Ten years is a long period of time in anyone’s life so when former Megaupload executives Mathias Ortmann and Bram van der Kolk spotted a light at the end of the tunnel, they understandably took it.
After more than a decade of fighting US extradition, the men recently reached an agreement to be charged and sentenced in New Zealand instead.
Not having to spend years fighting a criminal case in the United States potentially followed by a decade or two in prison is a victory in itself but having spent between a quarter and a fifth of their lives in legal limbo, Ortmann and van der Kolk had clearly had enough.
With the authorities in the US and New Zealand holding most of the cards, the men would’ve faced a series of high-stakes gambles by continuing to fight. With the odds of winning diminishing with every new roll and financial costs almost certainly set to explode no matter what the outcome, the decision to limit damages early is also one that allows the men to move on.
Last week the former Megaupload pair pleaded guilty, were convicted by a judge in New Zealand’s High Court, and now await sentencing. The crimes they admitted to in New Zealand are supposed to be similar to those they faced in the United States. In reality they are massively simplified and carry nothing like the maximum sentences available for the offenses listed in the US superseding criminal indictment dated January 16, 2012.
Megaupload Was Intended for Piracy
According to Ortmann and van der Kolk’s charging document, Megaupload was conceived, designed, and operated as a piracy-facilitating site right from the beginning. Together with Kim Dotcom, the trio reportedly noticed how much money Rapidshare was making from large-scale copyright infringement and set out to mimic it.
The objectives of the ‘organized criminal group’ behind Megaupload were to encourage the uploading of highly popular files knowing they were “overwhelmingly” infringing, to host and distribute those files, and to disguise the volume of infringing content on the site. Another objective, according to the document, was to frustrate the efforts of copyright holders who wanted their content removed.
Megaupload generated advertising revenue due to the popularity of the copyright-infringing content. The pirated content also attracted users who were incentivized to purchase premium subscriptions.
Ortmann and van der Kolk admitted that the primary source of Megaupload’s traffic, its primary income, and the reason for its popularity, were all down to the infringing content available on the site. And they knew that mass copyright infringement was hurting rights holders
Participation in an Organized Criminal Group
Ortmann and van der Kolk were convicted on four charges in total. Charges 1 and 2 relate to offenses contrary to sections 98A and 7A of the Crimes Act 1961.
Section 98A of the Crimes Act 1961 states that a person commits an offense and is liable to imprisonment for participating in an organized criminal group.
Under this law and in this case, an organized criminal group is in broad terms three or more people with an objective to obtain material benefits from the “commission of offenses” that are locally punishable by a four-year prison term. If benefits were obtained outside New Zealand and would’ve attracted a four-year sentence locally, the same standard applies.
Section 7A of the Crimes Act 1961 relates to offenses that occurred wholly outside New Zealand but can be prosecuted locally. The legislation has a primary focus on terrorist acts but offenses contrary to Section 98A are also covered.
The first charge relates to offenses under 98A and 7A and carries a maximum sentence of five years imprisonment. The second charge is identical but carries a ten year maximum sentence. This suggests that some of the crimes took place when five years was the maximum sentence for participating in a criminal group. The remainder came after New Zealand upped the maximum to ten years to discourage organized and gang crime.
Conspiring to Cause Loss by Deception
The third charge relates to offenses contrary to sections 240(1)(d) and 310 of the Crimes Act 1961.
Section 240(1)(d) states that someone found guilty of obtaining by deception (or causing loss by deception) by any deception and without claim of right, “causes loss to any other person.” Section 310 states that someone found guilty of conspiring with any person to commit an offense is liable to imprisonment for a term not exceeding seven years.
In the charging document, various acts of deception are attributed to Ortmann, van der Kolk and/or Kim Dotcom. They include telling NBC Universal that it was impossible to host infringing videos on sister site Megavideo and informing the USTR that Megaupload had a repeat infringer policy, had terminated 120,000 repeat infringers, and deleted infringing content worldwide, not just the United States.
Assurances were also given to PayPal that infringing content had been taken down and uploaders had been blocked but “only a few” of the uploaders were tackled, the document says.
Conspiring to Dishonestly Obtain Documents
The final charge relates to offenses contrary to sections 228 and 310 of the Crimes Act 1961. Section 310 relates to conspiracy (as above) while section 228(1)(a) is much more unusual.
“Every one is liable to imprisonment for a term not exceeding 7 years who, with intent to obtain any property, service, pecuniary advantage, or valuable consideration, dishonestly and without claim of right, takes or obtains any document,” it reads.
At the time of writing, New Zealand courts are most likely to hand down concurrent sentences. This means that separate sentences are handed down for each offense committed but those sentences are served simultaneously.
Given that the maximum sentence available for any of the above offenses is 10 years, Ortmann and van der Kolk are unlikely to face a sentence longer than that.
They also admitted guilt as soon as they were charged in New Zealand so there could be a sentencing reduction of 25%. Neither are violent offenders so could be eligible for release after serving just a third of their sentence.
While the sentencing judge will seek to hold the men accountable, after more than a decade of proving they can be responsible citizens of value to New Zealand (and in effect are rehabilitated already), a short sentence isn’t out of the question.
Kim Dotcom believes they may get just two years of home detention but while charges might be negotiable, sentence deals are expressly forbidden.
Finally, it’s worth noting the nature of these charges. Ever since the raid of Megaupload in 2012, Kim Dotcom has warned that if he goes to prison for hosting someone else’s infringing content on Megaupload, that could be disastrous for all service providers in New Zealand since there would be no ‘safe harbor’ for services under copyright law.
Whether by design or not, the charges above may have copyright infringment as the underlying acts but they seem to pose no threat to the status quo. Indeed, they don’t rely on the technical aspects of the Megaupload service at all but instead rest on the trio’s previously private discussions relating to copyright infringement and what wasn’t done to prevent it.
The full charging document can be found here (pdf)