Stop Stalling, US Attorneys Tell Kim Dotcom at Long-Delayed Extradition Hearing

If Megaupload founder Kim Dotcom is broke, how did he manage to bankroll a New Zealand political party last year, spending the equivalent of $3 million? Where did he get the money to offer a $5 million bounty for information that proved "wrongdoing and corruption" in the criminal-copyright case against him?

These are a few of the questions raised Wednesday in Auckland District Court by Christine Gordon. She's the New Zealand prosecutor arguing on behalf of the US Department of Justice as it seeks to throw Dotcom in jail.

The DOJ alleges Dotcom, 41, and three other former Megaupload managers designed the file-hosting service to be a sort of an infringing fun zone. Users flocked to the site to share pirated movies and music, and Megaupload's leadership cashed in by selling $175 million worth of ads and premium services. The former Megaupload execs deny breaking any laws.

An extradition hearing, which will decide whether New Zealand will surrender the Megaupload executives, is in its fourth week. Last Thursday, Dotcom told the judge he needs expert witnesses to testify on his behalf, but because most of his money has been seized by the US, he can't retain them. He added that once hired, the experts will need time to prepare and for that he needs the hearing postponed. The judge is considering the request.

If he denies it, then the defense must begin arguments, and we'll be a step closer to resolving what has been called the biggest internet copyright case of all time.

Not surprisingly, Gordon and the DOJ say Dotcom is trying to stall. Since the justice department initially charged the Megaupload execs in January 2012, the extradition hearing has been delayed 10 times.

"The court can be confident," Gordon told Nevin Dawson, the presiding judge, "that a stay is not justified."

Gordon said that Mathias Ortmann, Megaupload's indicted former chief technology officer, has $43,000 in a bank account. She said Bram van der Kolk, another indicted Megaupload exec, had "gifted his wife" $1 million worth of shares in Mega, a file-hosting service founded by the accused execs following the closure of Megaupload. The picture painted by Gordon was that the defendants are trying to shield money from authorities and their poverty claims are less than truthful.

Megaupload's former managers certainly don't look needy. Dotcom, for example, rolls up to the proceedings each day in a Mercedes G55 SUV, the kind of vehicle that—when new—sold for $120,000. He is typically waited on by two men, a security guard and butler. Dotcom continues to lease the 24-acre Dotcom Mansion, one of New Zealand's most expensive homes. He has said that he prepaid the lease, as well as many other expenses, when he still had money. He also said the reason he didn't prepay his legal fees is due to his inability to predict the top Hollywood studios would sue him and freeze his assets.

According to Gordon, the questions about assets and legal experts is irrelevant. On Friday when she began to challenge Dotcom's claims, she reminded the judge that it is not for him to try the case. His task, she said, is to determine whether there is enough evidence to justify a trial.

To illustrate the strength of the DOJ's evidence, she began to read from seized Megaupload emails and Skype logs. Gordon read without emphasis or inflection, maybe because courtroom theatrics were unnecessary. Nearly every word fell on the room like a hammer stroke.

"As long as we disqualify users for infringing files it is only counter productive and very costly in my opinion…because growth is mainly based on infringement anyway :)," van der Kolk wrote in 2008. It was part of a discussion between him and Ortmann about Megaupload's reward system, which paid cash prizes to users whose content generated lots of traffic or prompted other users to subscribe to the company's premium services.

Ortmann asked: "What if we modulate our tolerance according to sales triggered?" This appears to be a suggestion that Megaupload turn a blind eye to copyright infringers as long as they sell high numbers of premium services. Ortmann added: "Not a very honest thing to do, but economically viable."

Van der Kolk responded: "Yes, that way we at least don't disqualify any valuable users."

The problem was that disqualifying, or banning, repeat infringers was exactly what copyright law required them to do. Instead, according to the DOJ, they rewarded these users with cash.

Following the hearing, Ortmann and van der Kolk declined to comment. Dotcom's lawyer said he missed court due to back pain.

At the conclusion of Wednesday's hearing, Megaupload's lawyers asked the judge for additional time to prepare their response to Gordon. Judge Dawson wasn't happy. He said: "This is an important case. It needs to be gotten to the end of."