By KEVIN J. O'BRIEN
BERLIN — The Auckland police arrived at Dotcom Mansion on Friday morning in two helicopters, looking to arrest the leader of an organization that the U.S. authorities charge was engaged in copyright infringement and money laundering “on a massive scale.”
Kim Dotcom, born Kim Schmitz, a 37-year-old with Finnish and German citizenship, ran inside and activated several electronic locks. When the police “neutralized” those, he barricaded himself in a safe room. Officers cut their way through to nab him, standing near a firearm that they said looked like a sawed-off shotgun.
“It was definitely not as simple as knocking at the front door,” said Grant Wormald, a detective inspector.
In what the U.S. authorities have called one of the largest criminal copyright cases ever brought, the Justice Department and the F.B.I. shut down the Web site Megaupload.com and instigated the arrest of Mr. Dotcom, the site’s founder, and three other people in New Zealand. In all, seven people connected with the site were charged with running an international enterprise based on Internet piracy.
While the raid Friday may have been Mr. Dotcom’s most dramatic encounter with the law, it was not his first.
In February 2001, Mr. Dotcom told Die Welt that he spent three months in a Munich jail in 1994 and served two years’ probation for breaking into Pentagon computers and observing real-time satellite photos of Saddam Hussein’s palaces during the first Gulf war. In the mid-1990s, Mr. Dotcom received a suspended two-year sentence for a scam that made use of stolen phone card numbers.
In 2001, at the height of the dot-com hysteria, Mr. Dotcom was accused in what was then the largest insider-trading case in German history. Prosecutors in Munich said he bought shares in a struggling online business, letsbuyit.com, then announced he planned to make a major investment in the company and rescue it from insolvency.
Mr. Dotcom allegedly made more than $1 million when the shares soared.
Around that time, Mr. Dotcom, then still going by the name Kim Schmitz, disputed the accusations mounting against him during an appearance on The Harald Schmidt Show, a popular late night talk show in Germany.
“It is true that I offer a lot of open flank to attack because of my lifestyle and the public way I live with my success,” a congenial Mr. Dotcom, with a crewcut and black clothing, said. “It’s clear that that’s why people are looking for things to hang on me.”
Mr. Dotcom eventually fled Germany to escape those charges but was captured in Thailand, extradited and convicted in 2002. He spent five months in jail awaiting trial but received a suspended sentence on the underlying charges.
Mr. Dotcom dropped from view until last year, when German newspapers started reporting rumors of his luxury compound in New Zealand and possible involvement in Megaupload.
In the German television interview, which is posted on YouTube, Mr. Dotcom attributed the rumors swirling around him to a German tendency to envy those who have more.
“If I were in the United States, I would be just one of many with my lifestyle and would not draw any attention to myself,” Mr. Dotcom said.
Megaupload, one of the most popular so-called locker services on the Internet, allowed users to transfer large files like movies and music anonymously. Media companies have long accused it of abetting copyright infringement on a huge scale. In a grand jury indictment, Megaupload is accused of causing $500 million in damages to copyright owners and of making $175 million by selling ads and premium subscriptions.
The police in New Zealand said they were continuing to search the Dotcom Mansion property. In all, about 20 search warrants were executed in the United States and in eight other countries, including New Zealand.
About $50 million in assets were also seized, as well as a number of servers and 18 domain names that formed Megaupload’s network of file-sharing sites. The police said they seized 6 million New Zealand dollars, or $4.8 million, in luxury vehicles, including a Rolls-Royce Phantom Drophead Coupe and a pink 1959 Cadillac. They also seized art and electronic equipment and froze 11 million dollars in cash in various accounts.
Each of the seven people, who the indictment said were members of a criminal group it called Mega Conspiracy, is charged with five counts of copyright infringement and conspiracy. The charges could result in more than 20 years in prison.
Mr. Dotcom and three others arrested in New Zealand appeared in court Friday afternoon and were denied bail. Extradition proceedings will continue Monday.
The police said the other three arrested in New Zealand were Finn Batato, 38, a German citizen and resident; Mathias Ortmann, 40, a German citizen who is a resident of Hong Kong; and Bram van der Kolk, 29, a Dutch citizen who is a resident of New Zealand.
Ira P. Rothken, a lawyer for Megaupload, said by telephone Thursday that “Megaupload believes the government is wrong on the facts, wrong on the law.”
The arrests were greeted almost immediately with digital Molotov cocktails. The hacker collective Anonymous attacked the Web sites of the U.S. Justice Department and several major entertainment companies and trade groups.
Anonymous, which has previously set its sights on PayPal, Sony and major media executives, was more blunt in its response. The group disabled the Justice Department’s site for a time, and it also claimed credit for shutting down sites for the Motion Picture Association of America and the Recording Industry Association of America, two of the most powerful media lobbies in Washington, as well as those of Universal Music Group, the largest music label, and BMI, which represents music publishers.
The Megaupload case touches on many of the most controversial aspects of the anti-piracy debate in the United States, which this week saw lawmakers back off legislative efforts to crack down on foreign companies suspected to copyright infringement.
Megaupload and similar sites, like RapidShare and MediaFire, are often promoted as convenient ways to transfer large files legitimately; a recent promotional video had major stars like Will.i.am of the Black Eyed Peas singing Megaupload’s praises. But media companies say the legitimate uses are a veil concealing extensive theft.
Mr. Dotcom has made himself a visible target. He splits his time between Hong Kong and New Zealand and casts himself in flamboyant YouTube videos. His role as one of the most prominent Web locker operators has earned him a half-joking nickname in Hollywood: Dr. Evil.
According to the indictment, he took in $42 million from Megaupload’s operations in 2010.
The indictment against Megaupload, which stems from a U.S. inquiry that began two years ago, was handed down by a grand jury in Virginia two weeks ago but was not unsealed until Thursday.
It quotes extensively from correspondence among the defendants, who work for Megaupload and its related sites. The correspondence, the indictment says, shows that the operators knew the site contained unauthorized content.
The indictment cites an e-mail from last February, for example, in which three members of the group discussed an article about how to stop the government from seizing domain names.
The Megaupload case is unusual, said Orin S. Kerr, a law professor at George Washington University in Washington, in that U.S. prosecutors obtained the private e-mails of Megaupload’s operators in an effort to show they were operating in bad faith.
“The government hopes to use their private words against them,” Mr. Kerr said. “This should scare the owners and operators of similar sites.”
Jonathan Hutchison contributed reporting from Dunedin, New Zealand, Jack Ewing from Frankfurt, and Ben Sisario and Nicole Perlroth from New York.
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