NZ residents on piracy charges denied bail

KIRSTY JOHNSTON AND PALOMA MIGONE
Last updated 21:50 20/01/2012
KIM SCHMITZ
Reuters
ARRESTED: Internet millionaire Kim Schmitz in 1999.
Coatesville Mansion
LAWRENCE SMITH/Fairfax NZ
MANSION: Police and investigators at the Coatesville mansion.

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Alleged "mega conspiracy" internet pirate Kim Dotcom retreated behind a series of electronic locks and barricaded himself in a safe room, with a gun close to hand, before surrendering to police today.


Read more about the charges here.


Dotcom, 37, who ran the world's largest file-sharing site from his $30 million mansion in Auckland, was refused bail when he appeared in the North Shore District Court this afternoon. Three co-accused were also refused bail.

Police tonight continued to search the Megaupload.com founder's house, where they have restrained electronic equipment, artwork and an eclectic fleet of luxury vehicles including a Rolls Royce Phantom Drophead Coupe and a 1959 pink Cadillac.   

The vehicles are valued at around NZ$6m, while up to NZ$11m in cash was restrained in various accounts.

The raid was conducted alongside US Federal Bureau of Investigation agents, who had been working with New Zealand authorities on the case for almost a year.

The US government shut down Megaupload.com today, prompting retaliatory attacks by hackers on US public websites, including the FBI's site, and the websites of US film and music companies.

Dotcom appeared in court alongside co-accused Finn Batato, 38, and chief technical officer and co-founder Mathias Ortmann, 40, both from Germany, and Dutch national Bram van der Kolk, 29.

All four accused crammed into the dock, with Dotcom - also known as Kim Schmitz or Kim Tim Jim Vestor - at the front, flexing his hands by his sides.

The quartet will face extradition hearings to the US where the indictments were laid, the US Justice Department said. Crown Law were acting on behalf of the US Government in court today. New Zealand's involvement will be strictly to extradite the men. There will be no charges laid on behalf of New Zealand authorities.

Judge David McNaughton first considered multiple media applications to photograph the accused.

Dotcom's lawyer initially opposed the appearance of cameras in court, but Dotcom spoke out from the dock, saying he didn't mind photos or video.

"Because we have nothing to hide."

After the media crowded in, McNaughton said the four would be remanded in custody until another bail hearing on Monday.

Media were given 10 seconds to take photos, however the judge cut them off after five.

Dotcom and van der Kolk are both New Zealand residents. The other two were visitors, Detective Inspector Grant Wormald from the Organised and Financial Crime Agency NZ (OFCANZ) said at a conference this afternoon.

Indictment documents from the United States Court for the Eastern District of Virginia list five counts against the seven defendants, which it calls the "Mega Conspiracy".

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They include conspiring to commit racketeering, conspiracy to commit copyright infringement, conspiracy to commit money laundering, criminal copyright infringement by distributing material and by electronic means.

The charges could result in more than 20 years in prison.

Three others involved in the "conspiracy" - Julius Bencko, 35, from Slovakia, Sven Echternach, 39, from Germany and Andrus Nomm, 32, from Estonia - remained at large overseas, authorities said.

The US Justice Department and the FBI today said Megaupload.com and other related sites allegedly generated more than US$175 million (NZ$217m) in criminal proceeds and caused copyright holders more than US$500m in lost revenue from pirated films and other content.

MANSION RAID 'NOT AS SIMPLE AS KNOCKING ON THE DOOR'

More than 70 police, including the armed offenders squad, searched Coatesville's $30 million "Dotcom" mansion and nine others in Auckland early this morning as part of the swoop.

Wormald said it was a complex operation that was planned with the help of four FBI agents who flew to New Zealand this week.

"We were aware there were a number of people there. We had a range of issues we had to deal with...in getting from the gate to the door. It wasn't simply a case of going up and knocking on the door."

Wormald said there were at least 15 people at the home, including family, children and staff. There were security staff and bodyguards at the home.

A total of 18 luxury vehicles have been restrained and placed in the control of the Official Assignee. These vehicles include several top end Mercedes, a Rolls Royce Phantom Drophead Coupe and a 1959 pink Cadillac.  Various artwork, electronic equipment and bank accounts were also restrained.

The vehicles are valued at around NZ$6m, while up to NZ$11m in cash was restrained in various accounts.

Wormald says today's operation was a successful one despite a less than straightforward entry to the Dotcom Mansion"

"Police arrived in two marked Police helicopters. Despite our staff clearly identifying themselves Mr Dotcom retreated into the house and activated a number of electronic locking mechanisms.

"While Police neutralised these locks he then further barricaded himself into a safe room within the house which officers had to cut their way into.

"Once they gained entry into this room they found Mr Dotcom near a firearm which had the appearance of a shortened shotgun.

"It was definitely not as simple as knocking at the front door" said Mr Wormald.

  Wormald said today's arrests were the result of several months' co-ordination with the FBI and US Department of Justice.

"The FBI contacted New Zealand police in early 2011 with a request to assist with their investigation into the Mega conspiracy," Wormald said.

"We were happy to provide this assistance. Staff from OFCANZ and New Zealand police have worked with the US authorities over recent months to effect today's successful operation."

Law enforcement agencies worldwide also executed more than 20 search warrants in the United States and seven other countries.

Megaupload.com has said it is diligent in responding to complaints about pirated material.

HACKERS ATTACK

The US government today shut down Megaupload.com but, in retaliation, hackers attacked the public websites of the US Justice Department, the world's largest music company Universal Music, and the two big trade groups that represent the music and film industries.

"The government takes down Megaupload? 15 minutes later Anonymous takes down government & record label sites," a member of Anonymous said via Twitter.

Representatives with the Justice Department and Recording Industry Association of America declined comment on the attacks. Officials with Universal Music could not immediately be reached.

Motion Picture Association of America spokesman Howard Gantman said his group was working with law enforcement to identify the attackers.

HOW MEGAUPLOAD ALLEGEDLY WORKS

Megaupload has boasted of having more than 150 million registered users and 50 million daily visitors, according to the FBI indictment. At one point, it was estimated to be the 13th most frequently visited website on the Internet.

Users could upload material to the company's sites which then would create a link that could be distributed. The sites, which included video, music and pornography, did not provide search capabilities but rather relied on others to publish the links, the indictment said.

Users could purchase memberships to the site to obtain faster upload and download services, the primary source of revenue. Material that was not regularly downloaded was deleted and financial incentives were offered for popular content, according to the charges.

The web page with the link to the copyrighted material would include advertisements, another source of revenue.

If copyright holders complained about a specific link to the website, prosecutors said that Megaupload.com would remove that link but scores of others existed to the same material, according to prosecutors.

Other material found uploaded included child pornography and terrorism propaganda videos, according to the indictment. The US government's investigation began in March 2010.

-Fairfax NZ with Reuters

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