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October 07, 2016

Backpage CEO Charged with Pimping, Money Laundering

DALLAS – Acting on a California warrant, Texas authorities on Thursday raided the Dallas headquarters of classified ads website Backpage.com and arrested its chief executive officer.

The warrant accuses Carl Ferrer, the 55-year-old who co-founded Backpage in 2004, of knowingly operating a “hub for the illegal sex trade” for at least the past five years. He was taken into custody at George Bush Intercontinental Airport in Houston upon debarking a flight from Amsterdam, where the holding company that owns Backpage is located. Ferrer is the only named partner of the holding company.

According to Texas Attorney General Ken Paxton, a lengthy joint investigation by his office and that of the California attorney general uncovered evidence adult and child sex trafficking victims were forced into prostitution through escort ads that appeared on Backpage.

Texas has charged Ferrer with money laundering.

“Making money off the backs of innocent human beings by allowing them to be exploited for modern-day slavery is not acceptable in Texas,” said Paxton, a Republican who earlier this year was arrested on both federal and state felony securities fraud charges. A trial date has not been set. Paxton also is under investigation by the state bar association for alleged ethics violations related to his advising Texas county clerks to disregard the U.S. Supreme Court’s same-sex marriage ruling.

On Friday morning, Ferrer remained in Texas custody in lieu of $500,000 bond, awaiting an extradition hearing. California Attorney General Kamala Harris, a Democrat who is running for a U.S. Senate seat, plans to charge him with pimping a minor, pimping and conspiracy to commit pimping.

“Raking in millions of dollars from the trafficking and exploitation of vulnerable victims is outrageous, despicable and illegal,” she said. “Backpage and its executives purposefully and unlawfully designed Backpage to be the world’s top online brothel.”

A Senate investigating committee in 2015 estimated Backpage’s annual revenue at more than $150 million. According to the criminal complaint filed in California, the website received at least $2 million in monthly adult-services advertising fees between October 2014 and May 2015. The complaint also states internal documentation obtained through a search warrant indicates 99 percent of Backpage’s revenue between January 2013 and March 2015 was directly attributable to ads for illegal sexual services.

Some of the ads offered sex with minors, the complaint alleges, based on statements from underage prostitutes who said they placed ads on the website at the insistence of their pimps.

California charges also were based on the National Center for Missing & Exploited Children’s report that 2,900 instances of suspected child sex trafficking detected on Backpage since 2012 arose in California.

Since at least 2011, Backpage has been targeted by politicians, law enforcement, religious groups and non-governmental organizations who decry the site’s hands-off policy regarding advertising. Backpage surmounted legal challenges from its detractors by relying on a First Amendment defense. In 2012, Backpage began suing states and other jurisdictions over what the website’s executives characterized as harassment in the form of unconstitutional laws intended to curtail its business. In every case, Backpage emerged the winner.

In December 2015, Backpage sued the federal government over the Stop Avertising Victims of Exploitation (SAVE) Act, which Backpage calls unconstitutional. The act contains a provision making consumer-generated ad platforms as culpable of sex trafficking as the individuals who place illegal ads. The lawsuit awaits a court date.

Michael Lacey, 68, and James Larkin, 67, who co-founded Backpage and remain its controlling shareholders, also have been charged with conspiracy to commit pimping. Warrants have been issued for their arrest. If convicted of the charges, Larkin and Lacey face maximum sentences of six years each; Ferrer faces nearly 22 years in prison.

The Backpage situation shares some features with a case against now-shuttered gay escort site Rentboy.com. Then-CEO Jeffrey Hurant and six employees were arrested during an August 2015 raid on the website’s parent company’s Manhattan, N.Y., offices. Allegations against the group included promotion of prostitution, money laundering, conspiracy as a “global criminal enterprise” and trafficking in underage sex. Prosecutors dropped charges against the six employees in February 2016. After months of speculation about a plea deal, on Oct. 7 Hurant pleaded guilty to promoting prostitution in exchange for a reduced sentence of no more than two years incarceration.

Image provided by Texas Attorney General’s office.

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