United States v. Paul Hansmeier ( 2021 )

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 19-2386
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United States of America
Plaintiff - Appellee
v.
Paul R. Hansmeier
Defendant - Appellant
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Appeal from United States District Court
for the District of Minnesota
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Submitted: October 23, 2020
Filed: February 10, 2021
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Before BENTON, SHEPHERD, and KELLY, Circuit Judges.
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KELLY, Circuit Judge
Paul Hansmeier was charged in an 18-count indictment with mail and wire
fraud, 18 U.S.C. §§ 1341, 1343; conspiracy to commit mail and wire fraud, 18 U.S.C.
§ 1349; conspiracy to commit money laundering, 18 U.S.C. § 1956(h); and
conspiracy to commit and suborn perjury, 18 U.S.C. § 371. After the district court1
denied his motion to dismiss the 17 fraud and money laundering counts, Hansmeier
pleaded guilty to one count of conspiracy to commit mail and wire fraud and one
count of conspiracy to commit money laundering. He was sentenced to 168 months’
imprisonment and ordered to pay restitution in the amount of $1,541,527.37.
Hansmeier presents two arguments on appeal. First, he claims that the district
court erred in denying his motion to dismiss. Second, he contends that the district
court’s restitution award improperly included more than just the losses caused by his
offense. We affirm.
I.
A. 2
Paul Hansmeier was an attorney licensed to practice law in Minnesota. Along
with his business partner John Steele, who was charged in the same indictment,3
Hansmeier operated the law firm Steele Hansmeier PLLC. Beginning around
1
The Honorable Joan N. Ericksen, United States District Judge for the District
of Minnesota.
2
Though both Hansmeier and the government have offered additional factual
context in their presentations before this court, our analysis of Hansmeier’s motion
to dismiss is limited to what is contained in the indictment. United States v. Steffen,
687 F.3d 1104, 1107 n.2 (8th Cir. 2012) (“In reviewing the sufficiency of an
indictment, we accept the government’s factual allegations as true, without reference
to allegations outside the indicting document.” (quoting United States v. Farm &
Home Sav. Ass’n, 932 F.2d 1256, 1259 n.3 (8th Cir. 1994))). Accordingly, the
following description of Hansmeier’s conduct is drawn from the indictment that
forms the basis of our review and takes the facts alleged in the indictment as true.
Cf. id. (drawing “the facts set forth in [the] opinion . . . from the indictment”).
3
Steele pleaded guilty to both conspiracy counts in March 2017 and was
sentenced to a prison term of 60 months.
-2-
September 2010, the firm started representing organizations and individuals that
owned the copyrights to certain pornographic movies. As part of their
representation, Hansmeier and Steele pursued the following strategy, as described in
the indictment:
Defendants and their agents monitored file-sharing websites and obtained IP
Addresses of individuals who downloaded or attempted to download their
clients’ movies. Defendants then filed copyright infringement lawsuits
against these anonymous individuals, sometimes referred to as “John Does,”
and sought authority from the court—often referred to as “early discovery”—
to subpoena internet service providers for subscriber information associated
with the IP Addresses.
After receiving the subscriber information, defendants . . . made phone calls
and sent letters to the subscribers associated with targeted IP Addresses in
which they threatened overwhelming financial penalties—the copyright
statute permits plaintiffs to recover damages of up to $150,000 per
infringement—and public disclosure unless the purported infringers agreed to
pay a settlement of approximately $4,000. Many of the individuals who
received defendants’ letters and phone calls agreed to pay the settlement rather
than incur the expense of defending the lawsuit—which would undoubtedly
exceed the settlement amount—or risk being publicly shamed for allegedly
downloading pornographic movies.
The indictment alleges that Hansmeier and Steele started by monitoring file-
sharing websites to look for potential infringers. Beginning in April 2011, however,
the two men began directing their agents “to upload their clients’ pornographic
movies to BitTorrent file-sharing websites, including a website named the Pirate
Bay, in order to entice people to download the movies and make it easier to catch
those who attempted to obtain the movies.” Once Hansmeier and Steele identified
potential infringers who downloaded the movies, they took the same steps of seeking
early discovery, sending settlement demands, and receiving payments from alleged
infringers. Hansmeier and Steele told neither the courts in which they sought
discovery nor the alleged infringers that they were responsible for making the films
available on the file-sharing sites.
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Several months later, Hansmeier and Steele again modified their strategy.
First, in November 2011, they “caused Prenda Law to be created.” Though the firm
was nominally owned by their associate, the two men exerted de facto control over
it and used the firm to pursue their copyright infringement litigation. The indictment
alleges that Hansmeier and Steele “on multiple occasions falsely denied to various
courts any direct involvement with or control over Prenda Law.” Next, they created
the organizations AF Holdings and Ingenuity 13. Hansmeier and Steele represented
to the courts that these organizations were owned and controlled by other individuals
and used the names of an acquaintance and of a paralegal they employed. But in
reality, Hansmeier and Steele controlled both. Under their direction, these
organizations obtained copyrights to a number of pornographic films and then served
as Hansmeier and Steele’s clients as the two men pursued their copyright litigation.
Unknown to both the courts and the alleged infringers, Hansmeier and Steele were
thus the direct beneficiaries of all settlement payments made out to AF Holdings and
Ingenuity 13.
In May 2012, Hansmeier and Steele began creating pornographic films
themselves. Contracting with adult film actresses, Hansmeier and Steele produced
multiple short films and transferred the copyrights to Ingenuity 13. They did not
distribute the movies commercially, but instead posted them exclusively on file-
sharing websites and monitored the downloads. Using these entities and films,
Hansmeier and Steele continued to pursue their settlement-focused litigation
strategy. In doing so, they failed to disclose their involvement to either the courts or
the alleged infringers.
The indictment alleges that, in order to carry out their litigation strategy,
Hansmeier and Steele deceived both the courts in which they sought discovery and
the alleged infringers they sued. Specifically, the indictment accuses Hansmeier and
Steele of deliberately concealing from the courts “their role in distributing the
movies, as well as their significant personal stake in the outcome of the litigation.”
This concealment, the indictment alleges, was done with the purpose of gaining
access to downloaders’ identifying information, in order to “garner quick settlements
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from individuals who were unaware of the defendants’ role in uploading the movie,
and often either too embarrassed or could not afford to defend themselves.” The
indictment also characterizes the threatened lawsuits as legally baseless, suggesting
that Hansmeier and Steele had provided legal authorization to download the movies
when they caused them to be uploaded to file sharing sites. Accordingly, the
indictment claims, any representations Hansmeier and Steele made to the courts or
the alleged infringers that they and their clients had legitimate copyright
infringement claims or had suffered damages from that infringement were also false.
Around October 2012, “after courts had begun limiting the discovery [they]
could obtain through copyright infringement suits,” Hansmeier and Steele developed
a new way to seek copyright settlements. This involved the creation of three new
organizations: Guava, Livewire Holdings, and LW Systems. As with AF Holdings
and Ingenuity 13, though Hansmeier and Steele represented that these companies
were owned by other individuals, Hansmeier and Steele actually controlled each
company. Under their new strategy, Hansmeier and Steele filed lawsuits alleging
that certain John Does had hacked these companies’ computer systems. This, the
indictment claims, was a lie: while the John Does in question had apparently
downloaded the pornographic films, they had not hacked into any computer systems.
Indeed, the companies had no computer systems to hack.
In reality, according to the indictment, Hansmeier and Steele brought these
lawsuits in a renewed attempt to learn the identities of alleged infringers and to send
them settlement demands. In this effort, Hansmeier and Steele recruited “ruse
defendants.” These defendants were people Hansmeier and Steele had caught
downloading movies for which they (or their purported “clients”) possessed
copyrights. In exchange for Hansmeier and Steele waiving their copyright claims
against them, the ruse defendants agreed to be sued for hacking the companies’
computer systems. This then allowed the two men to seek discovery about the ruse
defendants’ alleged co-conspirators in the computer hacking. In reality, these “co-
conspirators” were just other downloaders of copyrighted movies whose IP
addresses Hansmeier and Steele identified through the file sharing sites. Once
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Hansmeier and Steele gained subpoena authority for the supposed co-conspirators’
information, they sent them the same copyright-based settlement demands described
above.
Eventually, courts grew suspicious of Hansmeier and Steele’s litigation
techniques and started denying their subpoena requests, dismissing their lawsuits,
imposing sanctions, and notifying state attorney disciplinary bodies and other courts.
The indictment includes language from a federal district court order imposing
sanctions against both men, in which the court states that the two “have demonstrated
their willingness to deceive not just this Court, but other courts where they have
appeared” and that their “deception was calculated so that the Court would grant
[their] early-discovery requests, thereby allowing [them] to identify [alleged
copyright infringers] and exact settlement proceeds from them.” The responses from
the courts effectively ended Hansmeier and Steele’s operation. But between 2011
and 2013, before they faced this increased scrutiny, Hansmeier, Steele, and their
entities received more than $6 million in copyright settlement payments, half of
which went to Hansmeier and Steele themselves.
B.
On December 14, 2016, a federal grand jury charged Hansmeier and Steele
with conspiracy to commit wire and mail fraud; multiple instances of mail and wire
fraud between December 2011 and April 2013; conspiracy to commit money
laundering; and conspiracy to commit and suborn perjury. Hansmeier moved to
dismiss all but the perjury count, arguing that the facts alleged did not constitute
criminal fraud. See Fed. R. Crim. P. 12(b)(3)(B) (authorizing pretrial challenges to
indictments that “fail[] to state an offense”). 4 The magistrate judge recommended
the motion be denied, and the district court adopted the recommendation.
4
Because the theory of money laundering charged was premised on Hansmeier
and Steele committing mail and wire fraud, this count was included in the motion to
dismiss.
-6-
Following the district court’s order, Hansmeier entered into a conditional plea
agreement with the government, pleading guilty to one count of conspiracy to
commit mail and wire fraud and one count of conspiracy to commit money
laundering, reserving the right to appeal the denial of his motion to dismiss.
At sentencing, the district court heard evidence about restitution. In support
of its proposed restitution amount, the government called Jared Kary, a special agent
with the FBI. Agent Kary described Hansmeier and Steele’s settlement strategy,
explaining that the settlements their targets agreed to pay typically “ranged between
$2,500 and $3,400,” though were sometimes lower. Based on his review of
Hansmeier and Steele’s financial documents, Agent Kary estimated that, between
2010 and 2013, the alleged infringers Hansmeier and Steele targeted paid over $6
million total in settlements. Agent Kary then summarized a spreadsheet the FBI
created to estimate the proper restitution amount. The spreadsheet did not include
all of the settlement money that came in over this time period. Rather, it was limited
to payments made after April 2011, which is when there was evidence that
Hansmeier and Steele posted to file-sharing websites a movie to which they held the
copyright—in other words, when, under the government’s theory, their fraud scheme
began—and to payments that he could link to specific victims. Based on these
parameters, he calculated a restitution figure of $1,541,527.37.
Hansmeier objected to this calculation on the basis that the FBI’s spreadsheet
did not distinguish between settlement payments that came from “legitimate
lawsuits” and those that came from fraudulent ones. The court found the defense’s
arguments unconvincing, noting “there does not appear from the testimony and from
the facts admitted at the plea . . . any more than potentially a negligible amount of
what could be reasonably considered money coming from a source other than the
overall fraudulent scheme. And so this is a pretty conservative restitution amount.”
The court ultimately accepted the government’s evidence and imposed restitution in
the amount of $1,541,527.37.
Hansmeier now appeals.
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II.
We review de novo a defendant’s motion to dismiss an indictment for failure
to state an offense. See United States v. Steffen, 687 F.3d 1104, 1109 (8th Cir.
2012). In doing so, we accept the allegations stated in the indictment as true, Farm
& Home Sav. Ass’n, 932 F.2d at 1259 n.3, and ask whether they can form the basis
of the charged offense. See United States v. Hayes, 574 F.3d 460, 472 (8th Cir.
2009) (“An indictment will ordinarily be held sufficient unless it is so defective that
it cannot be said, by any reasonable construction, to charge the offense for which the
defendant was convicted.” (quoting United States v. Sewell, 513 F.3d 820, 821 (8th
Cir. 2008))). A slightly greater level of detail is required for the bank, mail, or wire
fraud statutes, for which an indictment must “specify facts . . . with such reasonable
particularity as will apprise the defendant, with reasonable certainty, of the nature of
the accusation and as will enable the court to say that the facts stated are sufficient
in law to support a conviction.” Steffen, 687 F.3d at 1113 (cleaned up). The
question of whether the facts alleged in an indictment adequately state an offense
therefore turns on the elements of that offense. See United States v. Flute, 929 F.3d
584, 587 (8th Cir. 2019).
The mail and wire fraud statutes at issue here prohibit the use of interstate
mail or wire facilities to effect “any scheme or artifice to defraud, or for obtaining
money or property by means of false or fraudulent pretenses, representations, or
promises.” 18 U.S.C. §§ 1341, 1343. As Hansmeier notes, the term “scheme to
defraud” initially may seem slightly amorphous. See, e.g., United States v. Britton,
9 F.3d 708, 709 (8th Cir. 1993) (per curiam) (defining a scheme to defraud as “a
departure from fundamental honesty, moral uprightness, or fair play and candid
dealings in the general life of the community” (quoting United States v. Goldblatt,
813 F.2d 619, 624 (3d Cir. 1987))). But cases from this circuit and the Supreme
Court have offered more concrete guidance on what the mail and wire fraud statutes
require.
-8-
To prove the existence of a fraudulent scheme, the government must establish:
“(1) there was a deliberate plan of action or course of conduct to hide or misrepresent
information; (2) the hidden or misrepresented information was material; and (3) the
purpose was to get someone else to act on it.” United States v. Luna, 968 F.3d 922,
926 (8th Cir. 2020) (cleaned up). As this definition indicates, for criminal liability
to attach, a scheme to defraud must consist of material misrepresentations:
misrepresentations that have “a natural tendency to influence, or [are] capable of
influencing, the decision of the decisionmaking body to which [they are] addressed.”
United States v. Heppner, 519 F.3d 744, 749 (8th Cir. 2008) (quoting Preston v.
United States, 312 F.3d 959, 960 (8th Cir. 2002) (per curiam)); see also Luna, 968
F.3d at 926 (“To defraud someone requires material, affirmative misrepresentations
or active concealment of material information for the purpose of inducing action.”).
However, a scheme to defraud need not involve affirmative lies.
While nondisclosure of a relevant fact, “characterized by mere silence,” is not
enough for fraud, active concealment—“deceptive acts or contrivances intended to
hide information, mislead, avoid suspicion, or prevent further inquiry into a material
matter”—can form the basis of a fraudulent scheme. Steffen, 687 F.3d at 1114
(quoting United States v. Colton, 231 F.3d 890, 898–99 (4th Cir. 2000)); see also
United States v. Kidd, 963 F.3d 742, 751 (8th Cir. 2020) (recognizing that “evidence
of active concealment could prove a scheme to defraud”). Finally, though fraud
necessarily involves misrepresentations made with the “object” of obtaining money
or property from victims, Kelly v. United States, 140 S. Ct. 1565, 1572 (2020), it
is not the case that the victims targeted must be the direct recipients of the materially
deceptive statement or concealment, see Kidd, 963 F.3d at 749 (“The gravamen of
the offense is not a false representation to a victim, but the development of a scheme
to defraud.” (emphasis added)). Rather, we have held that the misrepresentations
may be made to third parties, where the third parties are used to further the scheme
to defraud the ultimate victims. See, e.g., United States v. Blumeyer, 114 F.3d 758,
768 (8th Cir. 1997) (recognizing a scheme to defraud where the defendant made
false representations to a regulatory agency with the goal that the agency’s actions
would bolster his “scheme to obtain money or property from others”).
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Hansmeier’s indictment identifies two related litigation strategies that
Hansmeier and Steele employed between late 2011 and 2013 and that form the basis
of the government’s fraud allegation. Both meet the elements of a fraudulent
scheme. In the first, Hansmeier and Steele brought copyright infringement lawsuits
and requested discovery on behalf of their supposed clients seeking the identities of
alleged copyright infringers but did not disclose (1) that they directed agents to make
the copyrighted works available on websites known for illegal downloading; and (2)
that the clients were in fact companies that Hansmeier and Steele set up in order to
personally profit from anticipated settlements. On its face, this alleged conduct
meets the elements required for a fraudulent scheme. See Luna, 968 F.3d at 926.
By posting the movies, Hansmeier and Steele took steps to ensure that they would
have a pool of potential copyright infringers to target through litigation. And by
having separate companies that they controlled act as their clients, they obscured
their personal and financial involvement in those lawsuits. Hansmeier and Steele’s
choice to conceal from the courts their full involvement in the lawsuits thus
constitutes a “deliberate plan of action . . . to hide or misrepresent information.” Id.
at 926.
The information they misrepresented was also material. Had the courts known
that Hansmeier and Steele intentionally posted the films on websites used for illegal
file sharing or that the two men were in fact the personal beneficiaries of their
“clients’” copyright claims, they would have treated the subpoena requests with far
greater skepticism—indeed, the indictment alleges that Hansmeier and Steele faced
dismissals of their lawsuits and sanctions when the extent of their involvement
eventually came to light. See Heppner, 519 F.3d at 749. That Hansmeier and Steele
created multiple organizations under the names of their associates in order to pursue
litigation, rather than naming themselves as the copyright holders, itself suggests
that they knew how relevant the courts would find this information. And the courts’
skepticism about Hansmeier and Steele’s level of personal involvement and financial
interest in the litigation would have been likely even if, as Hansmeier argues, their
claims did involve actionable copyright infringement. Cf. Luna, 968 F.3d at 927
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(holding that, in an insurance fraud case, it did not matter whether some of the claims
may have been independently valid, because “with a fuller picture of the clinic’s
practices, insurers would have investigated” and that “[t]his fact alone shows that
the information withheld had a tendency to influence their actions, even when it had
no effect on whether they ultimately paid”).
Finally, the indictment makes clear that the purpose of Hansmeier and Steele’s
concealment was to induce the courts to act, in the form of granting their subpoena
requests. And the ultimate object of those requests—and the deceptive tactics
leading up to them—was to obtain settlement payments from a pool of alleged
infringers. Putting the different elements together, the indictment alleges that
Hansmeier and Steele (1) developed and executed a plan that depended on them (2)
deliberately concealing material information from the courts, (3) with the purpose
of convincing those courts to grant their discovery requests and (4) with the ultimate
object of obtaining settlement payments from alleged infringers they identified
through those discovery requests. This conduct meets the elements of criminal
fraud.
The second litigation strategy utilized by Hansmeier and Steele, which began
in the fall of 2012, shared many features of the first, including the use of discovery
to obtain identifying information for alleged infringers and the deployment of that
information to then obtain settlement payments. While the second approach
similarly involved misleading courts by concealing material information in order to
subpoena downloaders’ identifying information, Hansmeier and Steele also began
actively lying to the courts. As the indictment describes, the two men falsely accused
a number of “ruse defendants” of hacking into their clients’ systems and, through
these false accusations, convinced the courts to provide them with the requested
discovery. Thus, and for the same reasons outlined above, the indictment’s
presentation of Hansmeier and Steele’s conduct involving ruse defendants is
sufficient to support fraud charges—the only difference is that the deception there
came in the form of affirmative misrepresentations.
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In sum, the conduct recounted in the indictment constitutes a “scheme . . . for
obtaining money or property by means of false or fraudulent pretenses,
representations, or promises.” 18 U.S.C. §§ 1341, 1343. Taking its allegations as
true, the indictment lays out a sufficient basis for the government’s charge that
Hansmeier committed fraud, and it informs the court and the parties involved of the
facts underlying that charge. This is what is legally required of an indictment. See
Steffen, 687 F.3d at 1113. In his defense, Hansmeier was free to dispute the facts,
offer alternative explanations for his conduct, or provide context to any of the actions
alleged. In short, it was Hansmeier’s right to present any lawful defense available
to him against the government’s effort to prove his guilt beyond a reasonable doubt.
But Hansmeier’s possible defenses are not relevant to our consideration of whether
the indictment itself properly stated the basis for the charged offenses.5 Because the
facts in the indictment, accepted as true, describe a fraudulent scheme prohibited by
federal law, Hansmeier cannot succeed in his claim that it is facially insufficient.
We affirm the district court’s denial of his motion to dismiss.
III.
Hansmeier also argues that the district court’s award of $1,541,527.37 in
restitution violated the Mandatory Victims Restitution Act (MVRA), 18 U.S.C.
§ 3663A. Specifically, he claims that the district court erred in relying on a
5
Disputing this conclusion, Hansmeier invokes the metaphor of a three-legged
stool, arguing that, because none of the independent “legs,” viewed on its own,
involves him lying to or concealing information from his ultimate victims, the theory
of fraud laid out in the indictment fails. Even assuming this characterization of his
conduct is accurate, there is no authority suggesting that courts should approach
fraud charges in this fragmented manner. Indeed, such an approach would risk
allowing more sophisticated fraudulent schemes, which may involve multiple,
independently legal acts or falsehoods aimed at providing the perpetrators with legal
or regulatory authority to pursue their victims, to go unchecked. Cf. Kidd, 963 F.3d
at 747–50 (insurance fraud orchestrated by a licensed chiropractor); Blumeyer, 114
F.3d at 766–68 (fraud committed by defendant who owned several insurance
companies).
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calculation that included not just losses by victims of the fraud scheme, but also
“legitimate” settlement payments from the same period (i.e., those paid by people
who downloaded copyright-protected movies posted on file-sharing websites by
people other than Steele and Hansmeier).
The government first responds that Hansmeier waived any right to challenge
the application of the MVRA in the terms of his plea deal. The agreement specifies:
Defendant understands and agrees that the Mandatory Restitution Act, 18
U.S.C. § 3663A, applies and that the Court is required to order the defendant
to pay the maximum restitution to the victims of his crimes as provided by
law. The defendant understands and agrees that the Court will order him to
make restitution for the entire loss caused by his fraud scheme and that the
restitution order will not be limited to the counts of conviction.
We do not read this provision as a waiver of Hansmeier’s right to appeal the
restitution award. Nor is it a pledge to pay the “$3 million in fraudulent proceeds”
identified elsewhere in the agreement. Unlike in the cases on which the government
relies, Hansmeier did not agree to pay “any restitution ordered by the District Court,”
United States v. Lester, 200 F.3d 1179 (8th Cir. 2000), or agree to pay restitution
“up to” a certain amount, United States v. Bartsh, 985 F.2d 930 (8th Cir. 1993).
Here, Hansmeier simply agreed that the MVRA would apply and that the court
would order him to pay restitution. He did not, in doing so, waive his right to
challenge any perceived error in the ultimate restitution amount imposed. Cf. United
States v. Polukhin, 896 F.3d 848, 852 (8th Cir. 2018) (holding that defendant did not
waive her right to appeal restitution when she made no agreement to pay whatever
the court ordered).
Because Hansmeier did not waive the issue, we will “review the district
court’s decision to award restitution for an abuse of discretion and the district court’s
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finding as to the amount of loss for clear error.” United States v. Frazier, 651 F.3d
899, 903 (8th Cir. 2011).6
The MVRA requires that sentencing courts order restitution in all cases where
“an identifiable victim or victims has suffered a physical injury or pecuniary loss”
“as a result of the commission of an offense.” 18 U.S.C. § 3663A(a), (c). Restitution
“must be based on the amount of loss actually caused by the defendant’s offense,”
and the burden is on the government to “prove that the restitution awarded does not
exceed the actual, provable loss caused by the offense.” United States v. Fonseca,
790 F.3d 852, 854 (8th Cir. 2015). In fraud cases, restitution “may be ordered for
criminal conduct that is part of a broad scheme to defraud, without regard to whether
the defendant is convicted for each fraudulent act in the scheme.” United States v.
Farrington, 499 F.3d 854, 860 (8th Cir. 2007) (quoting United States v. Ross, 279
F.3d 600, 609 (8th Cir. 2002)). However, the actual loss requirement means that
courts must be wary of over-inclusiveness—and particularly of setting payment
amounts that encompass both losses caused by the fraud at issue and legitimate
payments separate from the fraudulent scheme. See Luna, 968 F.3d at 930. But see
United States v. Karie, 976 F.3d 800, 806 (8th Cir. 2020) (“Where a defendant’s
dealings are systematically tainted with fraud, a district court may determine that the
total amount of payments equals the loss amount.” (cleaned up)).
Here, the government met its burden of showing by a preponderance of the
evidence that the $1,541,527.37 loss total was attributable solely to settlement
payments from the fraud scheme. See United States v. DeRosier, 501 F.3d 888, 896
6
Hansmeier argues that the appropriate standard of review is de novo.
However, de novo review applies only “to the extent the district court interpreted the
[MVRA] to determine its obligations in awarding restitution.” Frazier, 651 F.3d at
903. Here, the district court’s restitution decision did not involve a legal
interpretation of the MVRA. Rather, the primary question before the district court
was factual: how to determine whether payments sent to Hansmeier and Steele after
April 2011 were from fraud victims or from alleged copyright infringers paying
settlements in “legitimate” lawsuits. The district court’s decision to rely on the
calculation provided by the government is therefore subject to clear error review.
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(8th Cir. 2007) (“The burden is on the government to prove the amount of restitution
based on a preponderance of the evidence.”). The figure was based on calculations
Agent Kary presented to the court at the sentencing hearing. In coming to his final
loss amount, Agent Kary included only settlement payments from April 2011 on,
when Hansmeier and Steele directed an associate to upload a movie called Sexual
Obsession, which they held the copyright to and which they used in their fraudulent
lawsuits, to file sharing websites. Agent Kary explained that Sexual Obsession
became the “go-to movie as far as gaining settlements from individuals.” He said
that other movies were not a “significant” source of profit from that point on,
constituting just “a few [payments] trickling in here and there.” Considering this
information, the district court characterized potential payments from “legitimate”
lawsuits over this period as making up no “more than potentially a negligible
amount” of the money Hansmeier and Steele received. Cf. Karie, 976 F.3d at 806.
Agent Kary further attempted to narrow his calculation to payments from
fraud victims by excluding any payments that came in over this period that he could
not tie to a specific person—suggesting that his estimate might in fact have been
under-inclusive of the total amount Hansmeier and Steele received from their fraud
scheme. Agent Kary also showed his list of identified victims to Steele, who
confirmed that only one or two names were not those of fraud victims. Finally,
Hansmeier himself acknowledged in his plea agreement that, between 2011 and
2014, he and Steele “received more than $3,000,000 in fraudulent proceeds” from
their lawsuits.
In light of the information the government presented at sentencing, the district
court did not clearly err in concluding that the $1,541,527.37 figure was fairly
representative of the actual loss caused by the fraudulent scheme.
IV.
We affirm the judgment of the district court.
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