Megaupload Lawyer Accused of Conflict of Interest By U.S. Government

In the coming prosecution of Megaupload founder Kim Dotcom, the U.S. government says that it intends to call as witnesses many Hollywood and tech executives, including officials from the Walt Disney Co., Fox, Time Warner, Paramount, YouTube and Google. And the company believes this fact should preclude Megaupload's executives from retaining Andrew Schapiro, the superstar attorney who recently agreed to become part of the defense team.

Schapiro is a partner at Quinn Emanuel, a top law firm that has represented all of the above companies. The government believes this possibly represents a conflict to Schapiro's engagement. The defendants are fighting back.

Watch: Kim Dotcom Defend Legality of Megaupload

The attorney's conflicts are just one of the reasons given in a filing this week by the U.S. government that opposes allowing Schapiro to participate.

The government says that the proposed limited appearance by Schapiro violates procedure. Prosecutors say the government has been approached by four different U.S. law firms, all claiming to represent Dotcom. The government says it entered discussions with such firms -- including another powerhouse, Sidley Austin -- over the release of funds and return of seized property, just as other firms overseas were doing the same in those jurisdictions. According to the filing:

"The proposed limited appearance will do nothing to alleviate these concerns; to the contrary, it will allow defendants to continue a multi-pronged attack on this Court's orders and authority, as well as strain the government's resources. If Defense Counsel 'alone' cannot speak on behalf of Megaupload Limited and Kim Dotcom 'in all matters connected with the case,' then there will be no obligation for the left hand (in the United States) to know or control what the right (in overseas jurisdiction) is doing."

The U.S. adds that allowing the appearance would "embolden overseas counsel and even hasten the dissipation of seized assets currently located abroad."

Megaupload's Kim Dotcom Could Get Seized Property Back

Prosecutors argue many other reasons why the arrangement proposed by Schapiro isn't acceptable, from what would happen in the event that Dotcom prevails on the fight to be extracted to the notion that he's allegedly running afoul of the fugitive disentitlement doctrine, which "provides that the fugitive from justice may not seek relief from the judicial system whose authority he or she evades."

Megaupload Demands Return of Seized Data, Other Assets

But probably the most chin-scratching argument is the idea that the court can't permit an appearance until all potential conflict situations are resolved. Quinn Emanuel has represented entertainment companies, and Schapiro himself represented YouTube -- a "victim" of the alleged Megaupload crimes, according to the government.

"The assets seized by the government from defendants may eventually be restored to victims - including possibly the current and former Quinn Emanuel clients listed above - as restitution," says the government.

On Thursday, these arguments brought a strong rebuke from the defendants. According to the reply:

"[I]f the Government is to have its way in this case, the only lawyers before the Court will be those representing the Government. If the Government is to have its way, the only evidence available to the Court would be that cherry-picked by the Government, for the Government, from the universe of relevant servers slated to be wiped. If the Government is to have its way, in sum, Megaupload will never get its day in Court and the case will effectively be over before it has even begun...

[The government] knows that no such counsel would realistically be willing to litigate this case through to trial for free or without sufficient resources - or that any such counsel, even if willing, would have litigated at least a prior copyright dispute or two involving a work or a client somehow implicated within the ocean of ESI stored by Megaupload, which the Government would then claim is itself disqualifying. Knowing all this, the Government appears unwilling to litigate fair and square. Instead, it is acting to vitiate Megaupload's defense before the merits are ever reached....

Any law firm that knows its way around intellectual property litigation will presumably have handled a case involving a client or work that can be spotted somewhere amidst the sprawling electronic repository. Of course, only the Government has had meaningful opportunity to scour the relevant servers, and only the Government knows precisely what is in its resulting discovery files. This leaves the Government positioned to play "Gotcha" with any firm that may step up to make an appearance."

The defense adds that Quinn Emanuel is perfectly capable of measuring its ethical obligations.