MINNEAPOLIS — A federal bankruptcy court judge yesterday ordered the liquidation of former Prenda Law attorney Paul Hansmeier’s assets, ruling that he had sought bankruptcy protection with one purpose — “to thwart the collection efforts of his creditors.”
Hansmeier, along with law partners John Steele and Paul Duffy, winded down Prenda Law in 2013 after U.S. District Judge Otis Wright in Los Angeles sanctioned the three for deceiving the court in a porn copyright infringement case.
The Prenda Law attorneys allegedly created shell companies in order to file porn copyright infringement and computer hacking suits to exploit court subpoena powers and extort settlements against thousands of defendants. The firm, typically, sought about $3,400 per defendant.
According to a report in the Star Tribune, an attoney representing the U.S. bankruptcy trustee overseeing Hansmeier’s petition to reorganize $2.49 million in debts had asked the court to reject the former Prenda lawyer's proposal to pay creditors off over five years.
Attorney Michael Fadlovich, who represents the bankruptcy trustee, called Hansmeier's proposed Chapter 13 reorganization “an end run” and a possible misuse of the court system. He also emphasized that Hansmeier “couldn’t be trusted.”
Fadlovich also offered to the court a 43-page petition filed last month by the state board that investigates ethics complaints against Minnesota lawyers that shows Hansmeier’s alleged pattern of misleading various courts around the country over the porn copyright suits, which led to serious sanctions.
Further, Fadlovich argued that Hansmeier made at least 19 financial transfers totaling more than $590,000 that likely are “fraudulent conveyances.”
Hansmeier’s attorney had argued against liquidation, saying that creditors had a chance to be paid in full once his downtown condominium sells for $1.2 million this month.
“I know he’s a bad actor,” attorney Barbara May said of her client. But she noted that Hansmeier “has come to Jesus.”
U.S. Bankruptcy Judge Kathleen Sanberg ordered Hansmeier’s case converted from Chapter 13 to Chapter 7, citing what she called his pattern and practice of dishonesty with the court, both before and after filing bankruptcy.
Sanberg, in her order, approved a motion to have Hansmeier’s downtown condominium sold to satisfy claims.