A federal jury convicted two former Backpage.com executives guilty of conspiring to use the classified advertising website to encourage prostitution and a third guilty of a financial felony tied to the classified advertising website that prosecutors claimed was meant to permit and profit from prostitution.
Scott Spear and John “Jed” Brunst, former Backpage.com executives, were convicted of conspiring to use the internet to encourage prostitution. In addition, the jury found the two guilty of some financial crimes but not guilty of others.
Michael Lacey, Backpage originator and former editor of an alternative news weekly in Arizona, was found not guilty by a jury on prostitution-related charges. Lacey was found guilty of money laundering.
Lacey, a former Phoenix New Times editor, pursed his lips and shook his head as the jury fled the courtroom after the decision was read. It took more than 30 minutes to go through the list of allegations.
On more than 80 charges, the jury was deadlocked. Lacey was convicted on a single count involving a $16.5 million payment to a bank in Hungary in January 2017. According to the indictment, Lacey did so knowing the money reflected illicit earnings and sought to conceal it.
Two former Backpage workers who worked on the site’s ad filtering team were found not guilty on all prostitution-related charges.
Jurors declined to speak following the decision on Thursday. One juror, who did not want to be identified, said she was delighted the trial was finished and ready to go home.
Lacey, 75, and his attorney, Paul Cambria, declined to comment.
The stalemate on the majority of the counts against Lacey represented the federal government’s second failure to get a verdict against him on allegations that he managed Backpage in a way that made it easy for prostitutes, pimps, and clients to conduct transactions.
The website advertised employment, furniture, and concert tickets, but authorities claimed the business plan was focused on prostitution advertising, which were mostly located in the “escorts” section.
After parsing the verdict, it appeared that jurors agreed that Backpage executives built the website to enable prostitution but could not unanimously agree that Lacey was involved to the point of complicity.
Carl Ferrer, the former CEO of Backpage, said before the jury that Spear, 72, was a “micromanager” who cared about Backpage’s success.
During closing arguments, however, Spear’s attorney, Bruce Feder, stated that Spear was striving to remove illegal information off Backpage. He showed the jury many emails in which Spear urged staff to “clean the site up” and admonished them for failing to regulate advertisements appropriately.
“Scott, in good faith, did the best that he could,” he stated.
In his opening arguments, Assistant U.S. Attorney Andrew Stone referred to Brunst, 71, the former chief financial officer of Backpage, as a “key cog, key player” who devised new strategies to “keep the money flowing.”
However, Brunst’s attorney, Gary Lincenberg, stated that his client was only an accountant for a thriving media holding firm that owned not only Backpage but also multiple newspapers.
According to Lincenberg, just one witness, Ferrer, accused Brunst in any misconduct. And, according to him, Ferrer had cause to blame his client.
“Ferrer’s liberty depends on pleasing the prosecutors,” Lincenberg remarked. “His goal is to avoid prison, and he is hoping the prosecutors will recommend leniency.”
Spear and Brunst were both convicted of an overall conspiracy charge, which accused them of running Backpage in a way that encouraged prostitution. Spear was also found guilty on 17 more counts related to particular advertising that appeared on Backpage.
Spear was also found guilty on 21 charges of money laundering. Brunst was found guilty on all 33 charges of money laundering.
Prosecutors put out probable punishments on the charges based on federal standards in an August hearing ahead of the trial: Prosecutors said anyone tied to prostitution might face four to five years in jail.
The allegations of money laundering carry a potential punishment of 20 years in prison.
The case was constructed using emails seized by the United States Senate.
The case was predicated primarily on internal communications given over under subpoena to a U.S. Senate subcommittee. When the report was issued in January 2017, Missouri Democrat and former prosecutor Sen. Claire McCaskill claimed it included a “treasure trove” of information and urged prosecutors to utilize it to hold Backpage’s operators accountable.
After only a few days of testimony, the first trial resulted in a mistrial in September 2021. The court declared a mistrial after prosecutors obtained testimony regarding child sex trafficking that the judge deemed unfair to the defendants.
Prosecutors declared that the case will be retried. However, taking the matter to a second jury would take two years.
Lacey’s longtime business partner, James Larkin, committed suicide in the desert east of Phoenix in July, just days before opening statements began.
Larkin was charged with nearly same offenses as Lacey. The authorities froze the majority of both men’s assets, claiming the mansions and bank accounts reflected ill-gotten earnings from their crimes.
It is unclear whether the government will file new charges against Lacey. Following the verdict, the judge presiding over the case, Diane Humetewa, stated that she would anticipate a response from federal prosecutors during a hearing scheduled for December.
The trial was delayed until late August, a few days after Larkin’s death, but prosecutors persevered in prosecuting the case. The death was simply mentioned in passing in court. Potential jurors who had heard of it were questioned if it would affect their capacity to be fair.
Prosecutors contended that Backpage would change advertising to make them just provocative enough while maintaining plausible deniability that the corporation was aware the ads were for sex.
Internal emails revealed an ever-changing list of phrases to exclude from advertisements. According to evidence, the requirements tightened and eased based on the amount of media and law enforcement attention the website received.
Lacey founded the New Times weekly newspaper in 1970 to provide a voice to the anti-Vietnam War counterculture. Over the years, he built a reputation as a tough editor whose journal had no sacred cows.
Lacey and Larkin expanded the business into a network of alternative weekly newspapers across the United States. The corporation grew strong enough to acquire the Village Voice, a venerable New York City tabloid.
Lacey and Larkin were both incarcerated in 2007 by then-Maricopa County Sheriff Joe Arpaio for releasing the terms of a grand jury subpoena, which was meant to remain confidential. The subpoena requested information on online visitors to the magazine. The two were detained for many hours before the accusations were withdrawn. The two agreed a $3.75 million settlement with the county.
They utilized the money to support causes close to their hearts, primarily in the Latino community, which they believed had been unfairly persecuted by Arpaio.
Lacey’s lawyer said she is “fighting criminal activity.”
Lacey has maintained his innocence in this current instance. He and his counsel framed the trial as a threat to the First Amendment freedom to publish.
The Communications Decency Act, a federal statute, typically shields a website from responsibility for words written by individuals. Because of that statute, courts have shielded Backpage from criminal and civil charges throughout the years.
Lacey’s attorney, Paul Cambria, told jurors during his opening statement that some users exploited the service. But, he claimed, it was not the operators’ fault. He compared it to those who commit crimes by using cellphones or the mail.
“(Lacey) believed he was not facilitating, and that Backpage, which he owned a part of, was not facilitating prostitution,” Cambria told the court.
Backpage was praised by law enforcement and missing children’s organizations for responding to requests for information about possible underage females posted on the site, according to defense attorneys.
Cambria also stated that when Backpage modified or filtered out advertising, it was trying to prevent criminal conduct rather than enable it. He claimed that the government’s justification for modifying the advertisements was distorted.
“If you take words out, you are not promoting criminal activity,” she remarked. “You are fighting against criminal activity.”
Cambria further stated that Lacey had no knowledge of the persons who placed the advertisements and that there was no way to link him to any unlawful action that resulted from their posting.
However, prosecutors claimed that Backpage was doing more than just hosting the advertising. Instead, it worked to ensure that prostitutes and clients — potential “johns” — saw the site as a place to do business.
According to prosecutors, Backpage consistently worked on a strategy to corner the market on online prostitution advertisements. It sought to conceal its operations, in part by editing advertisements to make them less obvious. Prosecutors said that the apparent collaboration with law enforcement was a deception to keep officials at bay.
Prosecutors based their case on a collection of emails obtained through a subpoena to a U.S. Senate committee, which they claimed demonstrated Backpage willfully sought to promote itself as the dominant platform for online prostitution advertising. Internal records revealed budget predictions that predicted that firm would grow considerably over the years.
A draft of a suggested editorial Lacey authored praising Backpage’s assistance to the prostitute business was included in the internal papers. “For the very first time, the oldest profession in the world has transparency, record keeping and safeguards,” Lacey stated in the letter.
Carl Ferrer, the former chief operational officer of Backpage, was also a key witness for the government. Ferrer was the one who initially suggested the concept of launching an online classified advertising site to Lacey and Larkin.
Ferrer was also the one responsible for removing the phrase “the oldest profession in the world” from Lacey’s column.
When queried about the nature of the advertising put in the female escort area, which became the major component of Backpage, Ferrer did not mince words.
“They were prostitution ads,” he said to the jurors.
Ferrer said that he and other Backpage workers met with federal prosecutors in February 2018, only weeks before the charges were issued. After the conversation, Ferrer stated, “I came to the conclusion that maybe the best thing for me to do is shut down the site.”
Ferrer stated that he told his colleagues at Backpage that “I couldn’t do this anymore.”
What a crucial government witness told jurors about Backpage
Ferrer entered his guilty plea on behalf of himself and Backpage. Ferrer said in his plea that he plotted to clean “escort” advertising by eliminating photographs and wording that were suggestive of prostitution.
In his evidence, Ferrer told jurors that Backpage began a strategy in 2007 to expand the one component of the classified advertising website that consistently made money. “We were very successful in our prostitution marketing activities,” Ferrer told the jury.
An email dated April 2007 revealed a script that Backpage staff would use to basically steal advertising from Craigslist, its main competitor. According to Ferrer, sales personnel contacted persons who were putting prostitution advertising on Craigslist and promised to post the ads for free on Backpage.
Ferrer stated that the advertisements were obviously for prostitution since they were posted before either website attempted to clean them.
“The ads have sex act (pictures), they have sex act words,” Ferrer went on to say, “with a price per hours.”
According to Ferrer, market dominance is critical. “They needed their phone to ring,” that’s what he stated. “There were limited options for them to advertise.”
Ferrer also detailed a collaboration with the Erotic Review, a website that allows people to publish reviews of prostitutes.
The two websites devised a plan: Erotic Review reviews would include a link to that woman’s escort ad on Backpage. Backpage advertising would direct potential buyers to that escort’s reviews on the other website.
In evidence, Ferrer referred to the collaboration as the “secret sauce” that generated traffic for the Backpage advertising.
According to Ferrer, by July 2007, the system was producing 2 million visitors per month to Backpage.
The Erotic Review created an ad for Backpage that described the benefits of the collaboration to customers. The advertisement, which was displayed to jurors, promised buyers that they would “not be ripped off again.” Read her reviews before you pick up the phone.”
Craigslist eliminated its adult section in 2010, in response to criticism from government officials and anti-trafficking groups. Ferrer and other Backpage officials recognized an opportunity to establish a stranglehold on prostitution advertisements, according to Ferrer.
In an internal email, Larkin stated that Craiglist’s decision to discontinue its adult area might result in “a deluge of adult content ads for backpage.com.”
Despite the fact that it increased escort advertisements, Ferrer stated that Backpage officials “were very concerned we were next.”
As a result, according to Ferrer, the website began modifying advertising, recruiting a staff of personnel to look through them for objectionable phrases and imagery. That was eventually outsourced to moderators in other countries. A list of banned phrases was compiled for their benefit.
“We sanitized the site,” Ferrer explained to the jury. “We made it less obvious prostitution.”
Backpage, according to Ferrer, would report advertising to the National Center for Missing and Exploited Children, but would deliberately bombard the organization with reports in order to overload it. Ferrer further stated that Backpage would submit reports on advertisements put on other sites in order to divert attention away from Backpage.
Jurors also heard from three women who testified about being the topic of advertisements and how those advertisements frequently culminated in a sex for money exchange. One of the ladies stated that she was underage when some of the advertisements were published.