Backpage Principals Convicted of $500M Prostitution Enterprises Promotion Scheme

PHOENIX, Ariz. - A federal jury in Phoenix convicted three former owners of Backpage.com yesterday of multiple counts of promoting prostitution business enterprises and multiple counts of money laundering, including conspiracy offenses. Michael Lacey, 75, of Paradise Valley, Arizona, was convicted of one count of international concealment money laundering, and the jury was unable to reach a verdict on most of the other counts charged against him. Scott Spear, 72, of Phoenix, was convicted of a conspiracy to violate the Travel Act by facilitating prostitution, and multiple separate violations of the Travel Act, along with a conspiracy to commit money laundering and multiple separate money laundering violations. John “Jed” Brunst, 71, of Phoenix, was convicted of a conspiracy to violate the Travel Act by facilitating prostitution, along with a conspiracy to commit money laundering and multiple separate money laundering violations. Lacey, Spear, and Brunst each face a maximum penalty of 20 years in prison for the money laundering charges. Spear and Brunst also face up to 5 years in prison for the Travel Act violations. Federal District Court Judge Diane J. Humetewa will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

According to court documents and evidence presented at trial, the defendants owned Backpage.com, which was the internet’s leading forum for prostitution ads from September 2010, when Craigslist shut down its prostitution ad section, until April 2018, when the United States seized Backpage.com. Evidence at trial showed that the defendants knowingly promoted prostitution via various marketing strategies. For example, the defendants engaged in a reciprocal link program with an independent web forum that permitted “johns” to post reviews of prostitution acts with specific women. Additionally, the defendants utilized an automated filter and human moderators to remove known sex-for-money terms, while still allowing the ads to be posted. Through this attempt at sanitizing the ads, the defendants sought “plausible deniability” for what the defendants knew to be ads promoting prostitution. Over the life of the conspiracy, the defendants earned more than $500 million. In an effort to preserve the money earned, Lacey, Spear, and Brunst engaged in extensive money laundering by creating numerous shell companies in multiple foreign countries.

On March 28, 2018, a grand jury in Phoenix charged the defendants in an indictment with the crimes of 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.

In April 2018, Carl Ferrer, 57, of Frisco, Texas, Backpage’s co-founder and CEO, pleaded guilty to conspiracy to facilitate prostitution using a facility in interstate or foreign commerce and to engage in money laundering. Additionally, several Backpage-related corporate entities, including Backpage.com LLC, have entered guilty pleas to conspiracy to engage in money laundering.

In August 2018, Dan Hyer, 54, of Dallas, Texas, Backpage’s Sales & Marketing Director, pleaded guilty to conspiracy to facilitate prostitution using a facility in interstate or foreign commerce.

Co-defendants Andre Padilla, 50, of Plano, Texas, and Joye Vaught, 42, of Dallas, Texas, were acquitted on all charges. The remaining defendant, James Larkin, 73, died on July 31 before trial was scheduled to begin in August.

United States Attorney for the District of Arizona Gary M. Restaino, Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division, Special Agent in Charge Albert Childress of the IRS Criminal Investigation (IRS-CI) Phoenix Field Office, Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division, Special Agent in Charge Akil Davis of the Phoenix Division, and Inspector in Charge Carroll Harris of the U.S. Postal Inspection Service (USPIS) Los Angeles Division made the announcement.

IRS-CI, the FBI Phoenix Field Office, and USPIS conducted the investigation in this case. The Los Angeles Joint Regional Intelligence Center provided substantial assistance.

Assistant United States Attorneys Kevin Rapp, Andy Stone, Margaret Perlmeter, and Peter Kozinets of the District of Arizona and Trial Attorney Austin M. Berry of the Criminal Division’s Child Exploitation and Obscenity Section are prosecuting the case, with significant assistance from the U.S. Attorney’s Office for the Central District of California, the office of the California Attorney General, and the office of the Texas Attorney General. Assistant United States Attorney Daniel Boyle of the Central District of California is handling the asset forfeiture aspects of the case, with assistance from Assistant United States Attorney Joseph Bozdech of the District of Arizona.

CASE NUMBER:           CR-18-00422-PHX-DJH
RELEASE NUMBER:    2023-181_Backpage

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