The legal blackmail business: inside a P2P settlement factory

The "IT firm" Dunlap mentions appears to be Guardaley, the BitTorrent detection company cited in US Copyright Group court filings. Guardaley identifies the IP addresses of suspected infringers, logs all necessary data, and turns this information over the lawyers. But the firm is deeply implicated in the US Copyright Group, not just a mere contractor.
Guardaley is based in Germany, where it is run by Bejamin Perino and Patrick Acheche, though the firm has registered itself as a UK business, too, with an unlikely address in an Aldermaston office park.
In a document (PDF) filed with the White House's new "IP Czar" earlier this year, Perino is listed as the "managing director" of Guardaley, and Dunlap called on the expertise of his subordinate Acheche as an expert witness who swore to the accuracy of the company's data in court filings. But then, in April of this year, another court filing appeared in the Far Cry case. Here, Perino declared that he was "one of four Managers of the US Copyright Group (USCG) which is a private company dedicated to anti-piracy efforts in the motion picture industry involving unlawful torrent downloading."
Virginia state records seen by Ars show that DGW set up "US Copyright Group" as a legal entity, though it appears to be some sort of partnership between the law firm and the techies at Guardaley.
Here's where it gets weird: this summer, after falling out with his detection company, Crossley turned to a young man named Terence, who is referenced above and who helped Crossley get into the settlement letter business. Terence then helped Crossley sign on with... Guardaley.
Crossley writes about a "guy I know called Patrick who is good friends with Terence. Patrick is based in Germany with a high quality system. We get no hidden charges and I will drop my charges to fully absorb the extra cost."
He needed to rush the deal through, because the pornographer Jasper Feversham was upset that detection of his works had stopped; Crossley needed a new data supplier as soon as he could get one.
The deal, for 15 percent gross, was done through Terence; no emails emerge from Guardaley at all. Even Crossley found the situation odd. "Also, I note that Guardaley in the UK is registered as a dormant company. That needs to be changed if that is the contracting company. And why is there a company in the UK and why its it registered in Aldermaston? What's all that about? (as Peter Kay would say)."
In response, Terence offers some intriguing details. "GL [Guardaley] has a number of companies for monitoring and different ones are used depending on content and jurisdiction. The data supplier for [ACS Law client] Mediacat will be a Swiss company to manage PR (you know how it is!)."
Despite using the same tech, Guardaley apparently operates under numerous names. This means that each of the entities it creates needs a separate "expert's report" verifying that the system is accurate. The one drafted for Guardaley itself wouldn't work; a new expert must be found.
"An independent expert's report is in place for Guardaley, but your monitoring will be done through a different legal entity," wrote Terence. "This will mean that we will need to get a new one created. There will be no problems, as the technology used will be exactly the same as Guardaley's." And later: "We are in correspondence with an expert and the report can be finalised fairly quickly, well in advance of the first court order."
So, while Tom Dunlap suggests that "Guardaley" doesn't work for ACS Law, some other company with a new name and the same tech is. This gives Guardaley a hand in the two major "settlement letter" factories in the US and UK.

Follow the money

Why bother with all these hassles, all the vitriol, all the criticism from the House of Lords? Money, for one. Despite Crossley's claim that he runs a "tightly resourced small firm," he appears to be doing alright for himself. After bragging about getting a "Lambo or Ferrari," Crossley instead settled on a Jeep Compass 2.4CVT.
He spent the summer looking for a new high-end home to rent; one property send over for his consideration was "a contemporary mansion with breath taking views in an elevated position on this exclusive gated estate. Arranged over three floors the accommodation comprises entrance hall, cloakroom, kitchen/breakfast room, utility room, large dining room, lounge with doors out onto patio and balcony and double bedroom suite. Stairs down to family room, four double bedrooms, shower room, family bathroom. Stairs down to indoor swimming pool, bar area/gym with doors out onto patio, double bedroom suite and storage room, double garage." Such places go from £6,000 to £8,000 a month; not a modest sum.
And he's looking to buy a bulldog puppy.
But despite the expenditures, there are also some signs that cash does not flow steadily in this business. "You seem to have ignored my previous e-mail, I am not happy and want some revenue in account," demands one client. "Everyone is getting their bit and I am owed £17k ffs."
He also pleads with one of his data suppliers to do some work for him, and quickly. "We need to run that data to maintain cashflow," he wrote. "Meanwhile, we have come under considerable pressure from [UK Internet provider] O2 to pay an outstanding invoice of £13,107.00 in respect of the supply of that data. As we have not been able to send any letters out we have not been able to collect any income from that data to meet ISP costs. This matter is very pressing as O2 have said that unless it is paid straight away they will release all their staff that they have retained to provide the data. This will have the effect of delaying very considerably the time for the provision of the finished data from the ISP. This will impact on al of us, most importantly for cashflow."
In an operation like this, the letters need to keep flowing out for the money to keep flowing in. As Crossley noted after seeing all the confusion among alleged infringers, "I have an idea. We should send a factsheet.... answering all the usual questions and dispelling some common misapprehensions as I think it will better inform people and increase revenue."
But that revenue comes from confused people like the accountant who wrote ACS Law, claiming utter bafflement and innocence. "Due to a lack of detail in your letter, I had to Google search the title to find information on what I'm being accused of downloading. I was astounded to find it to be PORN of pregnant women. Sick!"
"I am an Accountant who works normal office hours. There is NO CHANCE I would be at home downloading porn at 11:43 in the morning. Furthermore, on the date stipulated, I was in Brighton for the day with a client. I am the owner of my home, I live alone and have being doing so at the current address for the past 4 years. No-one has access to my property unless I'm present."
But the attitude at ACS Law is, as one legal advisor put it, "I sometimes think that we try to be too nice. That is not our purpose. If our clients want nice then they are likely to go to a priest or social worker."
So the Lords can say what they like, the consumer groups can rail, and Westminster can levy fines for trash in the streets, but the letters for Pump Fiction will continue.