Dotcom got in trouble because he was intentionally hosting infringing content, going so far as to try to hide that material from the copyright owners by making it look like he had taken it down when notified of its presence when in fact he just made the URL that the owners knew about stop working. Employees that went too far and actually took down infringing material got reprimanded.

Go dig up a copy of the indictment. It includes a bunch of internal emails from Dotcom and other running his site where they talk about all this stuff. It was basically a site whose intent and business model was hosting pirated movies. That you could also use it to host your own photos or whatever was there to try to provide cover.