U of M law grad admits guilt in porn-troll scheme

John L. Steele, a University of Minnesota Law School graduate who once bragged to a reporter that he and a colleague earned millions of dollars by suing hundreds of people for illegally downloading pornography, admitted Monday in a Minneapolis federal courtroom that it was a scam.

Steele, a former Chicago lawyer who now lives in Pennsylvania, pleaded guilty to conspiracy to commit mail fraud and wire fraud, and conspiracy to launder money. He cut a deal that calls for him to cooperate in the prosecution of others involved, presumably his only co-defendant, Minneapolis lawyer Paul Hansmeier.

Hansmeier, who is suspended from practicing law, has denied the charges and awaits trial in Minneapolis.

In exchange for Steele's plea, the government agreed that it will dismiss 16 other charges against him, including mail fraud, wire fraud and conspiracy to commit and suborn perjury. The agreement contemplates a sentence of 8 to 10 years in prison if approved by U.S. District Judge Joan Ericksen, though Steele could win a reduction by providing substantial help.

According to the plea agreement, Steele and Hansmeier launched a scheme in 2011 "to fraudulently obtain copyright lawsuit settlements by deceiving state and federal courts throughout the country."

The government said Steele and Hansmeier used sham business entities to acquire copyrights to pornographic movies, some of which they filmed themselves. They posted the movies to file-sharing websites where others could watch them, then filed lawsuits against the "John Does" who anonymously downloaded the movies. That way, they could subpoena the internet service providers and identify possible defendants.

Steele acknowledged that he and Hansmeier concealed their roles and their interest in the lawsuits from the judges. When they filed suit against suspected porn consumers, they "used extortionate tactics to garner quick settlements," the plea agreement says. "When these individuals did fight back, the defendants dismissed the lawsuits rather than risk their scheme being unearthed."

From April 2011 until about December 2012, Steele and Hansmeier, or lawyers they hired, filed 200 fraudulent copyright infringement lawsuits around the country seeking the identities of the subscribers behind more than 3,000 internet protocol (IP) addresses. They collected more than $6 million in settlements and prompted losses of at least $3 million.

When judges began questioning their tactics, Steele and Hansmeier "repeatedly lied and caused others to lie" in an effort to hide their scheme, prosecutors say.

Dan Browning • 612-673-4493