Feds charge Backpage founder after human-trafficking investigation

Show Caption Hide Caption Cindy McCain lauds Backpage indictment Cindy McCain on April 6, 2018, lauded the indictment of one of Backpage's co-founders, Michael Lacey.

PHOENIX — A founder of a 45-year-old alternative weekly newspaper in Phoenix has been charged in the apparent culmination of a federal human-trafficking investigation.

Michael Lacey, 69, of Sedona, Ariz., who helped build a nationwide media empire out of the Phoenix New Times, was charged Friday as part a 93-count indictment that remained sealed late Friday, according to Lacey's lawyer, Larry Kazan.

Lacey also co-founded the online classified advertising site Backpage, and authorities had spent months probing whether the website served as a willing participant in the online sale of sex, including with underage girls.

Lacey, former editor of New Times, and Jim Larkin, the former publisher, were arrested in October 2016 on California charges that they had profited from prostitution activities through Backpage. A judge there threw out charges that the pair and Backpage Chief Executive Carl Ferrer conspired to engage in pimping.

Friday's charges are only the latest in a list of legal troubles for Lacey and also perhaps for Larkin, whose Paradise Valley, Ariz., home was the scene of an FBI search Friday.

► April 6: FBI raids Backpage founder's home just as classified listing site shut down

► April 6: Feds seize sex marketplace Backpage, a Delaware LLC in 'good standing'

► March 21: Senate approves bill to curb sex-trafficking, sending it to president

Before Backpage, launched in 2004, both men had built a chain of alternative weeklies across the USA with a mixture of arts coverage and investigations. In 2005, Lacey and Larkin bought out Village Voice Media in New York City.

In 2012, the men sold all the newspapers to the chain's editors and publishers. In interviews at the time, Lacey said he did so to shield the journalism from the furor over Backpage.

They began Backpage as an alternative to Craigslist, and it became the second most popular online classified site in the U.S. behind Craigslist.

Its problems didn't stem from the pets for sale section, but the personal ads — what a Senate subcommittee last year considered as people for sale, knowingly aiding in prostitution and child sex trafficking.

Craigslist restricted and then closed its erotic services section in 2010. Backpage considered that move an economic opportunity.

“Craig killed his adult section last night in all US markets,” read an October 2010 e-mail from Ferrer. “It is an opportunity for us."

Backpage experienced a 50% growth in ad volume within two months of Craigslist closing its adult section, according to an internal history of the company included in the Senate report.

Backpage.com officially shut down Backpage.com, a classified advertising website that faced persistent allegations of profiting from illegal prostitution, was shut down by the U.S. government Friday as authorities reportedly brought criminal charges against seven of those involved in operating the site.

Backpage shut down its adult section in January 2017, the same day Lacey, Larkin and other Backpage executives were called to testify at that Senate subcommittee hearing. The men refused to answer any questions then.

The types of ads that had appeared in the adult section of Backpage, including racy photos, migrated to the singles section. In recent weeks, in response to a federal law that holds websites accountable for knowingly facilitating human trafficking, the ads were restricted to a phone number, photos and links to other websites.

► Feb. 13: ‘It lights up the brain like crack’: Why men buy sex

► Aug. 4: Who's buying sex? Married white men, Minnesota study says

Cindy McCain, wife of Sen. John McCain, R-Ariz., and an outspoken critic of human trafficking, said she had heard that federal law enforcement officials had raided not only Lacey’s home, but every Backpage office worldwide.

“They’ve confiscated everything and shut the website down,” she said.

Cindy McCain called it a good day in the fight against human trafficking.

She said she and other advocates had worked for years to get Backpage to change its business model, but the company consistently refused.

“I wish that it didn’t have to go this far,” she said. “I wish they would have cooperated with us when we tried to get them to see they needed to stop this."

Liz McDougall, a lawyer for Backpage, said Friday evening that she could not comment on the day's events. Lacey and Larkin have also not responded to interview requests from The Arizona Republic.

For years, as advocates criticized the website as a forum for prostitution ads, lawyers representing Lacey, Larkin and Backpage, asserted that the site merely hosted ads others wrote and was responsible for neither the content nor consequences.

Lawyers for the website further argued that Backpage cooperated with law enforcement and took steps to curb sex trafficking from being conducted through the site.

Federal authorities pointed to internal e-mails they said showed that website actively edited ads with the intention of masking that illegal activity, not preventing it. Backpage employed an automated system that screened out words possibly indicative of illegal activity, rather than passing that information on to law enforcement, investigators concluded.

Internal e-mails showed that Backpage supervisors would debate whether certain words or phrases were obvious indicators of an exchange of money for sex, or if they were, as one executive wrote, “phrases of nuance.”

► Aug. 1: Senators: Alter Internet laws to hold Backpage liable for sex trafficking

► February 2017: Phoenix domestic-violence shelter files suit against Backpage

Words like “quickie” and “afternoon delight” were allowed, according to the e-mails. Other terms, including “amber alert” and “cheerleader,” were deemed indicative of minors being offered for sex and banned from the site, the e-mails said.

The business was lucrative. The adult ads were among the few Backpage charged users to post. Backpage earned $135 million in 2014, according to a U.S. Senate report.

A February 2015 appraisal said the company was worth more than $600 million.

► January 2017: Backpage execs refuse to answer panel probing sex trafficking

► January 2017: Backpage shuts adult services section following Senate report

A federal grand jury had been presented with evidence against Backpage since at least February 2017, according to court filings in a civil suit filed against Backpage.

In March 2017, each man filed paperwork that removed their names from homes they had owned.

Larkin made the Paradise Valley home he owned with his wife a gift to her as her "sole and separate property," according to the documents. Lacey conveyed his Sedona home to a limited liability company called Creek Hideaway.

Follow Richard Ruelas and Megan Cassidy on Twitter: @ruelaswritings and @meganrcassidy

These are the staggering statistics of sex trafficking IndyStar columnist Tim Swarens spent more than a year investigating a lucrative business where abused children are bought and sold.

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