Technology Spot

In a 2009 Forbes article, Megaupload spokesperson Bonnie Lam denied any connection existed between the company and Schmitz. But in response to an inquiry from CNET about the Perfect 10 case, Lam confirmed on Tuesday that Schmitz is part of the company's leadership.

"Perfect 10 is on a mission to intimidate legitimate Internet businesses into paying Perfect 10 for settlements," wrote Lam, who said she was writing from Megaworld headquarters. "Perfect 10 has picked the wrong target with Mega and we will fight for the rights of our users...One of the tactics of Perfect 10 involves one of our founders, Kim Schmitz, who recently changed his name to Kim Dotcom. He was convicted for hacking and insider trading in Germany almost a decade ago. Perfect 10 wants the court to believe that Kim's prior convictions are an indicator for criminal conduct regarding Mega.

"But Perfect 10 is wrong," Lam continued. "Since his convictions Kim has a clean record and under (Germany's) Clean-Slate legislation his prior convictions have been wiped. Today Kim is married and the father of three young children. He has matured, learned from his past mistakes and is a successful businessman...Kim is one of many shareholders at Mega and not involved in most day-to-day business decisions."

Don't believe it, argues Perfect 10's lawyers. In the porn studio's complaint, they wrote that Schmitz is all there is behind Megaupload. "Each of the entity defendants herein is the alter ego of Schmitz," Perfect 10 said in a court filing. "Schmitz formed Megaupload for the specific purpose of engaging in the business of illegally storing, displaying, and distributing the intellectual property of others. On information and belief, Schmitz alone profits from the revenues derived from these entities."

Perfect 10 also alleges that Schmitz owns and controls a U.S. hosting service. According to numerous reports, a company called Carpathia Hosting, based in Ashburn, Va., manages Megaupload and many of the other mega sites. Carpathia executives did not respond to repeated interview requests.

One might have reason to question assertions made about Schmitz given his record. He first made a name for himself as a computer hacker who was convicted of credit card fraud. In 2001, Schmitz was accused of securities fraud for buying up shares of an ailing company and announcing he would dedicate 50 million Euros into revamping the business. As a result, the company's stock price soared and he quickly sold his shares for a profit. Only trouble was he never had the 50 million Euros.

What copyright owners plan to do about Megaupload is unclear. The U.S. Senate is considering legislation that would give the government power to block access to overseas sites accused of trafficking in pirated or counterfeit materials. Comcast and Verizon are some of the major Internet service providers that have recently agreed to step up antipiracy efforts but for the time being those agreements only affect material downloaded via peer-to-peer services and has nothing to do with streaming services like Megaupload.

As for Schmitz himself, news reports from New Zealand indicate he is living in a $30 million mansion near Auckland. Megaupload's Lam said he's been granted permanent residency there. The Kiwis have reportedly taken to Schmitz after he paid for a huge fireworks display over Auckland Harbor last New Year's eve.

In one of his YouTube clips, Schmitz is videotaped driving at high speeds until he's stopped at a checkpoint. Slowly he rolls back into traffic undetected and then speeds off. He chortles and says, "Dr. Evil always gets away with it."