A U.S. bankruptcy trustee filed a lawsuit Thursday seeking to deny lawyer Paul Hansmeier protection from his creditors, citing “fraudulent” filings, false testimony about his assets and $178,000 in “hidden cash” stashed in a closet.
Hansmeier’s attorney, Barbara May, said that although neither she nor her client had seen the suit, it was not unexpected “when you’ve got a case that’s as big and dynamic as this one.” She said that Hansmeier would deny the trustee’s allegations.
“I think he’s been scrupulously honest,” May said of Hansmeier.
Colin Kreuziger, attorney for the trustee Daniel McDermott, clearly disagrees. His 17-page lawsuit describes Hansmeier’s actions before and after filing for bankruptcy as fraudulent and says he testified falsely over and over again.
Hansmeier and several associates reportedly collected millions of dollars in legal settlements by filing hundreds of copyright lawsuits across the country in a practice known derisively as “porn trolling.”
Those suits led to accusations that they had attempted to defraud the courts by getting judges to issue subpoenas so that they could obtain the identities of people they suspected of illegally downloading copyrighted pornography and pressuring them to settle.
Several judges imposed monetary sanctions on Hansmeier and his associates, which they have appealed. As of 2014, the sanctions against Hansmeier totaled $576,000, according to his bankruptcy filings.
A petition seeking his possible disbarment is pending before the Minnesota Supreme Court.
While the sanctions wended through court, Hansmeier launched a controversial practice of suing businesses in Minnesota on allegations that they failed to comply with disability access laws. The defendants, mostly small businesses, said they felt pressured into settlements rather than risk far more expensive legal bills fighting the suits.
Bills have been introduced in the Legislature this session that would make it more difficult to bring such lawsuits.
Kreuziger’s suit describes a trust that Hansmeier set up in 2010, shortly before he married Padraigin Browne, an intellectual property attorney in Minneapolis, who was named trustee. The money was supposed to benefit Hansmeier’s family members, though Hansmeier retained veto authority over its expenditures.
Hansmeier also set up a Delaware company called Monyet LLC with himself as the sole manager and the family trust as the company’s sole member. He began funding Monyet in 2011 with at least $500,000 from his former Minneapolis law firm. Hansmeier used some of the money to pay his mortgage and household expenses, the suit says.
In 2013, Browne took a $150,000 “trust transfer” and “hid the cash in a box in a closet,” the suit says. She added $28,000 to it in 2013. Hansmeier had access to the hidden cash, the suit says. It says Monyet also authorized $115,000 in loans to Hansmeier’s former law firm, for which he has no records.
The suit also describes Hansmeier and Browne putting their Minneapolis condo up for sale without court approval, telling their real estate agent to keep it off the Multiple Listing Service. The court learned about it last fall when they had a pending sale for $1.2 million to a judge on the Eighth U.S. Circuit Court of Appeals.
Browne could not be reached for comment Thursday.
The suit says that Hansmeier testified at a deposition that he does not make payments for any of his living expenses; all of the money came from Browne’s personal bank account. He also testified that he had no ownership interest, managerial authority or control over Disability Support Alliance, the entity he represents in disability-access lawsuits.
“All of that testimony is false,” the suit says.
The suit says that Hansmeier collected $83,000 from the disability suits without informing the trustee while his petition to reorganize his debts was pending. The petition was converted to an involuntary liquidation case in December. Now, the trustee is seeking to deny Hansmeier bankruptcy protection on allegations that he attempted to defraud creditors, concealed assets, failed to keep financial records, testified falsely in connection with the case and failed to satisfactorily explain a loss of assets.