Kim Dotcom vs the 'evil' enemy

<b>LONG ARM OF UNCLE SAM: Kim Dotcom is happy his Mega site is providing a good service, but angry with what he sees as political manoeuvring in the US, which set out to make an example of him in a court case.</b>
<b>LONG ARM OF UNCLE SAM: Kim Dotcom is happy his Mega site is providing a good service, but angry with what he sees as political manoeuvring in the US, which set out to make an example of him in a court case.</b>

The security gates are playing up at Dotcom mansion - opening and closing repeatedly, rasping giant gulps of thin air.

Inside, Kim Dotcom finishes up a meeting with a silver-haired lawyer, who exits through the kitchen with a nod of the head that suggests that, this time, he may have delivered slightly bad news.

A day later, the Court of Appeal overturns a High Court ruling that would have forced United States prosecutors to spell out their evidence against Dotcom and Megaupload before they could pursue their extradition bid.

But Dotcom is anticipating tomorrow's setback and already contemplating an appeal to the Supreme Court as we sit down for what will at times be an emotional two-hour interview.

Rather than being downhearted by the impending ruling, Dotcom is on the offensive.

Dotcom has been buoyed by the early success of his new Mega online storage service. The freezing of his assets no longer seems such a big impediment to his legal defence now that his new businesses are attracting external investment.

And he's bullish about "new evidence" that he reckons will make it "impossible" for the US to win its criminal case against him. In his view, the tables have turned.

Dotcom says Hollywood interests lobbied the Obama administration, through Vice-President Joe Biden, to make an example of his file storage and sharing site in return for tens of millions of dollars of election campaign funding.

His arrest coincided with Obama disappointing Hollywood by torpedoing the anti-piracy bill Sopa (Stop Online Piracy Act) which would have barred advertisers and credit card companies from dealing with websites accused of hosting pirated material and introduced a maximum five-year jail term for streaming pirated content. But four months later, the Wall Street Journal reported that Obama had "started to lure Hollywood donors back into his fold".

For now, it's a version of history that remains unchallenged. The United States embassy says US authorities won't comment on the genesis of the Megaupload investigation. Tony Eaton, chief executive of the local branch of the US's Motion Picture Association, the New Zealand Federation Against Copyright Theft, also won't comment on the role of Hollywood while the case is in progress.


In all his previous interviews, and even when he launched Mega on January 20, Dotcom says he maintained he would welcome a "diplomatic solution" to his case and was ready to talk.

But now, thoroughly radicalised by - and indignant at - the lack of a response from an enemy he sees as "arrogant and plain evil", he says he has had enough.

Dotcom and fellow Mega executive and new first-time father Finn Batato remark to one another that they are surprised that the raid that stunned the country in January last year still gets to them as much as it does.

"They came here and tried to destroy my life, and kill me and [expletive] my family and all my friends. They didn't give a damn about my life or my rights or any of the people who were working with us," Dotcom says.

"They thought: ‘There is this guy who is living a lavish lifestyle, no-one will have sympathy for him. He will have no money, so no lawyer will work for him.'

"They had plans in documents we have seen that we would be extradited within five or six weeks and then they would have locked us up, kept us in jail for two or three years before any kind of trial takes place and offered a plea deal: ‘Yes, you can get out if you agree to this and that and we keep all your money and your site is shut down.' That was their plan."

He bangs his fist on the table.

Dotcom reckons that plan had a 90 per cent chance of success, too. But now he believes US authorities no longer want to get their hands on him and are hoping the extradition case drags on as long as possible before falling over in New Zealand, whose justice system could then become their scapegoat.

Hollywood has achieved its "primary goal" of shutting down Megaupload, which is now the target of separate civil litigation, and scaring other online storage providers. But if the criminal case ever got to the US, prosecutors would look like "fools", he says.

"They don't have a basis in law to justify what they have done here and I think they realise that now. I think they are stuck. I don't think they know what to do."


Dotcom's confidence is shared by pundits on Victoria University's iPredict forecasting site, which lets people place bets on current events. Though Dotcom's extradition hearing is scheduled for August, iPredict puts the odds of him being extradited to the US either this year or next at a mere 14 per cent.

At the moment, the only unsuppressed information about the case against Dotcom and MegaUpload remains that encapsulated in a 72-page Grand Jury indictment. It provides ample evidence from intercepted emails that Megaupload executives knew about, joked about and were perhaps happy to have pirated material uploaded to Megaupload by its 180 million registered users.

But evidence that they actively induced piracy on a commercial scale, particularly of content owned by mainstream US publishers, is thinner on the ground.

The nub of the prosecution case is that Megaupload paid people to upload files that were popular enough to be frequently downloaded by other members.

The "upload rewards" programme made financial sense for Megaupload since the company offered a paid, premium service for people who wanted to download a lot of material from the site.

But it was, in the view of US authorities, an inducement to commit piracy that amounted to a criminal conspiracy between its executives and the reward scheme members, part of a "Mega conspiracy" that netted Megaupload US$175 million ($210m).

The indictment contains emails that suggest Megaupload paid rewards to at least two members who were engaged in piracy, including a prolific uploader of local content in Vietnam, though the payments appeared to be more in spite of a proportion of their uploaded files being subject to copyright, not because of it.

Dotcom says he canned the rewards scheme in July 2011, six months before the raid on his mansion, because of the "annoyance" that allegations about its effect were causing him, and that Megaupload didn't feel the loss.

Half of the rewards payments went to people who uploaded adult content to offshoot Megaporn, a site Dotcom says he set up as a "trash can" to keep his main Megaupload service clean for mainstream advertisers. That, and a 100 megabyte limit on rewards scheme files, would suggest the impact of the scheme might have been felt less by Hollywood and more by the Los Angeles' adult film industry.

Dotcom appears to have refuted one potentially damning claim in the indictment: that Megaupload failed to remove 36 pirated movies from its servers for more than a year. It seems the company had been led to believe by the US Justice Department that it was co-operating in a confidential criminal investigation into the offending content by not touching the files.

But Dotcom says that it is only one of about 20 half-truths contained in the indictment. Prosecutors said Dotcom considered limiting the number of links to copyright-infringing material that Warner Bros could automatically remove from Megaupload's servers to 5000 a day.

They neglected to mention that he decided against imposing that restriction later that day and elected to allow the publisher unlimited "take-downs", Dotcom says.

If this month's Court of Appeal judgment stands, US authorities will not have to back up the evidence they have against Dotcom and his co-accused at least until the August extradition hearing.


But the Appeal Court said the US would need to provide a summary of evidence that established a "prima facie" case at the hearing and the extradition court could demand more details from the US, via Justice Minister Judith Collins, if it had doubts that had been achieved.

Labour communications spokeswoman Clare Curran questions why, if that evidence exists, it isn't being volunteered now.

There is no sign any of Dotcom's co-accused or former staff have been tempted to turn "Queen's evidence". Batato, Mathias Ortmann and Bram van der Kolk, who were arrested alongside Dotcom in Auckland, are working with him to build his new businesses, Mega and music service Megabox.

Dotcom says he is also providing legal assistance to Estonian programmer Andrus Nomm, who was indicted by the US in Holland. He faces an extradition hearing as early as next month though Dotcom believes that is likely to be stayed, pending the bigger decisions in New Zealand.

Batato says US prosecutors were hoping someone at Megaupload would "break" and they would "get someone to say something that looked bad".

"But there is nothing to say. You would have to make something up."

If he could have all this - the mansion, his cars and artworks back, the fun, the lifestyle - but couldn't be involved in the internet business, would Dotcom take the deal?

"No. This is now a matter of principle for me," Dotcom responds. "I am going to fight. I am not going to back down.

"I will clear my name. I will make sure that something like this never happens again.

"I have human rights lawyers in my legal team now who are working pro bono who want to bring a case to the United Nations, who want to get other nations involved to show the misconduct by US prosecutors and the motivation behind it, because we already have enough to show this is a political case.


"If they think they can make this go away somehow, they are naive. Now I don't need to unseize my own money because I used my mind to create something new. All their advantages - all these little tricks they planned - are gone and I am in a position to truly fight back. I am not going to give that up, because they say ‘here are your cars again, here is your money'."

By "they", he means American and not New Zealand authorities. "Our understanding is that New Zealand has been misled, but they allowed themselves to be misled because they wanted to do something for the Americans," he says. "They haven't really looked at this the right way. But I think they also realise now that what they have done is wrong."

His demands are nothing less than to get Megaupload users back their files, compensation for himself and the 220 Megaupload staff and contractors who lost their jobs, "a clear apology for everything that happened" and a US law change that makes "over-reach" by prosecutors impossible. He even talks of impeachment.

It seems fairytale stuff.

But when New Zealand police bragged about helping bust the "Mega conspiracy" it didn't appear likely that Dotcom would later be appearing as Father Christmas in an Auckland pantomime. Nor that he would secure an apology from Prime Minister John Key for the illegal spying conducted on him by the GCSB, something Key said he first became aware of on or about September 17.

Dotcom says he has grown up since the armed police raided his home and burst his "happy bubble". He believes this has happened to him for a reason and he has found his calling. "I realise there is much more than my selfish goals and dreams."

Standing for a photo, he appears to have shed some weight from his 2 metre (6ft 7in) frame, which he attributes to stress. But sometimes, he says stoney-faced, after talking to a lawyer, the only thing that can cheer him up is a piece of cake.


Kim Dotcom's new Mega file storage service is already on a solid financial footing, six weeks after its launch, according to figures he is prepared to share only privately.

Dotcom says he founded Mega to "put right" the inconvenience suffered by Megaupload users who lost access to their files when it was seized and shuttered by the US Justice Department last year. Megaupload's legitimate users included "thousands of law firms", 15,000 US armed services staff who used it to communicate with friends and family, and the Brazilian government which employed Megaupload as an "e-government solution" that let people fill out government forms online.

 "I was really upset that millions of users lost access to their files," he says. Members' files are encrypted before they are uploaded to the site for storage. In order to view the files on another computer, the person who uploaded them would first have to send a link and the software key needed to decrypt them. Prominent Auckland intellectual property lawyer Rick Shera advised Dotcom on the new service. Dotcom recruited former InternetNZ chief executive Vikram Kumar to head Mega and the NZX has made non-committal noises in response to Dotcom's suggestion that Mega could list within the next 18 months. So far only some thousands of the three million-plus members who have stored more than 100 million files on Mega are paying customers, suggesting secure file storage alone might never be a huge money-spinner. But Dotcom plans to turn Mega into a secure email service by the end of the year.

Users would not have to share encryption keys in order to read emails. He envisages Mega evolving over the next year to 18 months into a broad communications platform that people could use to access a wide variety of secure applications built both by Mega and third parties. Meanwhile, Dotcom is spending "four hours a day" developing music service Megabox, which would give people free access to music in return for them downloading a software application that could replace a proportion of adverts on any websites they visited with ads served up by Megabox.

Megabox is being built by 20 developers, including a core team in Portugal, and Dotcom says he hopes it will be ready in five months. Dotcom says it was a "misunderstanding" that Megabox would be part of Mega. Instead, it will be run as a separate company and is unlikely to be publicly floated. Unlike Mega, which Dotcom brands as the "privacy" company, Megabox will rely on people handing over more information to advertisers in return for free content. It is also controversial because its ad-substituting software would siphon off a portion of advertising income earned by other websites. 

Sunday Star Times