A United States judge has rejected Megaupload's effort to escape the reach of US criminal law. Lawyers for Megaupload have argued that its lack of a US mailing address makes it impossible for the government to properly indict the file-sharing company. But in a Friday ruling, Judge Liam O'Grady ruled that the government may be able to satisfy the law by serving notice on Megaupload founder Kim Dotcom once he has been extradited to the United States.
American law requires that when the government criminally indicts a corporation, it must send notice of the indictment to the corporation's last known address in the United States. But Megaupload is a Hong Kong-based corporation, and its founder Kim Dotcom lives in New Zealand. Megaupload's lawyers argued that since Megaupload has no US address to send notice to, the government cannot satisfy the requirements of the law and therefore cannot indict Megaupload at all.
While that might seem like a perverse result, Megaupload attorneys made the case in July oral arguments that this was exactly what Congress intended. They contended that the misdeeds of Hong Kong corporations should be dealt with under Hong Kong law, and that it was unreasonable to expect a corporation with no US presence to defend itself in a courtroom halfway around the world.
But Judge O'Grady wasn't persuaded that Congress intended to create a loophole that would leave foreign corporations outside the reach of US law. "To this court's knowledge, no court has ever dismissed an indictment for failure to meet Rule 4's secondary mailing requirement," he wrote.
How did Judge O'Grady resolve the dilemma? Ordinarily, a corporation is regarded as legally distinct from the individuals that make it up. But in some circumstances, the government or a plaintiff can "pierce the corporate veil," convincing the court to hold a corporation responsible for the actions of individuals, and vice versa. If the court decided to treat Kim Dotcom as an alter ego for Megaupload, O'Grady reasoned, then once Dotcom was extradited the government could satisfy the mailing requirement by sending notice to Dotcom's jail cell.
So far, Dotcom has not been extradited and Megaupload's corporate veil has not been pierced. But because the mailing requirement has no time limit, Judge O'Grady decided that it would be premature to dismiss the indictment now. He denied Megaupload's motion without prejudice, meaning that the firm may be able to raise the issue again in the future once other legal issues have been resolved.
In the meantime, Megaupload's substantial assets will likely remain frozen, hampering the firm's ability to recover from the devastating January raid.
Unsurprisingly, the Motion Picture Association of America hailed the ruling. "Given the major role that Megaupload Limited played in the theft of innovation and creativity from hardworking creators and makers, we're pleased that the criminal case against it will proceed here in the US," a spokesperson said in an e-mailed statement.
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