Kim Dotcom and the campaign financing scandal

The evolving story of the Megaupload Mogul

The Arrest

In the early-morning hours of Jan. 20, 2012, more than 70 New Zealand police officers, including special-tactics personnel, descended on a $24 million mansion in the countryside near Auckland.

The raid, which culminated in the highest-profile arrest of an alleged copyright "pirate"to date, was the result of years of coordination among local police, the U.S. Department of Justice and the FBI and was carried out by personnel armed with M4A3 automatic assault rifles, Glock handguns, dogs, sledgehammers and saws. Police confiscated nearly $5 million worth of cars as well as eight flat-screen TVs, jet skis and a Predator statue.

Their target was Kim Dotcom, aka Kim Schmitz, the 300-pound-plus, 6-foot-7 German hacker-turned-web mogul who founded Megaupload, the cyber-locker service that offered its 180 million users remote storage of movies, music and other files. The 13th-most-visited site in the world at one point, Megaupload was a pirates' haven. 

During the raid, Dotcom was tracked down and arrested near a safe that held a loaded shotgun in the 25,000-square-foot property's "Red Room," a secret compartment behind a false door inside a closet. His pregnant wife, Mona, children and staff were found elsewhere in the mansion, which Dotcom had moved into in 2010 after emigrating from Hong Kong.

Authorities seized nearly $9 million of his cash, froze more than 50 bank accounts belonging to him, his associates and their various companies and shut down his website (a message from the FBI now appears at Megaupload.com). In its Jan. 5 indictment, the U.S. government accused Dotcom -- who was held at Auckland Central Remand Prison for a month after his arrest -- and six of his Megaupload colleagues of racketeering, money laundering and criminal copyright infringement.

According to the 72-page document, Megaupload caused more than $500 million in losses to copyright holders -- including all six major Hollywood studios and the big record labels -- during its roughly seven years of existence. The expectations are that Dotcom would be extradited to the U.S. for a trial where, if he is found guilty of all charges, he faces up to 50 years in a U.S. federal prison.

The scandal

Meantime, Dotcom is out on electronically-supervised bail, while a flock of lawyers works assiduously for the US Government, trying to get the extradition order served.  So far, it has cost the New Zealand taxpayer well over a million dollars.  The case has developed hitches.  Dotcom is a New Zealand citizen, having qualified, it seems, after spending ten million (local dollars) on Government Bonds.  A large part of the stash confiscated during the raid had nothing whatsoever to do with the case. Dotcom's lawyers are busily getting it back.

As the court cases grind on over Kim Dotcom’s possible extradition and his efforts to regain his computers, New Zealand is now agog at his political donations.  Not only did he fund lavish parties -- to the extent of flying Important People to them -- and fund a fancy fireworks show for the citizens of Auckland, but he donated $50,000 (split into two checks, apparently to beat the rules) to the mayoral campaign of John Banks, now the leader of the rightwing ACT political party.

Unsurprisingly, politicians who were courted and hosted by Dotcom are now scrambling to put distance between themselves and the millionaire. That hasn’t stopped the accusations and speculations flying, triggered by an interview with John Campbell on  TV3 in New Zealand that is perhaps the most-watched video of the year.