Prenda Law was a "copyright trolling" scheme that sued thousands for downloading online porn, but the organization was buried under a wave of judicial sanctions beginning in 2013.

However, the three lawyers found to be intertwined with the organization—John Steele, Paul Hansmeier, and Paul Duffy—continue to get in hot water. On Friday, an Illinois federal judge reconsidered (PDF) a 2014 ruling in which he found there wasn't enough evidence for a "contempt of court" finding. New evidence has convinced US District Judge David Herndon that Steele and Hansmeier should be found in contempt, and last week he ordered them to pay $65,263. That amount will get progressively larger, the judge warned, "if they continue their misdeeds before this Court."

In addition, Steele and Duffy "engaged in unreasonable, willful obstruction of discovery in bad faith," and Herndon ordered those two to pay for the defense's discovery expenses, needed to unwind the complex financial records.

The three offending lawyers have until July 15 to pay up.

"We're ecstatic because we finally got it, and this order gives them a set date by which to pay," said defense lawyer Jason Sweet in an interview with Ars. "They didn't have to obstruct discovery. It was always in their control. As the court found, they've shown a willingness to lie, and they'll continue to do so unless they're sanctioned."

Following the money

The case overseen by Herndon is Lightspeed Media v. Anthony Smith, a long-running Southern District of Illinois case in which Prenda-linked lawyers said that Smith and 6,600 "co-conspirators" had hacked into adult websites to steal content.

As those claims fell apart, the judge's focus turned to allegations of misconduct on the part of Lightspeed's lawyers, the same ones linked to Prenda Law. The attorneys who represented Smith, Sweet and his partner Dan Booth, have defended close to 100 copyright cases brought by Steele and Hansmeier. The duo has dug deep into Prenda's Byzantine finances.

Herndon's finding of contempt is based largely on financial records painstakingly pieced together by Booth and Sweet, 150 pages (PDF) of which are filed publicly in redacted form.

Herndon had already found Hansmeier and Steele in contempt in March 2014, finding their pleadings that they couldn't afford to pay the $261,000 sanction unconvincing. They appealed that expensive sanction and lost.

Even as Prenda's opponents collected that sanction money, the hunt for Prenda's cash continued. Booth and Sweet strove to show that their opponents had been lying when they pled poverty in early 2014. Booth and Sweet found evidence that Hansmeier dissolved Alpha Law to avoid paying attorneys fees in another case; they also found records of payments to McCullough Sparks. The latter is an "asset protection law firm" that specializes in the "541 Trust," which "removes assets from your personal ownership and from any disclosure... It is a private document and it cannot be discovered through any public records."

After a hearing in November, Herndon decided (PDF) that even though he had a "high degree of suspicion" about the Prenda lawyers' finances, it wasn't enough for sanctions.

After seeing additional evidence (PDF), though, Herndon changed his mind. In January and February of 2014, Steele maintained that a quarter-million-dollar sanction would be a "crippling liability," but in the same months he wrote checks for nearly $300,000—"just none to the Court." He wrote $38,000 in cashier's checks made out to himself and just over $172,000 earmarked for home renovations. In late 2014, the Miami home Steele had bought outright for $766,000 was on the market with an asking price of $1.6 million.

Hansmeier, too, claimed he didn't have access to $250,000. Meanwhile, he transferred more than $500,000 to an entity called Monyet, LLC. He claimed that was a trust set up for his son, but the document trail ultimately showed that most of Monyet's assets "went towards expenses such as payment of appellate bonds and attorney’s fees, investments in Liverwire Holdings, LLC, and loans to his Class Justice LLC law firm."

Sweet and Booth demonstrated that in 2012, the Prenda operators collected $4.4 million in online settlements and another $1.9 million in checks. $1.35 million of that was paid out as business expenses or to employees and clients—leaving nearly $5 million unaccounted for.

Booth and Sweet are still facing Hansmeier and Steele in other litigations, including AF Holdings v. Chowdhury. In that case, the attorneys are attempting to collect a default judgment of $64,180.80 plus interest. That case is on appeal at the 1st Circuit.