New Zealand reveals high-octane arrest in Internet fraud case

The Justice Department's massive copyright case against the file-sharing website Megaupload.com had the Internet world hopping this week. But it also got lawyers talking, about the scope of a criminal investigation that spanned eight countries and the hard-nosed tactics that the government deployed.


Prosecutors and FBI agents who built the case against Megaupload call it an international crime ring — a racketeering enterprise, like the mob or a drug gang, that made $175 million from pirated movies and music since 2005 and cost copyright holders nearly half a billion dollars more.


Starting last August, the U.S. worked behind the scenes with law enforcement counterparts in New Zealand, whose organized crime unit and police moved in to arrest the company's flamboyant founder Kim Dotcom at his mansion near Auckland Friday.


That was a little much for electronic privacy advocate Corrine McSherry, an attorney at the Electronic Frontier Foundation.


German national Kim Dotcom, also known as Kim Schmitz, was one of four men arrested on Friday, a day before his 38th birthday, in an investigation of the Megaupload.com website led by the U.S. Federal Bureau of Investigation.


The group was accused of engaging in a scheme that took more than $500 million away from copyright holders and generated over $175 million in proceeds from subscriptions and advertising.


A police official said dozens of officers, backed by helicopters, forced their way into the mansion, nestled in lush, rolling farmland, after Dotcom refused them entry, a scene more reminiscent of a high-octane spy drama than the usual policeman's lot in rural New Zealand.


"Despite our staff clearly identifying themselves, Mr Dotcom retreated into the house and activated a number of electronic-locking mechanisms," said Detective Inspector Grant Wormald from the Organised and Financial Crime Agency New Zealand.


Officers broke the locks and Dotcom barricaded himself into a safe room which officers had to cut their way through to gain access.


"Once they gained entry into this room, they found Mr Dotcom near a firearm which had the appearance of a shortened shotgun," he said. "It was definitely not as simple as knocking at the front door."


Two firearms were seized and a 55-year-old New Zealand man has since been charged with illegal possession of a pistol. Computers and documents were also retrieved and more than NZ$10 million ($8 million) was seized from financial institutions.


Television footage showed vehicles, including a pink Cadillac and a Rolls-Royce Phantom Drophead Coupe, being removed from the property.


The house where Dotcom was arrested was one of the largest and most expensive in the country, worth around NZ$30 million.