Update: Prosecutors say the gun had buckshot as well as rubber bullets. They said it was a modified weapon which would have required a permit. But it was in the safe in the room they found in (not as the media has reported, in his arms.) Buckshot is used in hunting. (Although cops like it too.) The prosecution making further arguments.

Update: Court has resumed from lunch. Both sides and the judge just went into chambers for a closed door session. Here's the latest:

• Kim DotCom's "heavily pregnant wife" was at the house. He wants to stay in NZ to be with his family. (This will be their fifth child.)
• The gun was in a safe, had never been fired and only had a rubber bullet.
• Kim DotCom's lawyer insists he was cooperative at the arrest -- he even provided details of a bank account not on their list
• There's no financial incentive to restart the business because the servers have been shut down
• His lawyer says, "This is not a case where there will be any concession by Mr Dotcom."

On the prosecution side: When Kim DotCom was charged in Germany, he fled to Thailand and was caught there. (Added: Defense says he was unaware of the charges and returned voluntarily when he learned of them.)He had two Finnish passports. (His lawyer says all passports have been seized.)

Kim DotCom asked the court to be released on home monitoring.

Update: QC Paul Davison, representing Kim DotCom, told the court the mansion's security guard helped police in that prior to the raid, he let an officer in to discuss security matters. The officer was wearing a camera hidden in a pen to record the interior of the house. "He called the police actions "nonsense"."

Original Post

A court in New Zealand is hearing bail arguments for Kim DotCom and the other Megaupload defendants, Bram van der Kolk, Mathias Ortmann, and Finn Batato. The court was in chaos this morning due to the huge media presence.

The prosecutor says one of the defendants who remains at large, Svenn Echternach, is not subject to extradition.

Submissions began with prosecutor Anne Toohey updating the court to the status of two of Dotcom's co-accused. She said Echternach had travelled from The Philipines to Germany, from where he could not be extradited to the USA. There was no agreement between the two countries, she said.

Another, Andrus Nomm, has been arrested in the Netherlands. The remaining at-large defendant is Julius Bencko, 35, of Slovakia.

Grounds for opposing bail:

[Prosecutor Toohey] gave multiple reasons as to why Dotcom was a risk, quoting his refusal to comply with his arrest, his plethora of resources and easy access to a lot of money, his previous flight from Germany, his multiple aliases, dual residency and access to transport such as a helicopter.

She also said there was a risk he would re-offend, that he has several passports is a citizen of several countries. (Finland and Germany that I know of.)

She also opposed electronic monitoring because it would entail phone and internet access.

It would also likely mean the co-conspirators living together, which Toohey said could result in the mega sites being re-activated.

Update: Apparently, the Judge is first hearing DotCom's case and then will hear the other defendants. The Judge said the presence of guns at the home is an aggravating factor for bail.

The defence are arguing this has amplified any offending, which Schmitz denies, "beyond reality" and misrepresents the business of "uploading". They argue the arrests were made in this way to "present the most dramatic intentions" and launch the case.

[The] defence says the scale of the police operation against Megaupload was unnecessarily grandiose. They object to the way search and arrest warrants were carried out, especially where armed offenders arrived in helicopters and dropped into the Dotcom mansion courtyard.

They are also arguing that Schmitz would be unable to carry on the business at the centre of the charges as Megaupload has been shut down, saying he has no interest in restarting the business until this matter is resolved. Schmitz would be seeking redress for the significant losses to his business.

The prosecutor also raised DotCom's access to helicopters. Apparently, there was one at the mansion.

His lawyers also dispute the helicopter claim saying New Zealand is too far away from other countries for it to be used to abscond. They also say it is unlikely he would be able to use a private jet, and this would be hard financially as all but one of his funds have been frozen.

The next step after the bail hearing is the extradition process. The U.S. has 45 days to make its request. It could be up to a year before the four get to the U.S. if they fight extradition. They have the right to appeal and to bring a habeas corpus action if an extradition order is entered. They can also apply for bail pending the extradition appeal.