23 Nov 2015

Dotcom hearing finally wrapping up

7:05 am on 23 November 2015

After more than four years of legal argument, appeals and adjournments, the fate of Kim Dotcom and his three co-accused will be left in the hands of a district court judge this week.

Mr Dotcom, Mathias Ortmann, Bram van der Kolk and Finn Batato face extradition to the United States on charges of copyright infringement, money-laundering and racketeering related to their now-defunct file-storage website Megaupload.

The men were arrested during an armed raid on Mr Dotcom's mansion in Coatesville - a semi-rural idyllic property north of Auckland - in 2012.

They claimed Megaupload was created to allow people to store and share large files.

But the FBI claimed the site wilfully breached copyright on a mass scale by hosting illegally-created movie, music and software files. The FBI said the site aided and abetted users who uploaded such files by paying them rewards.

Those two versions of events have been hashed out in an Auckland courtroom over the past ten weeks - six weeks longer than the hearing was scheduled to last.

Judge Nevin Dawson hears a submission from Christine Gordon, who is acting for the Crown on behalf of the United States (24 September 2015, Auckland).

Judge Nevin Dawson hears a submission from Christine Gordon, who is acting for the Crown on behalf of the United States. Photo: RNZ / Kim Baker Wilson

The defence lawyers finished their arguments last week, and the Crown - which has acted on behalf of the US - will give its closing reply today and tomorrow.

It will then be up to Judge Nevin Dawson - a district court judge since 2003 - to decide whether to send any or all of the men to the US to stand trial.

The case against Megaupload

The burden of proof for extradition is low - like a committal hearing in a domestic criminal case, prosecutors do not have to prove guilt; they need only show there was a case against the men on the face of it.

The US case is that, yes, Megaupload could be used as a private file storage locker - but that was not how most people were using it.

Instead, the vast majority were watching copyright-infringing files, many of them added to the site by a small pool of frequent uploaders.

Megaupload's senior employees aided and encouraged this behaviour, the US claimed - paying cash rewards to uploaders whose files proved popular, driving traffic and paying subscribers to the site.

Some of the most frequent uploaders earned more than $US50,000 over several years.

Kim Dotcom at his extradition hearing

Kim Dotcom at his extradition hearing Photo: RNZ/Kim Baker Wilson

Megaupload received tens of thousands of takedown notices from copyright holders and the way the site dealt with these was further evidence that it was deliberately preserving infringing content, the US said.

Instead of removing the file, Megaupload would only remove the link.

That meant if a file had more than one link to it - and some popular files could be accessed through dozens of different links - it could still be accessed.

Megaupload executives Mathias Ortmann (L) and Bram van der Kolk (R)

Megaupload executives Mathias Ortmann (L) and Bram van der Kolk (R) Photo: AFP

Throughout the hearing, the Crown referred to the many Skype and email messages the men - especially Mr van der Kolk and Mr Ortmann - had sent each other, as evidence that they were fully aware of, and complicit in, how their site was being used.

Mr van der Kolk and Mr Ortmann somehow managed to keep their poker faces while Crown lawyer Christine Gordon read out message after message the pair had sent to each other.

In one conversation, Mr van der Kolk told Mr Ortmann it would be counterproductive to try to save money by stopping reward payments to users who were uploading illegal files, "because growth is mainly based on infringement".

That was the "big flaw" in their business model, he said at another time.

"We are making profit off more than 90 percent infringing files."

Mr Dotcom - still their boss - sat just metres away in court as Ms Gordon read out a discussion the pair had in 2007, worrying what the big-spending German would do if Megaupload did end up in legal trouble.

"What if the s*** really hits the fan," Mr van der Kolk asked Mr Ortmann in a Skype message.

"Would he grab the last little bit of money and take off?"


To avoid extradition the men need a complete defence. Possible explanations for the evidence against them are considered defences that can be brought up at a full trial.

Their lawyers have attacked the US case on two main fronts: that the charges in the American indictment are not extraditable offences; and that even if they were, the summary of evidence that prosecutors presented was cherry-picked, out of context and inaccurate to the point that it was wholly unreliable.

Ex-Megaupload executive Finn Batato and his wife Anastasia leave court for lunch

Ex-Megaupload executive Finn Batato and his wife Anastasia leaving court (file). Photo: AFP

Mr Dotcom's lawyer Ron Mansfield argued Megaupload was set up as a file-storing site, and there were a large number of people who were using it for that purpose.

Under digital copyright law both in New Zealand and the US, an internet service provider is protected from liability for the behaviour of its users, provided a major purpose of the service is legal, and the site complies with take-down requests.

It was therefore not Megaupload's responsibility if its users turned the service to illegal purposes, Mr Mansfield told the court.

The site's policy of only removing individual links, rather than the files themselves, was also legitimate, he argued.

That was because removing the file itself might cut off access to someone who had stored a lawful copy of it.

Importantly, Megaupload didn't have a search function, Mr Mansfield said.

Third-party websites collated searchable databases of links - but again, those were not the responsibility of Megaupload itself, he said.

The charges

In her opening address, Crown lawyer Christine Gordon described Megaupload as "a simple scheme of fraud".

Under extradition law, a person can be extradited if their alleged conduct amounts to a crime in New Zealand law - even if that behaviour falls under a different crime in the country that's seeking extradition.

What Megaupload did amounted to common law fraud in New Zealand, Ms Gordon argued.

But if that was the case, why had the US not charged the men with fraud in the first place, Mr Mansfield asked.

The reason was the US Supreme Court had ruled that copyright breaches could only be charged under copyright law, not as fraud or other dishonesty offences, he said.

That created a situation where the US was now trying to extradite the men on a basis authorities could never claim if they'd arrested the Megaupload men in the US, Mr Mansfield said.

If the copyright charges could not stand, then neither could the money-laundering or racketeering charges, he said - because without an illegal business there was no money to launder, nor did a criminal group exist.


The hearing was dragged out well beyond the four-week schedule by a series of applications from the men's lawyers to stay the proceedings - visibly testing the patience of both Judge Dawson and the Crown lawyers.

Ron Mansfield

Ron Mansfield Photo: RNZ / Kim Baker WIlson

Two of the applications were dismissed, but Judge Dawson will rule on a third application at the same time as he considers the main extradition arguments.

That application claimed the men had been placed at a huge disadvantage by the US authorities' refusal to let them spend any of their frozen assets on legal costs outside of New Zealand.

Mr Mansfield argued that prevented them from hiring overseas legal and technical experts who could have helped to undermine the US case.

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