying to dump all the responsibility on others, mainly Gibbs, when Gibbs has already said that Hansmeier basically was his puppet master. At some point, you'd have to expect that Gibbs is going to realize he gains nothing by protecting Hansmeier and Steele any more.

  

Feds Identify 300,000 Americans as Terrorists

truther April 8, 2013

Joe Wright
AP

Do you hate paying taxes? Are you fighting foreclosure? Do you feel like no one should be allowed to commit violence against you and don’t always blindly follow the commands of the authorities? Do you film encounters with police or believe gold makes better currency than Federal Reserve Notes? Well you might be part of a domestic terrorism movement and not even know it.

On Friday, the Los Angeles Times posted an article attempting to define a domestic terrorist movement consisting of as many as 300,000 Americans. Some are even labeled as non-violent “paper terrorists”.

Is there a more Orwellian term than “non-violent terrorist”?  If you can think of one please share it in the comments below.

They refer to this so-called terror group as “sovereigns, zealots who refuse to recognize government authority in virtually any form.”
When attempting to further define and identify individuals in this movement, some very broad and dangerous stereotypes appear.
“Sovereigns believe U.S. currency has no value but recognize precious metals as valid currency,” wrote the LA Times, much like the US Constitution does.
“A central tenet of the sovereigns movement is that its adherents believe they owe no income taxes,” also much like the Constitution forbids.

What’s more, federal and state law enforcement are being trained that anyone who disobeys their commands falls into this terrorist movement and may pose a violent threat to them.

“Sovereign citizens are more likely not to obey their commands and more likely to commit violence during a traffic stop,” said Detective Rob Finch who’s made a cottage industry of anti-sovereigns police training.
“They refuse to recognize your authority, and that creates a dangerous situation,” Finch emphasized.
The LA Times piece points to a handful of colorful examples of people who defended themselves against police aggression, or who were plain crazy, as to why the movement should be considered violent.
But they don’t stop there. The FBI has even invented a new form of terrorism committed by nonviolent sovereigns called “paper terrorism”.

Even nonviolent sovereigns can cause headaches through what Finch calls “paper terrorism.” Some squat in foreclosed homes and file phony deeds claiming ownership, “paying” with photos of silver dollars.

Who knew fighting foreclosure was a form of terrorism? Paying taxes and mortgages with hand-written notes and photos is just funny, not really a threat to anyone.

However, self-described “sovereign citizen” James Turner faces ”a potential maximum prison term of 164 years, a maximum potential fine of $2,350,000, and mandatory restitution” to the state for the nonviolent act of paper terrorism.
A blog for law officers, PoliceOne.com, also tries to help cops identify sovereign citizens, saying they’ll ”likely to be argumentative with police authorities…may attempt to videotape your encounter…may refuse to give you their name or documents…”
To his credit, the article’s author states that the “Sovereign Citizen movement is not an organized civil or criminal enterprise. It’s a fractured series of loosely affiliated individuals who adhere to anti-government ideologies.”
It should be noted that the Feds and local law enforcement all received these characteristics and tactics from one original source: The Southern Poverty Law Center (SPLC). The SPLC has been on a publicly-funded partisan crusade to demonize so-called rightwing or patriotic extremists.
In 2010, SPLC put together a short documentary about “sovereign citizens” and the threat they supposedly pose. To help identify potential sovereigns, they warn about certain bumper stickers and challenges to authority in a professionally produced propaganda video.
Significantly, the video below has three times as many down-votes on YouTube as up-votes.  Watch it below:

Many believe that SPLC gets paid to make mountains out of mole hills to keep the terror-industrial complex thriving. After all, when are bumper stickers and paperwork a threat to anyone? And only an extreme minority react defensively when they are threatened by men in costumes they don’t worship as authority.
What’s confusing is that those who would try to either lump people with these characteristics into a collective group are either operating out of ignorance or with an agenda, or a little of both. The adjective “sovereign” when referring to a citizen or a state is defined as “enjoying autonomy, or independence”.
The most extreme sovereigns would certainly not adhere to the authority of any collective that aims to define them as a group. And just because one person who adopts this philosophy ends up shooting a cop, doesn’t mean all people who hate taxes or fight foreclosure are violent threats. To think otherwise smacks of a demonization agenda, nothing more.
The few examples of “terrorists” who committed violence are used as examples in every single article about Sovereign Citizens clearly aiming to smear the entire ideology as inherently violent. Yet, in every case, who initiated force against whom?
Some may argue that if an armed stranger forced you to pull over your car, or demanded entry into your home at the threat of shooting you or putting you in a cage, it could be considered an act of aggression or violence against you as a free and sovereign human no matter what assumed authority the aggressors think they possess. Strip away labels and you are defined by your actions.  What does that say about actions of the cops or the feds?
Is that really too complicated to add to these articles? The problem with doing that of course is that too many people may then sympathize with these people and the label of terrorist may not stick very well. In fact, it may expose the entire war on terror as a complete fraud, looking under cracks for perceived threats against people who just want to be left alone.
It’s unclear where the Feds came up with number 300,000 for potential terrorists wrapped in this label, but the number may not even be half of it.  Now, anyone who protests the government can be considered anti-government which is also now considered domestic terrorism. And, apparently, everyone fighting the banks in foreclosure with creative paperwork are also terrorists.
This begs the question, who isn’t a terrorist?
If the fraudulent banks and the guys with the badges, guns, armored vehicles, drones, surveillance equipment, and torture cages are the good guys in this plot, while foreclosure victims and advocates of individual liberty are terrorists, our society is in very big trouble.

Four Alleged Movie Pirates Set to Cover Entire Horror Movie Budget

• Andy
• April 9, 2013
• copyright trolls

No one really knows how much money they generate but it’s generally acknowledged that file-sharing settlements can be a lucrative business. However, while it has to be acknowledged that movie makers have costs to cover following the creation of their product, a case brought by a horror film company is on track to become especially lucrative. If things go to plan, just four alleged file-sharers will cover the costs of making an entire movie.
Over the years, as rumors of the potential profits spread, more and more companies have got involved in copyright trolling, to the point where opportunities to generate additional revenue from settlements are becoming as important as the profit to be made from traditional sales.
While the trolling business has proven particularly popular with porn companies, producers of other lower-class, lower-budget content have also seen a way to make proportionally higher profits than they did before.
This situation has been highlighted in perhaps the most dramatic way possible in an ongoing case highlighted by anti-troll site DieTrollDie.
Dimensional Dead Productions LLC v. Does 1-21 is a case against alleged BitTorrent sharers in the Eastern District of Tennessee. It’s a usual troll affair, with accusations that 21 Internet users shared the plaintiff’s horror movie with others without permission. Of course, Dimensional Dead want access to the alleged infringers’ identities so that they may be contacted to arrange a settlement.
According to information received by DTD, the plaintiff in the case has been asking alleged file-sharers for $5,000 to avoid court action, providing they pay within two weeks of being contacted. Failure to comply in a timely manner is reportedly resulting in a demand for $10,000.
While these kinds of threats are nothing new, this horror story has a shocking ending.
The movie in question is the horror movie Night of the Living Dead: Resurrection, which sounds like (but has nothing to do with) the George Romero movie of similar name.
Romero’s movie is from 1968, took six months to make and cost an estimated $114,000. Night of the Living Dead: Resurrection was made in 2011 in just over three weeks and cost $20,000.
This raises the possibility that if just four alleged file-sharers pay up ‘on time’ the entire budget for the movie will be covered by trolling. Ten alleged file-sharers paying up ‘late’ will mean that the movie’s budget will be covered five times over.
This ridiculous situation, where settlement amounts have no relation to actual damage caused, is only fueled by the specter of statutory damages and default judgments.
In the dying days of March when most troll watchers were enjoying the Prenda bloodletting, Judge Jane Magnus-Stinson in the Southern District of Indiana handed down a default judgment against an absent Gerald Glover for sharing a single movie. Total cost, a cool $151,425.
Ca-Ching!

Prenda Law: Let The Other Shoes Hit The Floor

from the here-comes-everybody dept

Ken White blogs at Popehat. He's a litigator and criminal defense attorney at Brown White & Newhouse LLP in Los Angeles. His views are his alone, not those of his firm.
All of my coverage of the Prenda Law saga is collected here.
Last week I described how Prenda Law principals John Steele, Paul Hansmeier, and Paul Duffy asserted their Fifth Amendment right against self-incrimination rather than answer a federal judge's questions about Prenda Law's litigation campaign. I predicted that attorneys defending against Prenda Law cases would begin to use that assertion against Prenda. Behold: they have.
Georgia On Their Mind
We begin in in the Northern District of Georgia, where AF Holdings LLC brought suit against a Mr. Patel. AF Holdings' local counsel voluntarily dismissed the case on March 18 as part of Prenda's wave of dismissals. Too late, too late. Mr. Patel has filed a motion for sanctions. Since AF Holdings had already dismissed, Patel was forced to rely — as I explained — on the court's inherent powers.
Patel's Motion is a blockbuster. It weaves together information and documents from cases across the country to present its argument against Prenda law and its lawyers. The exhibits to the Motion are here: Exhibit A, Exhibit B, Exhibit C, Exhibit D, Exhibit E, Exhibit F, Exhibit G, Exhibit H, Exhibit I, Exhibit J, Exhibit K, Exhibit L, Exhibit M, Exhibit N, Exhibit O, and Exhibit P. Among the most notable exhibits are transcripts. Exhibit C is the transcript of the utterly bizarre Florida hearing involving John Steele and Mark Lutz; Exhibit F is a transcript of the jaw-dropping March 11, 2013 hearing before Judge Wright at which Alan Cooper and Brett Gibbs testified, and Exhibit G is a transcript of the April 2 hearing at which Prenda's representatives took the Fifth. These are, on their own, very powerful, for reasons I have discussed before.
But that's not all. Patel has also submitted documents illuminating the conduct and seemingly inconsistent statements of various Prenda Law attorneys. Patel shows a pleading electronically "signed" by "Salt Marsh," one of the elusive figures behind Prenda Law's purported clients — it was also purportedly e-signed by Brett Gibbs. Patel shows that in January 2012, John Steele's attorneys wrote to the Florida State Bar on his behalf representing that "Mr. Steele is actually a client of Prenda — Mr. Steele maintains an ownership interest in some of Prenda's larger clients." It's difficult to reconcile this admission with Mr. Steele's assertion at the April 2 hearing that the attorney-client privilege would prevent him from answering questions about Prenda Law's clients. There's also a rather hilarious quote from a March 15, 2013 email on behalf of Prenda. The Motion doesn't make it clear whether this email was sent by Prenda local counsel or a Prenda principal:

I understand that there is an insane liberal group which is flying around Mr. Alan Cooper for its own benefit. This group is akin to "Anonymous". It doesn't believe in copyright laws. It does believe that computer hacking should be legal. I'm not certain if these southern courts (unlike liberal San Francisco Courts) will hold the same beliefs that this crazy "its ok to hack websites" group holds.

Bear in mind that assertion about the Electronic Frontier Foundation was uttered four days after Alan Cooper testified that his name had been misappropriated by Prenda and that John Steele had left him threatening voice mail messages when he complained. Whoever sent that email either isn't following what is going on, or believes he can bluff it out. Good luck with that.
Patel's motion is well worth reading for anyone interested in an exposition of the growing evidence concerning Prenda Law.
Annoyed In Illinois
Prenda's troubles don't end in Georgia.
In Illinois, Prenda — using its putative client "Lightspeed Media Corporation" — filed state law claims. One defendant — a Mr. Smith — removed the case to federal court in the Southern District of Illinois. Prenda recently began to retreat in that case — Paul Hansmeier and John Steele moved to withdraw, leaving Paul Duffy holding the bag. Duffy, in turn, dismissed the case during the great strategic repositioning of March 2013. Once again, they were too late.
Smith has filed a motion seeking attorney fees as a sanction. The exhibits to the motion are here: Exhibit A, Exhibit B, Exhibit C, Exhibit D, Exhibit E, Exhibit F, and the Forbes article attached as an unlettered exhibit.
Smith is represented, in part, by Jason E. Sweet of Booth Sweet LLP, who also represents Alan Cooper and Paul Godfread in the defamation litigation Prenda recklessly brought against them. Sweet was responsible for what I called a Perry Mason moment during the March 11 hearing; he stood up from the gallery to tell Judge Wright that Brett Gibbs had, in fact, represented himself as "national counsel" for Prenda. Sweet knows the case and knows Prenda, which shows. The Smith motion is a helpful addition to the Patel motion: it focuses more on Prenda's methods of identifying defendants, it attacks Prenda's state law theories, and then it piles on with Prenda's recent misfortunes in courts across the country. A representative sample of the latter:

Steele, Hansmeier and Duffy have orchestrated a nationwide campaign through Prenda Law and other related entities that several courts have found extends beyond vexatious litigation into fraud on the court. For one example that beggars description, Duffy, a prinicpal of Prenda Law, wrote a letter to the court disclaiming any role in representing the plaintiff, a Prenda Law client, though Prenda Law’s local counsel admitted having been retained to represent the plaintiff by Prenda Law principal Brett Gibbs. Hr’g Tr., Sunlust Pictures, LLC v. Nguyen, No. 12-cv-1685, pp. 10-12 (M.D. Fl. Nov. 27, 2012) (Exhibit D hereto). Mark Lutz, formerly a Prenda Law paralegal, represented himself as the plaintiff’s “corporate representative,” but conceded that he had no knowledge of the corporate officers and was paid on a contract basis to make courtroom appearances as a corporate representative for Prenda Law plaintiffs, including Hard Drive Productions and Guava LLC. Id. pp. 13-17 (misidentifying Mr. Lutz as “John Lutz”). The Sunlust Court dismissed the case from the bench “for failure to appear at this hearing, for failure to present a lawful agent, for attempted fraud on the Court by offering up a person who has no authority to act on behalf of the corporation as its corporate representative.” Id. p. 20. Steele, who happened to be present at the hearing, represented to the Court, “I don’t represent Sunlust or anybody anymore. I no longer actively practice law. … I do appear occasionally at hearings on an ad hoc basis, but I do not have any current clients.” Id. p. 19. (At the time, Steele was listed as lead counsel in this action.)

Ouch.
Prenda's Dilemma
Here's the dilemma of Prenda Law's principals: they can't both take the Fifth and fully respond to motions like these. They can't assert good faith and explain seeming inconsistencies without submitting declarations. If they want to continue to refuse to answer questions, they can only respond with legal arguments and bland generalities.
Paul Duffy has just tried that in San Francisco. In response to a raucous motion for fees in an AF Holdings case in the Northern District of California, Paul Duffy has responded with a dry and academic argument about the circumstances in which the Copyright Act permits a court to award fees to a defendant. Duffy's response is not badly written, and doesn't seem to be wrong on the law, but it's not at all the response you'd expect from a lawyer being accused of what amounts to a nationwide criminal enterprise. It's like someone said "Ken, I have it on good authority that you routinely molest squirrels in a public park near your house," and I responded "your accusation is without merit because that park is private."
Paul Duffy, and Prenda Law, might get lucky, and courts might summarily ignore or deny the sanctions and fees motions. But if any judge seeks to make an inquiry even a fraction as involved as Judge Wright has, then Prenda Law and its principals will find themselves choosing between warding off sanctions and maintaining their prudent silence.
This is only the beginning. Stay tuned.

Prenda Law: Prenda, Duffy, And Van Den Hemel Respond to Judge Wright

Apr 8, 2013

By Ken.

Law

All of my coverage of the Prenda Law saga is collected here.
Two Prenda posts in a day may seem gratuitous. But I go where PACER leads me.
Late today Heather Rosing — currently counsel for the entity Prenda Law, Prenda principal Paul Duffy, and paralegal Angela Van Den Hemel — filed a brief in response to Judge Wright's latest Order to Show Cause. You may recall that Judge Wright told her she could do so at the April 2, 2013 hearing.
In this post I will review the arguments in the brief and discuss their significance for the fortunes of Prenda Law and its principals. Let me begin with this: Rosing has filed the best brief I have seen from Penda's side during this whole wretched story. Briefs by Prenda's own lawyers responding to accusations of misconduct have been smug, angry, evasive, and self-righteous. Rosing's brief is professional. It makes colorable arguments, and supports them with authority where there is authority to be had. There's no perfect way to tell an angry federal judge he lacks jurisdiction; she strikes a tone that's firm but respectful. It's well written, well organized, and as comprehensive as prudence permits. This is good work.
But what does it say?

The brief is here. It attaches declarations from Raymond Rogers (who assigned the copyrights to AF Holdings), Joshua Chin (who offers expert testimony about Prenda's identification of downloaders), and Brent Berry (who makes alarming claims about Alan Cooper, discussed below). The brief also attaches a Request for Judicial Notice (a legal device asking a court to consider indisputable evidence, like the existence of documents previously filed in court) and Exhibit 1, Exhibit 2, Exhibit 3, Exhibit 4, and Exhibit 5.
I'll review the arguments by subject matter. Rosing divides them — as she should — according to the subjects specified in Judge Wright's Order to Show Cause.
The Fifth Amendment: Rosing acknowledges, as she must, that Duffy and Van Den Hemel invoked the Fifth Amendment and declined to answer questions at the April 2, 2013 hearing. She also notes that while Prenda Law does not enjoy Fifth Amendment rights, Duffy could not be compelled to answer on behalf of Prenda if he invoked. Then Rosing makes a creative argument: in the face of a clear doctrine that courts may consider a litigant's invocation of the Fifth in civil cases, she argues that because Judge Wright threatened imprisonment as a possible consequence, the proceeding was effectively criminal, and therefore her clients' invocation can't be held against them. As a defense attorney I admire the moxie of the argument. But Judge Wright can render it moot by avoiding any use of his contempt power and confining his sanctions to civil ones.
Limits On the Court's Sanctions Authority: Next Rosing reviews the limits of Judge Wright's power under Rule 11, his inherent power, and federal statute, as I discussed here. Rosing points out that Judge Wright has limited power over people and entities that did not appear before him or direct or supervise attorneys before him. This argument is strong as to Van Den Hemel, somewhat weaker as to Duffy (particularly if Judge Wright takes notice of Duffy's nationwide participation in Prenda Law matters), and weakest as to Prenda Law itself.
Critique of the March 11 Hearing: Next Rosing attacks what she sees as defects in the March 11 hearing before Judge Wright. She complains that Morgan Pietz, counsel for the John Doe in one of the cases, was an "improper prosecutor" — but this is only pertinent if Judge Wright was required to treat the hearing as a criminal contempt proceeding triggering the right to an independent prosecutor; otherwise there's no requirement that Pietz be neutral. She complains that Judge Wright considered improper unsworn testimony from Jason Sweet, who spoke up from the gallery in what I called a Perry Mason moment. But that's irrelevant unless Judge Wright relies on what Mr. Sweet said during that brief exchange. She asserts that Judge Wright considered inadmissible evidence, and that she was not permitted to object to it. Leaving aside the analysis of the merits of her objections, the argument is only relevant to the extent Judge Wright considers the evidence in question, and it's not clear he will. She complains that Judge Wright considered evidence outside of the five cases before him and the scope of his pending Order to Show Cause. This argument is weak; the other evidence was pertinent as proof of Prenda Law's overall conduct and as evidence of knowledge and intent of its principals.
Attack on Alan Cooper: With respect to Judge Wright's suggestion that Prenda Law might have forged Alan Cooper's signature on assignments of copyright, Rosing offers multiple arguments. She repeats the standard Prenda Law argument that any misrepresentation is not meaningful because it's undisputed that the companies that assigned copyrights to Prenda Law's clients signed the assignments even if Alan Cooper didn't. In a hint of the Resevoir-Dogs-level bloodletting to come, she implies that the evidence only supports John Steele knowing about any forgery, not Prenda Law or Duffy or Van Den Hemel. She argues that upon learning of Cooper's testimony Duffy immediately filed the "Notice of Allegations" I described before and dismissed pending cases. That, she asserts, shows his good faith.
But those are mundane arguments. Rosing also launches a surprising attack on Alan Cooper himself. She offers the declaration of Brent Berry, an acquaintance of Cooper and Steele, who claims that Cooper knew of his putative position with AF Holdings and asked Cooper "how's my porn company doing?" Berry also claims that Cooper is mentally ill and threatened him, and attaches many disturbing text messages purportedly from Cooper. This, Rosing argues, shows that Cooper's testimony that his identity has been stolen cannot be trusted.
At this point I see no reason to place any trust in claims made by Prenda witnesses. But even if Berry's claims about Cooper are true, they don't exonerate Prenda or its principals. If the claims about Cooper are true, it means that Prenda principals, rather than stealing an identity to serve as the principal of a front company, used a mentally ill caretaker as the putative executive of a front company. "How's my porn company doing?" is not the question of an involved and genuine executive; it's the question of someone used as a front. Berry's declaration is entirely consistent with the theory that Prenda Law was using entities to conceal the financial stake of its lawyers.
The Violation of Judge Wright's Discovery Order: Judge Wright ordered Prenda Law to explain whether it violated his discovery orders when, as evidence demonstrated, it continued to gather the identities of downloaders after Judge Wright ordered a halt to discovery. Here Rosing points the finger at Steele and Hansmeier, pointing out that Brett Gibbs said he reported Judge Wright's order to them, not to Duffy or Van Den Hemel. That argument is somewhat persuasive, at least as to Van Den Hemel. Rosing also argues that because Gibbs, Steele, and Hansmeier are only "of counsel" to Prenda Law, Prenda Law is not responsible for their conduct. That argument is considerably less persuasive given the evidence that Prenda supervised cases across the country.
Investigation Into the Identity of Downloaders: From early in the case, Judge Wright has ruled that Prenda Law's methods of associating downloads to particular individuals through IP matches is unsound. He ordered the litigants to show cause why they shouldn't be sanctioned for initiating cases based on IP matches. Here Rosing devotes a substantial portion of the brief to what amounts to a defense of the entire litigation model, not just to Prenda Law, Duffy, and Van Den Hemel. I will let others critique the defense. Suffice it to say that even if Judge Wright is correct that the IP match is not an adequate basis for a John Doe suit or for discovery into the identity of IP subscribers, the law here is unsettled enough that I think the case for sanctions on this basis is not very strong. Rosing makes a good case that, at least, pursuing discovery or bringing John Doe actions is not objectively unreasonable enough to warrant sanctions. This is dry stuff; the only particularly entertaining part is when she cites the Kinsey report for the proposition that it's reasonable to assume that, given a family using an IP address, the porn downloader is the adolescent male.
Financial Interests: Judge Wright suggested that litigants may be sanctioned for concealing the financial interest of the lawyers in the putative Prenda Law clients. Rosing first argues that there is no evidence that Duffy or Van Den Hemel had any interest themselves or were aware of any interest held by Steele or Hansmeier. Note, here, more cracks in the unity of Prenda Law figures — there's no omerta with this crew. I think that's a difficult argument to make about Duffy in light of the evidence of his involvement in Prenda's nationwide cases, but it's a perfectly persuasive argument as to Van Den Hemel. Next, Rosing tries a rather bold materiality argument certain to agitate Judge Wright. She argues that the only purpose of the disclosure of financial interests is to let judges know when they must recuse themselves, and since Judge Wright didn't recuse himself when he formed the suspicion that the Prenda Law principals have financial interests in their clients, there must be no basis for recusal, and therefore the concealment (if any) is irrelevant. Now there's an in-your-face argument. It's too cute, I think: the definition of materiality is broader than Rosing seems to imagine. There's a perfectly good reason courts and litigants would want to know if attorneys are the owners and concealed principals of their clients — it makes them potential witnesses in the case, which carries its own complications for the lawyers, parties, and court. This is the one argument in Rosing's brief I would not have made under any circumstances.
The Related Case Issue: Judge Wright asserts that Prenda Law should have filed notices of related cases in the Central District of California because the cases involved the same plaintiffs, same attorneys, and same issues. That's certainly arguable. But is failure to do so sanctionable? Rosing attaches an exhibit showing that the Northern District of California declined to treat cases as related under the same circumstances. That suggests that Prenda Law had a colorable basis for not filing a related case notice in Los Angeles. Rosing is right on this narrow issue, I think. (Brett Gibbs, in testifying about this on March 11, was unclear — he suggested that the issue in the Northern District was consolidation, which is something different.)
Failure to Appear: Finally, Rosing argues that Judge Wright should not sanction Van Den Hemel and Duffy for failing to appear at the March 11 hearing. She repeats arguments from her unsuccessful ex parte application: she asserts that Judge Wright lacks jurisdiction over them, and that they received inadequate notice. She also argues that because they made themselves available by phone they should not be penalized for failing to appear in person. Given the evidence before Judge Wright in the form of Prenda's nationwide litigation, the Hansmeier deposition, and Brett Gibbs' testimony, I think the jurisdiction argument is terrible as to Prenda Law, weak as to Duffy, and only so-so as to Van Den Hemel, who was connected to Prenda Law activities reaching into California. The notice issue is not particularly persuasive either — it strains credulity past the breaking point to assert that the entire Prenda team wasn't intimately familiar with what was going on before Judge Wright. As for the argument that it was enough to be available by telephone — well, it's a mitigating factor, but I don't expect it to be persuasive to Judge Wright.
What can we take away from the brief Rosing filed on behalf of Prenda Law, Duffy, and Van Den Hemel?
First, it's clear Rosing is competent and will continue to deliver good representation to them, and is carefully making a record. Their invocation of the Fifth suggests they are, at least, smart enough to take her advice. Second, it's clear that the Prenda Law team no longer presents a unified front. Duffy and Van Den Hemel are now clearly adverse to Steele and Hansmeier. That's no surprise. Third, it's clear that Judge Wright does not have an easy task before him. His powers, as I've discussed before, are limited, and if he wants to make any sanctions stick (as opposed to handing the matter off to state bars or criminal authorities), he's going to have to be careful about making a record.
Stay tuned.