Dot Comb Ail Feb 29

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THE UNITED STATES OF AMERICA V DOTCOM HC AK CRI-2012-404-19 [29 February 2012]

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CRI-2012-404-19

[2012] NZHC 328

UNDER the Extradition Act 1999

IN THE MATTER OF proceedings to extradite Kim Dotcom andothers

BETWEEN THE UNITED STATES OF AMERICAAppellant

AND KIM DOTCOMRespondent

Hearing: 28 February 2012

Counsel: AM Toohey, F Sinclair and D Boldt for AppellantP Davison QC, W Akel and R Woods for Respondent

Judgment: 29 February 2012

JUDGMENT OF BREWER J

_________________________________________________________________________________SOLICITORSCrown Law (Wellington) for AppellantSimpson Grierson (Auckland) for Respondent

COUNSELPaul Davison QC


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[1] In January of this year Mr Dotcom was arrested by the Police pursuant to aprovisional arrest warrant issued by a District Court Judge pursuant to s 20 of the

Extradition Act 1999. The United States of America wishes to extradite Mr Dotcom

and others to that country to face charges relating to criminal use of the internet for

commercial gain.

[2] Mr Dotcom applied for bail in the District Court on 25 January 2012. Bailwas declined. He appealed that decision to this Court. His appeal was dismissed by

Asher J on 3 February 2012.

[3] Subsequently, Mr Dotcom again applied for bail to the District Court.Judge NR Dawson in the District Court at North Shore granted Mr Dotcom bail on

22 February 2012.1 The bail granted was of the electronically monitored variety and

there were other restrictive conditions.

[4] The Crown, on behalf of the United States of America, appeals against thegrant of bail.

[5]

The application heard by Judge Dawson was made on the basis that there wasnew information which should be considered by the Court and that Mr Dotcoms

circumstances had changed. Of the matters put forward, Judge Dawson considered

that the existence of extradition treaties between the United States of America with

both Finland and Germany was a new circumstance. Mr Dotcom has current

passports for those countries and the existence of such treaties was not known to the

Judges who decided the first round of bail applications. Judge Dawson also

considered that the absence of any new evidence as to Mr Dotcoms financial ability

to fund a flight attempt was also a new factor. Accordingly, he felt justified in

considering bail afresh.

[6] The hearing before the District Court Judge focused on whether Mr Dotcomis a flight risk. He records2 that it was accepted by counsel that this was the crux of

the issue.

1 Dotcom & Ors v United States of America DC North Shore, 22 February 2012.2 Ibid, at [8].


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[7] The Judge found that the factors which indicate that Mr Dotcom is a flightrisk include his name changes, a criminal record, multiple bank accounts in different

names, the avoidance of lengthy prosecution, the risk of a lengthy sentence if found

guilty, and loss of lifestyle. The risk of flight, in the Judges view, was supported by

the suspicion that Mr Dotcom will still have significant unrevealed financial

resources which could be used to finance an escape and thereafter a comfortable and

protected lifestyle.3

[8] The District Court Judge found the factors against Mr Dotcom being a flightrisk include that he would thereafter live his life as a fugitive, he would have to

abandon his pregnant wife and three children, and he would effectively lose all the

considerable assets and bank accounts in a number of countries that have already

been seized or frozen. The Judge noted the submission on behalf of Mr Dotcom that

he has a good defence to the charges and that he has every reason to stay and fight

for his familys future and his seized assets.4

[9] The Judge found that the most significant change since Mr Dotcoms firstbail application on 23 January 2012 was the passage of time. Since that date, the

Judge found, all Mr Dotcoms known assets have been seized and are now

unavailable to him. No new assets or accounts of any significance have been

revealed since his arrest. Mr Dotcoms position that he has not concealed any assets

or bank accounts had not been gainsaid. Accordingly, the suspicion that because

Mr Dotcom is very wealthy means that he must have assets he has not revealed

cannot now be used against him with the same force as previously.

[10]

The District Court Judge found that the factors relating to flight risk did notrequire Mr Dotcom to remain in custody once satisfactory bail conditions were put in

place.

3 Ibid, at [33].4 Ibid, at [34].


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The appellants submissions

[11] The principal submission on behalf of the Crown before me was that theDistrict Court Judge plainly erred in granting bail. He should not have held thatthere were new or changed circumstances justifying a departure from the earlier

decision of the District Court and from the dismissal of the appeal from that decision

in this Court.

[12] So far as the extradition treaties are concerned, Ms Toohey made lengthysubmissions to the effect that the extradition treaty between the United States of

America and Germany would result in Mr Dotcom being treated more gently if he

were to flee to Germany than if he were to be extradited directly to the United States

of America. In particular, it is submitted that the treaty would not permit him to be

extradited and that whether he would be prosecuted in Germany at the request of the

United States of America would be a matter of discretion for the German authorities.

The same is said to be true of Finland.

[13] So far as the significance of the passage of time is concerned, the submissionis that the District Court Judge was not justified in regarding this factor as casting the

issue of undiscovered funds in a new light. The decision of Asher J on the first bail

appeal did not turn on any finding that there were undiscovered funds.

[14] Similarly, the Crown submitted that the District Court Judge should not haveinferred anything from the absence of any newly discovered accounts since

Mr Dotcoms arrest. The restrained accounts were identified as part of a prolonged

investigation preceding the January arrests and were linked to companies or namesknown to be associated with Mr Dotcom. It was submitted that any emergency fund

that he might possess is likely to be better disguised and may well not be in

New Zealand. There was no evidence from which the District Court Judge could

have properly drawn any conclusions about post-arrest investigations.

[15] In support of this submission, the Crown filed an affidavit of Peter DavidMarshall regarding Hong Kong accounts and sworn on 27 February 2012. The

purpose of this affidavit was to put into evidence a letter to the Attorney-General


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dated 24 February 2012 from a Mr Prabhu, an Assistant United States Attorney. The

letter listed six accounts that the United States had previously been unaware of and

which have now been temporarily restrained by Hong Kong law enforcement. These

accounts had not been disclosed by Mr Dotcom in any of the previous proceedings.

[16] I interpolate here that Mr Davison QC for Mr Dotcom submitted that none ofthese accounts are in the name of Mr Dotcom except for an account with the Grand

Hyatt Hotel which has a negative balance. Further, none of the balances are

significant. I accept that submission. I also accept Ms Tooheys point that the recent

discovery of these accounts demonstrates the complexity of Mr Dotcoms affairs and

the difficulties faced by the United States of America in identifying all accounts in

which he has an interest.

[17] Mr Prabhus letter says that funds restrained to date in the name ofMr Dotcom (including funds held in other names by which he is legally known) total

approximately USD$17.8 million. Funds held in the name of various mega

conspiracy companies total approximately USD$6.8 million. These amounts do not

include money and property restrained in New Zealand. I am advised that the value

of restrained property in New Zealand is approximately $20 million.

[18] Mr Prabhus letter says that payments to Mr Dotcom for the years 2007 -2010inclusive which have been identified are in the range of approximately

USD$54 million to USD$68 million. It is submitted that these monies are greatly in

excess of the value of the property restrained and indicate the potential which exists

for significant funds to be in other accounts which have not yet been found.

[19] The Crown submitted that the final evidential position as to Mr Dotcomsknown assets before the District Court Judge was essentially unchanged from the

position before Asher J.

Submissions on behalf of Mr Dotcom

[20] Mr Davison, not surprisingly, supported the decision of the District CourtJudge. He submitted that the application for bail brought before the District Court


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Judge was not advanced primarily on the basis that the circumstances had changed,

but rather upon the fact that there was sufficient new evidence in relation to the

existing circumstances to warrant the Court reconsidering the refusal of bail.

[21] On the issue of flight risk, Mr Davison supported what he considered to bethe careful consideration that the District Court Judge paid to the crucial question of

flight risk.

[22] Mr Davison took issue with the inference that the Crown sought to draw fromthe letter of Mr Prabhu that significant funds might not be restrained. He submitted

that the singular lifestyle of Mr Dotcom could well account for any difference in the

figures.

[23] Mr Davison put emphasis on the anticipated length of time before theextradition application could be heard. The District Court Judge had concluded that

the information as to this was no different from that anticipated by Asher J in his

judgment and therefore did not require consideration as a new or changed

circumstance. However, the latest position is that the extradition hearing will not

take place until 20 August 2012. A related difficulty is that the Police have seizedMr Dotcoms personal laptop and a large number of computers which were also at

his address. There is a difficulty between the parties as to gaining access to the

information stored on those computers. Mr Davison says that it will be very

important for the Defence to have a clone of the hard drives so that Mr Dotcom can

properly put his case at the extradition hearing. Ms Toohey for the Crown advised

me that it would cost some $200,000 to clone the computers and that no agreement

has been reached to do that at this point. Certainly, I accept Mr Davisonssubmission that a remand in custody at this point would adversely affect

Mr Dotcoms ability to properly prepare for the extradition hearing and instruct

counsel.

Decision

[24] The law is that a person is entitled to bring successive applications for bail.As a matter of law, but not as a threshold to jurisdiction, if the applicant cannot point


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to a change in circumstances or other matters which warrant a fresh examination of

the question of bail, the Court is entitled to adopt the earlier finding and move on

from there.5

[25] In this case, Mr Dotcoms lawyers made a further application for bail basedupon nine matters which they submitted justified the District Court Judge in

considering the application in full. The District Court Judge decided that two of

those matters did justify him considering the question of bail afresh. He did so. In

the exercise of his discretion he granted bail. The matter is now before me on

appeal. Whether or not I agree that there were new circumstances which should

have caused the District Court Judge to consider bail afresh is to an extent beside the

point. The District Court Judge chose to consider the application for bail afresh and

he exercised his discretion in favour of Mr Dotcom. I have to consider the whole of

the decision of the District Court Judge against the usual principles. This appeal

proceeds by way of rehearing and I have to reach my own decision on whether the

outcome reached by the District Court Judge resulted from a correct exercise of his

discretion overall.

[26] Of the two circumstances considered by the District Court Judge to be new, Iagree with him on the revealed existence of extradition treaties between the United

States of America and Germany and between the United States of America and

Finland. These countries are the countries of Mr Dotcoms citizenship. If they were

thought in the earlier application to be safe havens in the event of flight then that

could properly be seen by the District Court Judge to be significant. It does not

matter whether the Judges in the previous application thought it significant. The

District Court Judge has his own discretion and can form his own views.

[27] I disagree with the District Court Judge that the passage of time since the firstbail application to the hearing of the second application (22 days) amounted to a

change of circumstance because no evidence of further bank accounts had emerged

within it. I agree with the Crown that this period is not long enough to be very

significant and that the District Court Judge did not have sufficient evidence upon

which to base the firm inferences which he has drawn. However, I do agree with

5 Zhang v Police HC Hamilton AP68/02, 22 May 2003, Fisher J.


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him that the period has enabled all known assets to be seized and secured away from

Mr Dotcoms control.

[28] That being said, I must now consider the appeal overall.[29] The fact that the appeal proceeds by way of rehearing does not mean that thisis a completely new hearing. I have to reconsider the issues that were raised before

the District Court Judge and I have to take account of the fact that he was exercising

a discretion. The Court of Appeal, as has been cited to me by both counsel, has

described the approach on appeal against a decision to grant bail as follows:6

... Someone who appeals a refusal of bail and is unable to point to a materialchange in the circumstances since the lower Courts decision faces thedifficulty that it is a challenge to the exercise by a Judge of a discretion. Theappellant must therefore establish that the refusal of bail was contrary toprinciple, or that the Judge failed to consider all relevant matters or took intoaccount irrelevant matters, or that the decision was plainly wrong. (Wherethere has been such a change in circumstances the better course is for afurther application to be made to the lower Court, rather than the pursuit ofan appeal.)

[30] The same principle applies to an appeal by the Crown against a granting ofbail.

[31] I begin my examination by acknowledging the statutory principle thatMr Dotcom is entitled to be released upon bail in this case unless there is just cause

for his continued detention.

[32] In this case, the risk that Mr Dotcom may fail to appear in Court for hisextradition hearing is the determinative factor. In considering this factor the Court

may take into account the nature of the offences for which extradition is sought, the

strength of the evidence and the probability of conviction, the seriousness of the

punishment to which Mr Dotcom would be liable, his character and past conduct,

whether there is a history of offending while on bail or breaching Court orders,

including orders imposing bail conditions, the likely length of time before the

extradition hearing and any other relevant matter.

6 B v Police (No 2) [2000] 1 NZLR 31 (CA) at [6], affirmed inHereroa v R [2011] NZCA 491 at[19].


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[33] In this case the nature of the alleged offending is making criminal use of theinternet for financial profit. The safety of the public is not at risk. The sums of

money alleged to be involved (in the hundreds of millions of dollars) make the

alleged offending very serious in the continuum of its kind. Against that is the value

of the assets already seized around the world. Those assets (amounting to roughly

USD$40 million) are at issue and unless Mr Dotcom is prepared to abandon them he

will have to contest the charges.

[34] I am not in a position to assess the strength of the evidence againstMr Dotcom and the probability of conviction. I am told that he will defend the

charges and that the probability of conviction is not high. On the other hand, I am

told that the strength of the evidence is such that extradition to the United States of

America is inevitable and that the risk of conviction is sufficiently high that

Mr Dotcom would be motivated to avoid the prosecution process. For the purposes

of the bail application, I take it simply that Mr Dotcom faces serious charges, a

lengthy prosecution process and no certainty of outcome. If he could avoid all this

then he would.

[35] I am not in a position to evaluate the seriousness of the punishment to whichMr Dotcom might be liable. However, common sense says that convictions for the

criminal conduct with which he is charged to any significant extent would result in a

lengthy term of imprisonment.

[36] I have heard that Mr Dotcom has a history of offending, although some ofthat was when he was a teenager. There is no relevant history of offending while on

bail or breaching Court orders but in the overall scheme of things that is of littlemoment.

[37] I understand that any extradition hearing would not take place until August ofthis year; in other words, at least another six months in custody for Mr Dotcom were

the Crowns appeal to succeed. One consequence of his being in custody for this

period would be the difficulties he would face in accessing computer-stored

information and instructing counsel.


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[38] The other relevant matters are those referred to by the District Court Judgeand by counsel. I will not go through them individually. In summary, Mr Dotcom

seems to be an unusual character who has amassed a large fortune through the

commercial use of the internet. He has two valid passports from two countries in

different names (although there is nothing illegal about that). He has many credit

cards and bank cards in various names. There is a suspicion, based on his

accumulation of wealth and collection of bank accounts, that he might have the

undisclosed means of financing a flight from jurisdiction and a comfortable life

thereafter.

[39] I stand back and look at the overall situation. Mr Dotcom is a very wealthyman who has had all of his identified assets seized or frozen. The charges against

him are that the business methods by which he acquired his wealth were illegal. If

he were convicted of all the charges against him, I take it that he would lose the

assets now sequestered and would spend a considerable amount of time in an

American prison. Of course, he would like to avoid all of that if he could. But to be

incarcerated for another six months awaiting the extradition hearing, the risk of flight

has to be a real one.

[40] I find myself in agreement with the District Court Judge. He has assessed thefactors which he was required by law to assess and I cannot say that he was wrong in

his conclusion as to the flight risk. He has, in my view, overstated the significance

of the passage of time for the issue as to whether unidentified funds exist. But I do

not find that that overstatement led him into error overall. Electronically monitored

bail means that the acknowledged risk of flight is ameliorated. It essentially puts a

perimeter around Mr Dotcoms home and if he breaches the perimeter then theauthorities will know about it very shortly. That is a significant impediment to a

person as recognisable as Mr Dotcom who seeks to flee the country clandestinely.

[41] Am I certain that Mr Dotcom will not flee the country or attempt to do so?Of course I am not. But the law does not require me to be certain. If it did, then

there would be no right to apply for bail on the basis that it should be granted unless

good cause is shown to deny it. Of course there is a possibility that somewhere there

is a bank account with millions of dollars in it. And it might be that Mr Dotcom is


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secretly determined to flee the jurisdiction of this country if he possibly can. But my

task, as was the task of the District Court Judge, is to weigh the flight risk against the

presumption at law that Mr Dotcom should have his liberty. Overall, I agree with the

District Court Judge that the risk of flight, ameliorated by electronically monitored

bail, does not overturn that presumption. The appeal is dismissed accordingly.

________________________________

Brewer J

Dot Comb Ail Feb 29

Documents

Transcript of Dot Comb Ail Feb 29