Megaupload lawyer claims the feds are impeding its defence

The United States Government has refused to allow the Megaupload defendants access to information on their servers and this is impeding their ability to defend themselves, the company's lawyer told CNET.

Megaupload founder Kim Dotcom.
(Credit: 3 News)

Ira Rothken, the US attorney overseeing Megaupload's international defence team, said the US has refused to release funds that would enable Megaupload to preserve and gather materials from company servers vital to its defence. Rothken said that he fears US officials are withholding the money in an attempt to unfairly hobble Megaupload's defence.

"It's hard to reconcile the chain of events in this matter with any other conclusion," Rothken said. "Megaupload is frustrated and wants to preserve the data for litigation and to defend itself and ultimately — with the approval of the court — to provide consumers access to their data."

In January, the US issued an indictment against Megaupload, founder Kim Dotcom and six other managers of the cyberlocker service, where users could store files and then share the contents with others. Megaupload's leadership is accused of conspiring to commit internet piracy, racketeering and wire fraud. Dotcom's home in Auckland was raided by New Zealand police, his assets seized and the service shut down. The US wants to try Dotcom in this country and an extradition hearing is scheduled for August. Rothken said there is no criminal copyright infringement statute in the United States and said Megaupload will prevail.

The case is important because in the past, the worst that could happen to a service accused of helping customers infringe intellectual property was getting sued. Not any more.

US officials seem intent on making some types of copyright infringement a criminal offence. US authorities say Megaupload was responsible for US$500 million in damages to copyright owners and they appear to have dedicated a significant amount of resources to prosecuting the company. To defend itself against the US Government, Megaupload will need all the resources in which it is entitled, said Rothken.

As Megaupload prepares for the extradition hearing, company lawyers are unable to collect emails, files and other documents that they say will refute the allegations against Megaupload. The company's servers are hosted by Virginia-based Carpathia Hosting. The government initially locked the servers up while they collected evidence, but in January released all claims to them.

Megaupload believed that this allowed them to copy the information stored on servers. Rothken said he attempted to hire an electronic-discovery expert from KPMG to collect the data, but the cost would exceed US$7 million and US officials declined to release funds from Megaupload's seized assets to pay for the operation.

Rothken then negotiated a deal with Carpathia to buy the servers for a little over US$1 million, but the government again refused to release the money. Rothken said that the servers were worth more than the US$1 million and after the case was over their sale would bring the cost of the transaction to zero.

Still, the government wouldn't budge.

A spokesperson for the US Attorney for the Eastern District of Virginia, where the Megaupload indictment was issued, suggested in an email that the office didn't consider Rothken's requests reasonable.

"As we've stated previously," the spokesperson wrote, "we continue to give careful and thoughtful consideration to any reasonable and detailed proposal by Megaupload's counsel that addresses the practical and technical issues of this matter for the court. Ultimately, it is the court that will decide what is appropriate and whether any funds will be released to carry it out."

A hearing on the issue of what will be done with Megaupload's data is expected for mid April. Carpathia has said the cost of maintaining the servers has topped US$500,000 and pleaded with the court to either allow the company to delete the information or to figure out a way to pay for the data storage.

The Motion Picture Association of America (MPAA) has said that it wants to preserve the data so that it can use it as evidence should it decide to file civil litigation. The Electronic Frontier Foundation wants the material saved so that legal files stored on the service can be returned to consumers at the earliest possible time.


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