Indictment accuses Backpage founders of aiding prostitution

Two founders of Backpage.com and five others who work for the classified site have been indicted on federal charges in what authorities say was a scheme to knowingly facilitate prostitution by running ads for sexual services and using foreign banks to hide revenues.

A 93-count indictment unsealed Monday alleges that Backpage.com on some occasions helped customers edit their ads so they would stay within legal limits while still encouraging commercial sex. Federal law enforcement authorities also have seized Backpage.com and its affiliated websites.

The company is 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 maintains it diligently tries to prevent prostitution ads, it still allows them and has declined to take steps to confront the problem, the indictment said.

Larry Kazan, an attorney representing Lacey, didn’t return a phone call seeking comment on the indictment. Court records didn’t list a lawyer for Larkin.

Executive vice president Scott Spear was charged with facilitating prostitution and money laundering, while chief financial officer John Brunst was charged with money laundering.

Sales and marketing director Dan Hyer, operations manager Andrew Padilla and assistant operations manager Joye Vaught also were charged with facilitating prostitution. The indictment alleged that Padilla threatened to fire any employee who acknowledged in writing that the escorts depicted in ads were actually prostitutes.

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 seven people charged in the federal indictment are accused of trying to sanitize ads by removing photos and words that were indicative of prostitution and then publishing a revised version of the notices.

Backpage.com lets users create posts to sell items, seek a roommate, participate in forums, list upcoming events or post job openings. It also has had listings for adult escorts and other sexual services, and authorities say advertising related to those services has been extremely lucrative. Authorities say 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.

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.

In the past, the site’s operators challenged the California charges on First Amendment grounds.

Officials have struggled with how to deal with the website without violating free speech protections.

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