Indictment accuses Backpage founders of aiding prostitution

PHOENIX — Seven men, four of whom are from Arizona and two of whom were the founders of Backpage.com, were indicted on federal charges Monday in what authorities say was a scheme to facilitate prostitution by running ads for sexual services and hiding their revenues.

Website founders 69-year-old Michael Lacey and 68-year-old James Larkin, both from Paradise Valley, were charged in a 93-count federal indictment.

Scott Spear, a 67-year-old man from Scottsdale and John “Jed” Brunst, a 66-year-old man from Phoenix were the other two Arizona men included in the indictment.

The other men who were indicted were 49-year-old Daniel Hyer, 45-year-old Andrew Padilla and 37-year-old Jaala Joye Vaught, all of whom were from Texas.

Larry Kazan, who represented Lacey, did not return a call seeking comment. There was no listing for Larkin’s attorney.

There were no lawyers listed in court records for Spear, Brunst, Hyer and Padilla. Stephen Weiss, attorney for Vaught, didn’t immediately return a call Monday seeking comment.

The charges included conspiracy to facilitate prostitution using a facility in interstate or foreign commerce, facilitating prostitution using a facility in interstate or foreign commerce, conspiracy to commit money laundering, concealment money laundering, international promotional money laundering and transactional money laundering, a press release said.

The indictment, which was unsealed Monday, alleged that Backpage.com, on some occasions, had helped customers edit their ads so they would stay within legal limits while still encouraging commercial sex.

The company was accused of laundering money by wiring ad proceeds into foreign bank accounts.

The indictment said many ads published on Backpage.com depicted children who were sex trafficking victims.

While the site maintained it diligently tried to prevent prostitution ads, it still allowed them and declined to take steps to confront the problem, the indictment said.

Authorities also seized Backpage.com and its affiliated websites last week.

Lacey and Larkin were already facing state money laundering charges in California.

Backpage.com let users create posts to sell items, seek a roommate, participate in forums, list upcoming events or post job openings.

It also had listings for adult escorts and other sexual services, and authorities said advertising related to those services has been extremely lucrative. Authorities said online sex ads appeal to people who want to pay for sex but don’t want to go to locations where they would risk arrest.

In a statement, Attorney General Jeff Sessions said Backpage.com “existed as the dominant marketplace for illicit commercial sex, a place where sex traffickers frequently advertised children and adults alike” for far too long.

“But this illegality stops right now,” the statement read.

“Last Friday, the Department of Justice seized Backpage, and it can no longer be used by criminals to promote and facilitate human trafficking.”

First Assistant U.S. Attorney Elizabeth A. Strange said in a statement that it was “appropriate” that the website was facing criminal charges in Arizona, where it was founded.

“I applaud the tremendous efforts of the agents who contributed to last Friday’s enforcement action and who assisted in obtaining the indictment in this case,” Strange said.

“Some of the internal emails and company documents described in the indictment are shocking in their callousness.”

“The events of last Friday and today are a big win, not only for the agents who investigated these crimes, but more importantly for the victims, including children, who were harmed as a consequence of the alleged actions of Backpage.com,” Chief Postal Inspector Cottrell said in a statement.

“By laundering the illegal gains of an enterprise, Backpage perpetuated the exploitation of victims and continued to finance their business. The U.S. Postal Inspection Service is committed to protecting our customers by stopping the money laundering to ensure the cycle of victimization ends.”

Backpage.com is a Dutch-owned limited liability corporation incorporated in Delaware, but its principal place of business is in Dallas.

Federal officials said Backpage.com keeps its bank accounts and servers in Arizona.

Lacey and Larkin are former owners of the Village Voice and the Phoenix New Times. The indictment said Lacey and Larkin purportedly sold their interest in Backpage.com in 2015, though they have retained control over the site.

Lacey and Larkin were arrested in Arizona by then-Sheriff Joe Arpaio’s office in 2007 for publishing information about a secret grand jury subpoena demanding information on its stories and online readers.

They won a $3.75 million settlement from county government as a result of their now-discredited arrests.

Last year, the website’s chief executive Carl Ferrer, along with Lacey and Larkin, pleaded not guilty to money laundering charges in California, where state prosecutors said the website operators had illegally funneled money through multiple companies and created various websites to get around banks that refused to process transactions.

The California state attorney general’s office also had moved to file pimping conspiracy and other charges against the Backpage.com operators.

However, a judge dismissed them, saying they relate to the publishing of sex-related advertisements and could not be filed because of a federal law protecting free speech that grants immunity to websites that post content created by others.

The Associated Press contributed to this report. 

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