Crime - Sacto 911

Money laundering charges against Backpage.com execs can proceed, judge rules

Backpage.com team attends court hearing in Sacramento

Criminal money laundering charges can move ahead against the team behind Backpage.com, the website California state prosecutors allege is a worldwide portal for the illicit online sex trade.
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Criminal money laundering charges can move ahead against the team behind Backpage.com, the website California state prosecutors allege is a worldwide portal for the illicit online sex trade.

Criminal money laundering charges can move ahead against the team behind Backpage.com, the website state prosecutors allege is a worldwide portal for the illicit online sex trade.

But in a partial victory for the website’s executives, a Sacramento Superior Court judge on Wednesday threw out 13 pimping charges also pressed by state attorney general’s prosecutors.

A preliminary hearing on the remaining 27 charges against website executives Carl Ferrer, Michael Lacey and James Larkin is set for Oct. 3 before Sacramento Superior Court Judge Lawrence Brown.

Brown, in remarks from the bench, said the First Amendment protections Backpage’s attorneys claimed under federal communications statutes are “not without limit.” Brown ruled that the pimping charges will not proceed, but that allegations of bank fraud and money laundering will survive over Backpage’s objections.

“Even the most ardent defenders of a vigorous World Wide Web would have to concede that if a provider engaged in their own criminal acts, versus those of their customers, immunity must fail. And so it is in this case,” Brown wrote in his 18-page ruling.

Backpage’s attorneys maintained from the outset of the case that the charges brought by the state Attorney General’s Office under then-California Attorney General Kamala Harris unfairly and unconstitutionally targeted Backpage for publishing sexually oriented content created by others. Backpage’s attorneys cited the federal Communications Decency Act, or CDA, which generally grants protections for online publishers that publish content from third parties.

But prosecutors say the site knowingly created ads that sold sex, peddled children for sex acts, coached customers on how to draft sex-soliciting ads, then funneled the vast revenue back into the company. Seven of the pimping charges tossed out Wednesday involved selling minors for sex online.

Backpage since has come under increasing scrutiny from states’ attorneys general and federal lawmakers. A scathing congressional subcommittee’s report in January called the site “the leading online marketplace for commercial sex,” alleging that Backpage “has been far more complicit in online sex trafficking than anyone previously knew.”

And in an upcoming op-ed piece for Time magazine, Sens. Richard Blumenthal, D-Conn., and Rob Portman, the Ohio Republican who chaired the investigative subcommittee that released the Backpage report, call upon Congress to amend the CDA to crack down on online sex trafficking and Backpage.

Prosecutors alleged that Backpage CEO Ferrer and his partners, former Village Voice and New Times owners Larkin and Lacey, used a network of shell corporations to hide from banks millions of dollars in illicit ad revenue obtained from pimps, prostitutes and their customers through its “Adult Services” section. Nearly all of the site’s worldwide income, prosecutors allege, can be traced back to its “Adult Services” section.

Ferrer, Lacey and Larkin entered not guilty pleas Wednesday with a promise to return on the allegations.

“We will win at preliminary hearing,” Backpage attorney Cristina Arguedas vowed outside the courtroom.

Later, Arguedas and defense counsel James Grant released a joint statement: “We are pleased that the court has dismissed all the charges having to do with the content of the website, including the prosecution’s intentionally salacious and completely unfounded prostitution or pimping charges. We believe that’s the right decision for internet free speech and the First Amendment.”

Linda Smith, a former Washington state congresswoman who now heads Shared Hope International, an advocacy group for women and children victims of human trafficking, attended the hearing with other advocates. She said she was disappointed by the dismissal of sex charges, but was otherwise encouraged by Brown’s ruling.

“You can see justice for the people of California,” Smith told a gathering of reporters after the hearing. “These particular people are bad actors. They should be going to jail. If you’re going to defend children being sold online, that’s where they deserve to be.”

State attorney general’s prosecutors in January refiled a raft of money laundering charges against Backpage after Sacramento Superior Court Judge Michael Bowman tossed out the state’s original sex-related allegations largely on free speech grounds.

Kristen DiAngelo speaks after backpage.com CEO Carl Ferrer and controlling shareholders Michael Lacey and James Larkin appear in Sacramento Superior Court on Wednesday, Oct. 12, 2016.

Darrell Smith: 916-321-1040, @dvaughnsmith

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