2012-04-02_Bail_Variation_Decision

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					IN THE DISTRICT COURT
AT NORTH SHORE


               UNDER                     THE EXTRADITION ACT 1999


               IN THE MATTER OF          PROCEEDINGS TO EXTRADITE KIM
                                         DOTCOM AND OTHERS


               BETWEEN                   KIM DOTCOM, MATHIAS ORTMANN,
                                         BRAM VAN DER KOLK AND FINN
                                         BATATO
                                         Applicants

               AND                       THE UNITED STATES OF AMERICA
                                         Respondents


Appearances: Mr Ruffin with him Ms Toohey for the United States
             Mr Davison QC with him Ms Wood for Kim Dotcom
             Mr Foley for Messrs Batato, Van der Kolk and Ortmann

Hearing:       2 April 2012
Decision:      2 April 2012



         DECISION OF HIS HONOUR JUDGE DAVID J. HARVEY ON BAIL




There were a number of applications before the Court brought by Mr. Dotcom and his
associates. The applications for disclosure are adjourned to a date to be fixed by arrangement
with Counsel and the Court.

The applications to determine the release of items taken in the search of Mr Dotcom’s
premises in January 2012 are withdrawn and unless there can be some agreement between the
applicants and the respondent, there may need to be an application to the High Court for
judicial review.

This decision address applications for variation of the bail conditions of Mr Dotcom and his
associates Messrs. Ortmann, Van der Kolk and Batato.
The application for variation by Messrs. Ortmann, Van der Kolk and Batato is for
cancellation of the prohibition that they have access to the internet, and that they be permitted
to travel to 5H The Prom, Coatesville, for meetings with Mr Dotcom without the necessity of
a lawyer being present.

Mr. Dotcom seeks variation of his bail conditions

    a) to allow him access to the internet and
    b) to travel directly between 5H The Prom and the Round Head Studios' premises on
        such occasions as are approved by the applicant's EM Bail Assessor and for such
        durations as are approved provided such requests or applications for approval are
        submitted to the EM Bail Assessor at least 24 hours prior to the intended visits and
        subject to such visits to Round Head Studios being concluded to enable the applicant
        to return from Round Head Studios to 5H The Prom, Coatesville, by no later than
        7.30pm.
    c) Amending condition 19 that prohibits the applicant from going to or entering the
        address at 186 Mahoenui Road, Coatesville, so as to permit the applicant to enter the
        residence for the purpose of using the interior swimming pool at a specified time each
        day for a specified period of up to 1 1/2 hours.

Mr Dotcom had sought a variation to allow him to travel to the Orakei address for
unsupervised meetings with Messrs. Ortmann, Van der Kolk and Batato but did not pursue
that at this hearing.

Ms Toohey for the Respondent offered no objection to the variation to allow the applicants
access to the Internet. Clauses 3 and 17 of the bail conditions are therefore deleted.

No objection was offered to the application to amend condition 19 to allow Mr Dotcom to go
to 18 Mahoenui Rd Coatesville so that he may use the swimming pool for 1 1/2 hours each
day. However, so that the EM Bail Assessor was not unduly inconvenienced and so that the
monitoring company could be properly informed, Ms Toohey submitted that the attendance
should be at a fixed time. Mr. Davison for Mr Dotcom stated that the usual time of
attendance would be between 8:00 pm and 9:30 pm each evening. I am prepared to vary
clause 19 to read as follows:

        Not to go to 186 Mahoenui Road, Coatesville, Auckland except to use the indoor
        swimming pool at that address between the hours of 8:00 pm and 9:30 pm daily, or
       such other times not exceeding one and a half hours as may be arranged with the EM
       Bail Assessor such arrangements to be authorised not less than 24 hours before the
       intended amended start time.

There was an inconsistency between two of the clauses in Mr Dotcom’s bail bond. Ms
Toohey recognised that inconsistency and accordingly condition 21 may be deleted.

However, the respondent opposes the applications allowing Mr Dotcom to attend the
Roundhead Recording Studios and allowing Messrs Ortmann, Van der Kolk and Batato to
attend at Coatesville for unsupervised meetings. The basis of the opposition is that there is a
risk of flight that remains and such variation will compromise the carefully structured bail
conditions that have been imposed to reduce the risk of flight.

Roundhead Studios Variation.

Mr. Davison submitted that prior to his arrest in January 2012, the applicant had installed and
established at the bail address a very sophisticated recording studio, within which music and
songs were recorded with the assistance and participation of international recording artists.

The recordings and production of an album of songs was interrupted by the events of 20
January 2012. Following the police raid the recording studio equipment was removed from
the bail address and those responsible for the recording process are now located at
Roundhead Studios where it is intended to complete production of the album/s.

The applicant wishes to be able to attend the Roundhead Studio to play his part in the
process, which includes both the writing of songs, contributing to the music and some
performances. The completion of this production is important as it is expected to provide a
means of the applicant deriving income which will be necessary for him to maintain his
family and to meet expenses associated with his defence.

Ms Toohey’s opposition is premised on the following grounds:

   a) There is an absence of detail of evidence about the recordings in which Mr Dotcom is
       involved. No evidence has been presented to give the Court an assurance that a
        recording is in production, how it is being funded, who the other artists involved are
        or any other particulars.1
    b) Mr Dotcom has been granted access to funds by the High Court and therefore has no
        need to be engaged in income earning activities
    c) That to allow such a wide variation would render the curfew\EM monitoring
        conditions meaningless


In her written submissions, Ms Toohey put it this way. There is no indication of how often
Mr Dotcom would wish to attend the recording studio, for how long, or with whom. If Mr
Dotcom is permitted to go to the studio in the morning and must only return to 5H The Prom
by 7.30pm, he would effectively be left unmonitored for the entire day. Such a variation
would complicate monitoring and impose an unreasonable burden on the bail assessor. It
would effectively end the curfew, which is a critical tool in mitigating the self-evident flight
risk.


There was also a level of scepticism about the success of the recording. Ms Toohey put it this
way. Even leaving aside the respondent’s scepticism regarding Mr Dotcom’s prospects of
achieving significant commercial success as a recording artist, these funds will provide more
than ample financial security for Mr Dotcom and his family without having to rely upon
income from the production of an album.


This Court cannot speculate on the success or otherwise of Mr Dotcom’s venture. The
numerous varieties of modern musical genres suggest that there are probably unimagined
audiences available, and modern legitimate digital distribution systems are changing the face
of the music market. I could venture to suggest that notoriety alone could well be a marketing
angle for Mr Dotcom’s venture.


However, Ms Toohey does have a point in her argument that there is a paucity of evidence to
support the argument put forward, although they have been responsibly advanced by senior
Counsel whose summary of the matters in my view can be relied upon as to the existence of
the business proposition, although he is unable to go into the detail that Ms Toohey desires.

1
 The Court cannot take into account the matters referred to in an article by David Fisher in the NZ Herald
dated 1 April 2012 - http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10796045 (last
accessed 2 April 2012)
The Visiting Variation


A similar objection is raised by Ms Toohey as to the application to allow Messrs. Ortmann,
Van der Kolk and Batato to travel to Coatesville for meetings with Mr. Dotcom, for the
purposes of preparation for the extradition hearing, for the proceedings in the United States
should they eventuate and for the various civil proceedings that have commenced as a result
of the collapse of the Megaupload enterprise. In addition, Mr. Foley argues that there is a
humanitarian element to be considered in that these three men are under house arrest and will
be so for some months, and that relief from such restrictions would be advantageous to their
well-being.


On the other hand Ms Toohey again argues the aspect of risk. At the moment, meetings
between the parties are supervised by a lawyer. Now that they have access to the Internet and
that essentially the case is an electronic one communications between the applicants may be
effected via the Internet and if face-to-face meetings are required they can be conducted via
an Internet conferencing facility such as Skype.2


Mr Foley countered that argument by submitting that notwithstanding the various
communications protocols available via the Internet, there were occasions when personal
interactions and the free-flow of discussions in the “non-dissociative” environment of a face-
to-face meeting could be advantageous.


In her written submissions Ms Toohey also raised some other concerns arising out of the
variation to allow unsupervised meetings. The short passage of time since the granting of bail
cannot be seen as guaranteeing against re-establishment of the company. The fact that there
has been no attempt to re-establish the Megaupload site in the two months since the operation
terminated does not mitigate the risk of reoffending. Indeed, it may simply be a reflection of
the effectiveness of the present bail conditions.


As I understand it the principle ground for opposition to bail has been based on flight risk. As
far as I am aware there have been no offences committed in New Zealand and the suggestion


2
    http://www.skype.com
that there may be “re-offending” cannot be sustained in that regard. Assuming that there have
been offences that can be proven in other jurisdictions, it should be observed that the
applicants are entitled to the presumption of innocence. Mr Davison argues in addition that to
“restart” Megaupload or any similar enterprise would require capital that is not available to
the applicants together with technical equipment and resources that are very expensive. It is
simply not possible for Mr Dotcom and his associates to undertake such an enterprise, and
indeed if the fears of the respondents were realistic, they would not have consented to Mr
Dotcom having access to the Internet.


Ms Toohey argued electronically monitored bail and a 24 hour curfew were imposed to limit
the applicants’ flight risk. The risk of flight remains a real and significant possibility which
cannot be discounted. The applicants, she stated, all have the financial resources to obtain
forged identify or travel documents to arrange travel out of the country by covert means
should they choose to do so, particularly if they are entitled to internet access. Despite factors
that might encourage the applicants to remain in this jurisdiction (including the value of
restrained assets), the attraction of flight to a safe haven cannot be eliminated, as has been
traversed in the decisions of this Court and the High Court to date. Furthermore unlimited
trips away from bail residences are also undesirable in that they impose additional work for
bail assessors and complicate monitoring.


Discussion
In his decision on 22 February 2012 granting bail Judge Dawson stated:


       [33] The granting or refusal of bail is a discretion to be exercised after considering
       all the circumstances. The factors which indicate that Mr Dotcom is a flight risk
       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. This is supported by the suspicion that he will still have
       significant unrevealed financial resources he can use to escape detection and live well.


       [34] The factors against him being a flight risk include that he would live his life
       as a fugitive, he would be abandoning his expectant wife and three children and he
       would effectively lose all the considerable assets and bank accounts in a number of
       countries that have been seized or frozen by the respondent. It is submitted that he
       has a good defence to the charges and that he has every reason to stay and fight for
       his family's future and his seized assets.


       [35] The most significant change since Mr Dotcom's first bail application on
       23 January 2012 is the passing of time. The first bail hearing took place very soon
       after Mr Dotcom's dramatic arrest, high public interest and speculation and more
       importantly, large uncertainty as to the extent and location of Mr Dotcom's and
       Megaupload's resources and assets. Since that time, all known assets have been
       seized and are unavailable for Mr Dotcom's use or disposal. No new assets or
       accounts of any significance have been revealed since his atTest. Mr Dotcom's
       submission that he has not concealed any assets or bame accounts has largely been
       borne out.


       [36] A suspicion that because Mr Dotcom is very wealthy means that he must
       have assets he has not revealed is not evidence of further assets and cannot now be
       used against him with the same force as before in his application for bail.


Although the decision to grant bail was premised upon changes in circumstances, in my view
changes in circumstances, including the passage of time recognised by Judge Dawson, can be
taken into account in considering bail variations. Indeed, most bail variations arise as a result
of changed circumstances – addresses no longer available, job offers forthcoming, family
circumstances such as weddings, births, anniversaries and birthdays along with deaths. Bail
conditions must be necessary to mitigate risk, but by the same token they should be flexible
to a certain degree and ensure that the risk is not unduly enhanced or increased.


The comments by Judge Dawson suggest that the immediacy of flight risk was reduced when
the matter came before him in February. Since then Mr Dotcom has been on bail – his
associates from an earlier date – and the Court has had an opportunity to consider their
performance. Matters such as the good character of Mr Dotcom’s associates seem to be borne
out by their strict adherence to bail conditions. Unlike many who are granted bail, none of the
applicants have come before the Court with any bail breaches that has required a re-grant or
reconsideration of bail or an application for a notation under s. 38 of the Bail Act. It would
appear that their conduct on bail has been exemplary.
The following factors in my view may be taken into account in assessing whether or not the
level of flight risk remains as high as it has been pitched previously and whether the necessity
for the very restrictive conditions remains.
    a) The exemplary conduct of the applicants whilst on bail
    b) For Mr Dotcom, the birth of his twins which gives him further incentive to remain in
        the jurisdiction. He has publicised himself as a family man. He, of all people, is aware
        of the importance of image and to flee the jurisdiction and abandon his family would
        be damaging. In addition, as Judge Dawson observed, he would live his life as a
        fugitive.
    c) When there have occasions when the EM Bail regime has been relaxed – for example
        to attend meetings with lawyers which have lasted up to 8 hours, or meetings with one
        another in the presence of a lawyer, there have been no difficulties or concerns about
        flight.
    d) Additional bail conditions may be crafted to minimise flight risk.
    e) It is to the advantage of the applicants and consistent with their preparation for trial
        rights under the New Zealand Bill of Rights Act that they have the opportunity to
        meet on an occasional basis.

I therefore propose to grant the bail variations but my approach will be a staged one. I view
this as a first step on the path.

Condition 8 of Mr Dotcom’s bail provides “Allowed to attend pre-approved (by the EM Ball
Assessor), medical or dental appointments and any scheduled legal appointments.
Confirmation of the appointment is to be provided to the EM Ball Assessor 48 hours, in
advance. Travel to be direct between the EM Ball address and that of the appointment.”

I propose the addition of clause 8(a) which reads as follows:

        Allowed to attend at the premises of Roundhead Studios at 151 Newton Rd Ponsonby
        on two days of each week at such times as are approved by the applicant's EM Bail
        Assessor and for a durations of no more than four hours after arriving at the premises
        of Roundhead Studios provided such requests or applications for approval are
        submitted to the EM Bail Assessor at least 24 hours prior to the intended visits.

        Travel to and from 5H The Prom and the premises of Roundhead Studios is to be by
        the shortest practicable route.
       Mr Dotcom is to notify the EM Bail Assessor 5 minutes prior to his departure from
       5H The Prom and 5 minutes prior to his departure from Roundhead Studios. He is
       also to confirm his presence at Roundhead Studios with the EM Bail Assessor upon
       arrival at Roundhead Studios and 2 hours after his arrival at Roundhead Studios.

       Mr. Dotcom is to remain on the premises of Roundhead Studios at all times during his
       visits and is not to leave those premises other than to make the return journey.

       If Mr Dotcom is in possession of a smartphone with photographic capability, he
       should send a photograph of himself at Roundhead Studios with the logo or reception
       of those premises plainly in view to a phone number approved by the EM Bail
       Assessor.

I consider that those conditions will mitigate flight risk. If it becomes necessary for Mr
Dotcom to seek an extension of this variation, his performance of these conditions will be
critical to any future assessment undertaken by the Court.

I consider that in-person visits by Messrs. Ortmann, Van der Kolk and Batato to 5H The
Prom may take place but on a limited basis. I consider that there are occasions when face-to-
face meetings are preferable to “on-line” communication and they have demonstrated an
adherence to bail conditions that provides me with some confidence that they may be trusted.
Their bail condition clause 8 shall have the following addition 8(a)

       Allowed to attend at 5H The Prom Coatesville on any one day per week for a period
       of no longer than 6 hours as approved by the EM Bail Assessor such approval to be
       submitted to the EM Bail Assessor no less than 24 hours before the proposed visit.

       Travel between 37 Ngaiwi St Orakei and 5H The Prom Coatesville to be by the
       shortest practicable route.

       Any one of the three applicants Ortmann, Van der Kalk or Batato is to notify the EM
       Bail Assessor 5 minutes prior to departure from 37 Ngaiwi St Orakei and 5 minutes
       prior to departure from 5H The Prom. Any one of the applicants is also to confirm his
       presence at 5H The Prom Coatesville with the EM Bail Assessor upon arrival at that
       address and 2 hours after his arrival at 5H The Prom Coatesville.

       The applicants are to remain on the premises of 5H The Prom Coatesville and are not
       to leave for any purpose other than to make the return journey.
I consider those conditions will address any concerns about flight risk. If it becomes
necessary for to seek an extension of this variation, performance of these conditions will be
critical to any future assessment undertaken by the Court.

Clause 16 of the bail conditions – a non-association clause – is deleted.

Bail is varied accordingly.

In closing I make the following observation. Mr Davison signalled that there may be an
application to allow Mr Dotcom to be present at 186 Mahoenui Rd Coatesville. This is the
property known as “The Dotcom Mansion”. He pointed out that there is no objection to the
presence of other family members on the property, so any issues of preservation of the scene
do not appear to be significant. The only issue seemed to be that of EM Bail monitoring. If
that is the only reason, and it can be resolved, there seems to be little reason why Mr Dotcom
cannot resume his occupation of that property.




Judge David J Harvey
District Court Judge

				
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