- The Washington Times
Monday, April 9, 2018

Seven executives at the classified advertising site Backpage.com have been indicted on 93 counts, including promoting prostitution and money laundering.

The Backpage officials were arrested Friday, the same day federal authorities seized all of the company’s websites around the globe and raided the Arizona home of one of its founders, Michael Lacey.

A federal judge in Phoenix unsealed the indictment late Monday. Mr. Lacey and James Larkin, who also helped launch the internet site, are among those charged. Federal authorities said the indictment was issued in Arizona because that was where Backpage was founded and where it stores its servers and has bank accounts.

The indictment claims Backpage operated as the internet’s leading source of prostitution advertisements, earning more than $500 million in sex trade revenue since its inception in 2004. Backpage earned about $135 million in 2014, up from $5.3 million in 2008, according to a 2017 Senate report.

“Virtually every dollar flowing into Backpage’s coffers represents the proceeds of illegal activity,” prosecutors said in the indictment.

The defendants are charged with conspiracy to knowingly facilitate prostitution through interstate commerce, facilitating prostitution through interstate commerce and conspiracy to commit money laundering. Each count carries as much as 20 years in prison.

In addition to Mr. Lacey and Mr. Larkin, defendants include Scott Spear, who held a 4 percent interest in the company; John “Jed” Brunst, chief financial officer and a 6 percent owner of Backpage; Dan Hyer, director of sales and marketing; Operations Manager Andrew Padilla and Assistant Operations Manager Joye Vaught.

Elizabeth McDougall, an attorney for Backpage, did not immediately respond to a request for comment.

In the past, Mr. Lacey and Mr. Larkin have said that they notify law enforcement when they are aware of illegal activity. They also have asserted that their site is protected by the Communications Decency Act, which protects internet companies from being held liable for what others post on their sites.

Backpage is accused of facilitating prostitution by pimps and others who advertised on the site, according to the indictment. Prosecutors say Mr. Lacey bragged that Backpage had contributed to the prostitution industry, writing in an internal memo that for the first time that “the oldest profession in the world has transparency, record keeping and safeguards.”

Many of those ads depicted children, according to the indictment, although the defendants are not facing any charges that they knowingly advertised children for sex. Prosecutors cited 17 instances in which children as young as 14 were trafficked for sex through the site.

In 2015, a pimp sold a 15-year-old for sex through Backpage, according to the indictment. The minor, identified as Victim 13, was falsely represented in a California Backpage ad as being 19 years old with photos of her face and body, the indictment said. Prosecutors say Backpage representatives contacted the trafficker with instructions on how to fix the ad so it could be published.

That same year, a 14-year-old who was sold for sex in Texas was killed by a customer who tried to destroy her corpse by lighting it on fire, the indictment said. The victim’s father demanded that Backpage remove the ads showing his daughter, but Backpage did not immediately comply with this request.

Another victim who was advertised for sex in Texas and Louisiana was killed in 2015 when she jumped out of a moving vehicle to escape her trafficker, the Justice Department says.

The National Association of Attorneys General said in a 2011 letter that it had tracked more than 50 instances in 22 states over three years of charges filed against those who have trafficked or attempted to traffic minors on Backpage.

“For far too long, Backpage.com existed as the dominant marketplace for illicit commercial sex, a place where sex traffickers frequently advertised children and adults alike,” Attorney General Jeff Sessions said in a statement announcing the indictment. “But this illegality stops right now. On Friday, the Justice Department seized Backpage, and it can no longer be used by criminals to promote and facilitate human trafficking.”

The Justice Department claimed that the sex trafficking was done with the full consent and knowledge of Backpage executives. When presented with an ad depicting a child, Backpage would delete the age and then publish a revised version of the ad.

“Such editing, of course, did nothing to change the fact that the ad features the prostitution of a child,” prosecutors said in the indictment.

On another occasion, Backpage limited the number of ads featuring children to 16 a day because it was afraid more than 500 of its ads that month would be referred to the National Center for Missing and Exploited Children, the indictment says.

Prosecutors also have charged Backpage defendants with numerous counts of money laundering to evade law enforcement. That includes wiring funds to offshore back accounts and then redistributing money to the defendants and converting customer payments into bitcoin and other forms of cryptocurrency.

Federal authorities have shut down websites in the past amid allegations of sex trafficking. In 2014, the FBI seized the free online escort directory MyRedBook. Two people affiliated with the San Francisco-based website faced money laundering, racketing and prostitution charges. A year later, Rentboy.com, where New York male escorts advertised their services was also seized with six of its employees indicted on similar charges.

Visitors to Backpage on Friday saw a notice from the federal authorities announcing the seizure.

“[B]ackpage.com and affiliated websites have been seized as part of an enforcement action by the Federal Bureau of Investigation, the U.S. Postal Inspection Service and the Internal Revenue Service Criminal Investigative Division with analytical assistance form the Joint Regional Intelligence Center,” the announcement said.

The announcement also listed other agencies involved in the apparent seizure, including the U.S. attorney’s offices for California, Texas and Arizona.

The Justice Department appears to be emboldened by the anti-sex-trafficking legislation passed by last month by the House and the Senate. But the bill has not yet been singed into law by President Trump.

The legislation, known as the Allow States and Victims to Fight Online Sex Trafficking, makes it easier for states to prosecute websites that knowingly facilitate online sex trafficking. It was written specifically to target Backpage and similar companies.

Sen. Claire McCaskill, Missouri Democrat and a member of a Senate panel that investigated online sex trafficking, praised the Justice Department’s actions against Backpage.

“This is great news for survivors, advocates, and law enforcement in Missouri and across the country, but it’s also long-overdue, and further proof of why our bipartisan legislation is so critical. State and local law enforcement need this bill to enable them to take swift action against websites that knowingly facilitate sex trafficking of children online, and to stop the next Backpage long before another website can claim so many innocent victims,” Ms. McCaskill said in a statement.

• Jeff Mordock can be reached at jmordock@washingtontimes.com.

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