Money laundering and prostitution charges against Backpage may be weak
Earlier this month, the Department of Justice seized and shutdown Backpage.com, the online equivalent of a newspaper’s classified ads section. But while many considered the website to be a useful tool for advertising their used goods and services online, the DOJ is now accusing Backpage’s executives of money laundering and using the website to facilitate prostitution, including the sex trafficking minors.
In addition to shutting down the site, federal prosecutors in Arizona recently unsealed a 93-count indictment against seven individuals, including some of the founders of Backpage. The indictment essentially accuses Backpage and its executives of running an online prostitution ring by allowing users to post ads for prostitutes. The indictment also includes over 40 counts of money laundering based on the payments customers made to Backpage.
It’s true that Backpage featured user-submitted ads for escort services, adult companionship, and online dating, all of which are perfectly lawful activities. In fact, the company explicitly warned users not to offer illegal services and employed digital and human moderators to block ads that were clearly advertising prostitution.
It is impractical to think that a website featuring a huge amount of user-submitted content can carefully monitor and police every user’s posts. The key to the charges here is that many of the ads published on Backpage actually did turn out to be ads for prostitutes, including children who were victims of sex trafficking.
The indictment goes a step too far, however, when it makes the bald assertion that all of Backpage’s executives, not just Ferrer, knew about this and intentionally allowed prostitution to be advertised on the site.
Among other things, the indictment relies on company emails seized by the government that include conversations between Backpage’s executives. For example, one email discusses how Backpage could benefit from a decision by a competing classifieds website, Craigslist, to shut down its “adult” advertisement section. The indictment also points to policies Backpage had in place to edit and moderate ads that seemed to advertise prostitution. Another email included in the indictment instructs Backpage employees not to describe ads for legal escort services as ads for prostitution.
All of this is to say that the government’s case against Backpage boils down to innuendo and insinuations that the company’s employees and executives must’ve known what their site was being used for. That’s simply not enough to convict these individuals for intentionally facilitating prostitution.
Convicting Backpage’s executives and employees requires proof that they acted with the intent to promote prostitution
Unless the government has more evidence, it will have a hard time proving that everyone charged in this case knowingly facilitated prostitution, let alone the prostitution of minors.
A prior attempt to prosecute Backpage in California failed because a federal law granted websites immune for content on their pages that was produced by a third party users. Shortly after this indictment was unsealed, however, Congress repealed the law creating immunity for websites in these cases.
To convict Backpage employees of facilitating prostitution, the government has to prove the elements of 18 U.S.C. § 1952(a)(3)(A). This means the government must prove that the employees:
- Used Backpage to engage in electronic transactions across state lines
- With the specific intent to promote, manage, establish, carry on, or facilitate prostitution
- And thereafter did or attempted to in fact facilitate prostitution
This means that Backpage and its employees had to have specifically intended to facilitate sex-for-money transactions. For the government to succeed in its prosecution, it would have to prove beyond a reasonable doubt that Backpage’s executives knew their users were posting ads specifically for prostitution, as opposed to escort and companionship services.
That’s going to be tough for the government because escort and adult companionship services, which are legal activities, often feature ads that are suggestive of sex and intimacy. Ads promoting prostitution use similarly ambiguous wording to blend in with ads for escorts and adult companions. And it’s worth pointing out again that Backpage’s official policies sought to prevent sex trafficking from being advertised on the site.
The government is likely going to rely heavily on the testimony of Carl Ferrer, former CEO and a co-founder of Backpage. Shortly after the indictment was unsealed, the state and federal prosecutors disclosed they had entered into a plea deal with Ferrer. The indictment frequently mentions an executive referred to as “C.F.” in its allegations, suggesting Ferrer heavily cooperated with the government in its investigation. In his plea, Ferrer stated that he was aware that the majority of Backpage ads were for prostitution and mentions that he worked with “co-conspirators.”
But just because Ferrer claims he was aware of ads for prostitution, and chose to look the other way, doesn’t mean anyone else named in the indictment did. And Ferrer clearly has a motivation to accuse others of wrongdoing here—his sentence will be reduced if he can help the government convict others.
To convict Backpage’s executives and employees, the government can’t just rely on Carl Ferrer’s word or the fact that some of these ads did indeed turn out to be ads for prostitution. And it’s not enough to prove that these individuals should have known what the ads were actually advertising. The standard for conviction here isn’t negligence—Backpage’s executives had to specifically know and intend to allow their users to submit ads for prostitution in order to be convicted.
The money laundering charges also require the government to prove that Backpage was actually facilitating prostitution.
In addition to over fifty counts of facilitating prostitution, almost half of the counts in the indictment include allegations of money laundering, including the exaggerated allegation that “virtually every dollar flowing into Backpage’s coffers represents the proceeds of illegal activity.”
Of course, the government’s ability to prove that Backpage and its executives engaged in money laundering entirely hinges on its ability to prove that Backpage illegally facilitated prostitution. That’s because the money laundering charges involve someone deriving money from criminal activities and using that money in financial transactions with the intent to conceal its illegal source. There are also other forms of money laundering, such as using proceeds from a criminal activity to further that criminal activity or entering into transactions involving over $10,000 using money derived from a criminal source.
These are serious charges, and it’s unfortunate that Congress and news outlets have already made up their minds about this case and convicted the individuals named in the indictment. The truth is, however, that the law only punishes those that play an active hand in facilitating prostitution.
Page Pate is an accomplished trial lawyer with over 25 years of experience in criminal defense, civil litigation, and whistleblower representation. Page is listed in The Best Lawyers in America, Top 100 Lawyers by The National Trial Lawyers, and named to the list of Super Lawyers for the past 15 consecutive years. Page is a frequent expert legal analyst for local and national media and has served as an Adjunct Professor at the University of Georgia Law School. Read Page’s reviews on AVVO. Follow Page on Twitter @pagepate and on Linkedin.