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Dotcom co-defendants sentenced 11 years after arrest

30 Jun 2023

| Author: Anna Longdill

Sentencing – Crimes Act 1961, ss 228, 310, 340 and 98A  – conspiring to cause loss by deception, conspiring to dishonestly obtain documents, and participation in an organised criminal group – massive breach of copyright by file sharing platform Megaupload from 2005 to 2012 – appropriate sentencing structure – cumulative or concurrent? – assessment of culpability – relevant factors – starting point – discount for personal mitigating factors

R v Ortmann & van der Kolk [2023] NZHC 1504 per Fitzgerald J.

Mathias Ortmann and Bram van der Kolk face sentencing, having pleaded guilty to one charge of conspiring to cause loss by deception, one charge of conspiring to dishonestly obtain documents, and two charges of participating in an organised criminal group.

The charges relate to their involvement in establishing the online platform Megaupload in 2005 and its operation until it was terminated in 2012.

Megaupload provided cloud storage and file sharing facilities. It enabled users to gain near unlimited access to digital content such as commercial movies, television shows, music recordings, video games and commercial software.

The overwhelming majority of Megaupload’s traffic consisted of copyright-protected content, which was being made available to users in breach of copyright. A conservative estimate of the financial harm to copyright owners by the United States Department of Justice was at least US$500 million. Megaupload caused the rights of copyright owners to be breached on a mass scale.

Chief technical officer Ortmann and head programmer van der Kolk, along with chief executive Kim Dotcom and marketing director Finn Batato, were originally arrested in 2012.  The United States sought extradition. Over the ensuing nine years, these proceedings have spanned all levels of courts from the District Court to the Supreme Court. The men were ultimately determined to be eligible for surrender for extradition.

Subsequently, an agreement was reached with authorities that Ortmann and van der Kolk would plead guilty to charges laid in New Zealand, the United States would no longer seek their extradition, and they would help US authorities in relation to proceedings concerning Megaupload there.

Applicable principles: Sentencing – scale of offending – incentivisation of copyright infringement – steps taken to avoid detection – knowledge of scale of copyright infringement – revenue created from traffic flowing to copyright infringing content – harm to victims – scope and admissibility issues relating to victim impact statements – approach to sentencing – appropriate sentencing structure – cumulative or concurrent approach to sentencing? – assessment of authorities (NZ and UK) – overall culpability (high) and starting points – magnitude and sophistication of offending – nature of victims – financial gain motivation – lengthy period of offending – personal mitigating factors – guilty pleas – assistance to authorities – reparation – remorse.

Held: Conspiracy to commit fraud charges taken as the lead offences for sentencing purposes. A cumulative approach to sentencing is available. The overall culpability was assessed as high. Starting point of 10 years, 6 months’ imprisonment for Ortmann and 10 years’ imprisonment for van der Kolk was taken. A combined discount for personal mitigating factors of 75% was given. Final sentence of two years, seven months’ imprisonment for Ortmann and two years, six months’ imprisonment for van der Kolk imposed. Reparation orders made by consent.

Note: the United States’ request for Dotcom’s surrender for extradition is still awaiting a decision from the Minister of Justice. Proceedings against the remaining defendant, Batato, were withdrawn in 2021. He passed away in 2022.

R v Ortmann 2023-NZHC-1504

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