The arrests come after the government seized all of Backpage’s websites around the world on Friday.
The indictment was unsealed Monday after all defendants made their first appearances before a magistrate in Phoenix. Among those charged are the site’s founders, Michael Lacey and James Larkin. Carl Ferrer, the site’s current owner was not charged. But the indictment claims the site continued to be financed by Lacey and Larkin and two other co-owners who all retained operational control of Backpage.
The indictment accuses Backpage of facilitating prostitution committed by those posting ads on the site, specifically citing 17 victims trafficked on Backpage, some as young as 14. Authorities also allege the company laundered some of the estimated $500 million in prostitution-related revenue the site has generated since its launch in 2004.
“Virtually every dollar flowing into Backpage’s coffers represents the proceeds of illegal activity,” according to the indictment.
The government alleges that Backpage netted profits of more than $112 million in 2013 and more than $134 million in 2014. A Senate report issued last year said that Backpage ran sites for 943 locations in 97 countries and 17 languages.
In addition to the criminal counts, the government is seeking to seize 10 residences in California, Arizona, Texas and Illinois, 25 bank accounts and 35 website domains in the U.S. and 20 other countries.
“Many of the ads published on Backpage depicted children who were victims of sex trafficking,” the indictment states. “Although Backpage has sought to create the perception that it diligently attempts to prevent the publication of such ads, the reality is that Backpage has allowed such ads to be published while declining — for financial reasons — to take necessary steps to address the problem.”
Backpage has argued that it assists law enforcement in tracking down victims and perpetrators of crimes, which some police officials have corroborated, and is not a participant in the advertising on the site. Some in the sex worker industry say that removing Backpage from the Internet takes away a safe mechanism for screening clients, and that the ads will simply move to sites outside the country, or to social media.
The federal investigation in Phoenix was first disclosed by Backpage in a court filing in February 2017. Lacey and Larkin created Backpage in Phoenix as owners of the New Times alternative weekly newspaper chain, which became Village Voice Media Holdings after Lacey and Larkin bought the iconic New York weekly.
Backpage’s general counsel, Liz McDougall, did not return messages seeking comment. Larry Kazan, who told the Arizona Republic he was representing Lacey, also did not return a message.
Backpage is a classified ads website that grew after Craigslist.com stopped hosting “Adult Services” ads in 2010. Embedded among the ads for adult prostitutes on Backpage are solicitations for teenage girls and boys, anti-sex trafficking advocates said, enabling pimps to repeatedly sell children for sex. Though Backpage closed its “Adult Services” section in January 2017, the ads promptly reappeared in the “Dating” section, most recently with very little written copy accompanying photos of the males and females seeking dates.
Desiree Robinson, a 16-year-old girl in Chicago, was slain in 2016 after responding to an ad placed by her pimp on Backpage. Charles McFee pleaded guilty on April 3 to one count of sex trafficking conspiracy for recruiting her into a life that ultimately led to her slaying. McFee brought Robinson to a pimp, Joseph Hazley, who also faces charges in the case.
Robinson’s mother, Yvonne Ambrose, filed a lawsuit against Backpage, alleging the company knowingly facilitates sex traffickers.
“For years, Backpage.com has been a major hub of sex trafficking, the place where some of our nation’s most vulnerable women and children have been bought and sold,” said Lauren Hersh, national director of World Without Exploitation. “The closure of Backpage removes one of the most prolific online platforms of exploitation. It is high time to hold websites accountable for the harm they knowingly cause by facilitating sexual exploitation.”
Mary Mazzio, whose documentary “I Am Jane Doe” featured numerous women trafficked on Backpage said, “I don’t think any of the children who filed suit against Backpage ever thought their fight for justice would result in a federal indictment or a legislative response. That Congress and the Department of Justice would respond with urgency to the voices of these children, as well as survivors from across the country, who lined up, shoulder to shoulder in support of these children, is stunning.”
Seizing websites is not a new tactic for the Justice Department. The department last year said it had shut down AlphaBay, a site on the dark Web that functioned as an illicit marketplace for guns, drugs and fake documents. It has previously seized websites suspected of facilitating prostitution, such as RentBoy.com and MyRedBook.com, and obtained convictions of the sites’ operators.
But Backpage had evaded prosecution, in large part by invoking the Communications Decency Act. Enacted in 1996, the law provides legal immunity for website operators for content posted by third parties, so long as the operators weren’t involved in creating the content. Lawsuits brought by women who had been trafficked on Backpage were dismissed by federal courts in Chicago and Boston because of the immunity granted by Section 230 of the decency act, as was a criminal case in California filed by the attorney general there.
The courts in each case invited Congress to amend the decency act. So the Senate subcommittee on investigations launched a probe into Backpage, and found that Backpage employees were editing prostitution ads to delete references to underage girls, while still allowing the ads to be posted.
In addition, The Washington Post found that Backpage had hired a contractor in the Philippines to solicit ads from prostitutes advertising on other websites, creating ready-made ads for them on Backpage, though Backpage had said it was not involved in creating content. The indictment cites the Philippines operation and said internal emails showed it was part of a “five-year business plan” and the “main task is international market content acquisition.”
Members of the House and Senate both launched bills last year to amend Section 230, and a combined version of those passed both houses last month. Nicknamed “FOSTA,” for the Fight Online Sex Trafficking Act, it would enable victims and state prosecutors to pursue websites in criminal and civil court without being blocked by Section 230. It is awaiting President Trump’s signature or veto.
But opponents of the bill noted that federal prosecutors already had the tools to pursue websites such as Backpage, and indeed the new indictment did not require the new legislation. It accuses Backpage of being on notice for many years, from law enforcement, news media and its own public relations firm, that its most of its ads were thinly veiled offers for prostitutes.
In addition to one conspiracy count, 50 counts of facilitating prostitution cite specific ads published on Backpage between September 2013 and February of this year The indictment also includes one count of conspiracy to commit money laundering, and then 41 counts of alleged instances where sums of money as large as $5 million were shifted between banks to allegedly avoid detection.
That included routing the money through seemingly unrelated businesses, wiring it through other countries and converting it in and out of bitcoin and other forms of cryptocurrency, according to the indictment.
In addition to Lacey and Larkin, also indicted were Backpage executive vice president Scott Spear, chief financial officer John “Jed” Brunst, sales and marketing director Dan Hyer, operations manager Andrew Padilla and assistant operations manager Joye Vaught.
Chicago Tribune reporter Jason Meisner contributed to this report.
