By Canadian Press

Backpage founder Michael Lacey convicted of 1 money laundering count

Nov 16, 2023 | 7:03 PM

PHOENIX (AP) — Michael Lacey, a founder of the lucrative classified site Backpage.com, was convicted Thursday on a single count of money laundering and acquitted on another. But an Arizona jury deadlocked on 84 other counts against him in a case that alleged he participated in a scheme to sell sex ads, leading the judge to declare a mistrial.

U.S. District Judge Diane Humetewa in Phoenix declared the mistrial after jurors deliberated for six days. It marked the second time a mistrial has been declared in the case against the site’s co-founder.

Lacey’s first trial in 2021 ended in a mistrial when another judge concluded prosecutors had too many references to child sex trafficking in a case where no one faced such a charge. Lacey declined comment as he walked out of a Phoenix courtroom.

Lacey, 75, was tried on a total of 86 criminal counts in the case against him and four other Backpage employees.

Chief Financial Officer John Brunst was convicted of one count of conspiracy to violate the Travel Act and more than 30 money laundering counts.

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Executive Vice President Scott Spear was convicted of one count of conspiracy to violate the Travel Act, more than a dozen counts of facilitation of prostitution and about 20 money laundering counts.

Operations manager Andrew Padilla and assistant operations manager Joye Vaught were acquitted of a conspiracy charge and dozens of counts of facilitation of prostitution.

Joy Bertrand, who represented Vaught, said her client was relieved by the acquittals in a case that “ruined her life.”

Before launching Backpage, Lacey founded the Phoenix New Times weekly newspaper with James Larkin, who was charged in the case and died by suicide in late July about a week before the second trial against Backpage’s operators was scheduled to begin.

Lacey and Larkin held ownership interests in other weeklies such as The Village Voice and ultimately sold their newspapers in 2013. But they held onto Backpage, which authorities say generated $500 million in prostitution-related revenue from its inception in 2004 until 2018, when it was shut down by the government.

Prosecutors had argued that Backpage’s operators ignored warnings to stop running prostitution ads, some involving children. The operators were accused of giving free ads to sex workers and cultivating arrangements with others who worked in the sex trade to get them to post ads with the company.

Backpage’s operators said they never allowed ads for sex and assigned employees and automated tools to try to delete such ads. Their legal team maintained the content on the site was protected by the First Amendment.

Prosecutors also said Lacey used cryptocurrency and wired money to foreign bank accounts to launder revenues earned from the site’s ad sales after banks raised concerns that they were being used for illegal purposes.

Lacey’s lawyer Paul Cambria had said his client was focused on running an alternative newspaper chain and wasn’t involved in day-to-day operations of Backpage. Cambria said there was no evidence Lacey saw the 50 ads at issue before his trial.

Cambria also said Backpage cooperated with authorities by responding to subpoenas for records and that the assistance provided by the site led to charges against pimps and prostitutes. He showed jurors a May 2011 certificate of appreciation that was issued to Carl Ferrer, Backpage’s chief executive at the time the government shut down the site, and signed by then-FBI Director Robert Mueller for the site’s assistance in an investigation. Based on Backpage’s cooperation with law enforcement, the attorney said Lacey had a good-faith belief Backpage was being operated lawfully.

A U.S. Government Accountability Office report released in June 2021 said the FBI’s ability to identify victims and sex traffickers had decreased significantly after Backpage was seized by the government, because law enforcement was familiar with the site and Backpage was generally responsive to requests for information.

In 2018, the site’s sales and marketing director, Dan Hyer, had pleaded guilty to conspiring to facilitate prostitution and acknowledged he participated in a scheme to give free ads to prostitutes to win over their business. Ferrer also pleaded guilty to a separate federal conspiracy case in Arizona and to state money laundering charges in California.

Jacques Billeaud, The Associated Press