Federal prosecutors in the Backpage case appear to be employing a strangulation strategy: Swipe the defendants’ money, then go after their lawyers.
Attorneys for veteran newspapermen Michael Lacey, Jim Larkin, and their co-defendants in the Backpage.com case jousted with federal prosecutors in Phoenix over a government motion to disqualify a team of First Amendment lawyers from the prestigious firm of Davis Wright Tremaine.
On Friday, October 5, during a three-hour hearing in the courtroom of U.S. District Judge Steven P. Logan, a cadre of defense attorneys argued that critical First Amendment issues were at stake, as well as their clients’ Fifth and Sixth Amendment right to counsel.
Thomas Bienert, representing Larkin, asserted that the First Amendment is at the heart of the case.
“Our clients are not guilty, because what is alleged here against our clients is not a crime as it relates to them. Why? Because of the First Amendment,” Bienert told the judge.
The government’s actions also conflict with a federal law that generally protects online platforms and interactive websites against liability for the content that users post.
“Our clients are not guilty, because what is alleged here against our clients is not a crime as it relates to them,” defense attorney Thomas Bienert declared. “Why? Because of the First Amendment.”
Six months ago, on April 6, the FBI seized and shut down Backpage and arrested seven current or former company executives. The government singled out Lacey and Larkin, who co-founded Backpage in 2004 to compete with Craigslist, for special treatment. The two men’s homes were raided, their assets and valuables seized. They were jailed for a week before being granted hearings, at which each was freed on a $1 million bond.
In a related case, a federal judge in California has yet to rule on motions in which the defendants have challenged the asset seizures, also on First Amendment grounds.
Larkin, Lacey, and the other defendants face multiple felony charges of conspiracy, money laundering, and facilitating prostitution on the website, which hosted millions of classified ads for everything from apartment rentals to dog sitters. Prosecutors contend that Backpage’s owners and operators knowingly “used a variety of strategies” to camouflage ads for prostitution by making them appear to be solicitations for dating or escort services or other lawful activities.
It’s a rationale Bienert flatly rejected at the hearing.
“The First Amendment issues make clear that publishers are not responsible for any criminal acts of people who take out ads in their published materials,” he stated. “Now, the government disputes that, I get it, but that is the main principle of our defense — before we even get to all of the factual issues. So first and foremost, the First Amendment issues infect this case from cradle to grave.”
Bienert argued further that defending against the government’s charges requires the expertise of Davis Wright Tremaine, whose First Amendment attorneys “frankly are among, if not the best, in the country.”
For many years and in various jurisdictions across the country, Bienert explained, Davis Wright’s First Amendment duo of Robert Corn-Revere and Jim Grant have successfully defended Backpage and its former owners from criminal and civil claims arising from adult advertising that appeared on the website.
Invoking both the First Amendment and Section 230 of the Communications Decency Act of 1996, the law that grants immunity to website operators for third-party content, Davis Wright has rebuffed criminal indictments, overturned adverse rulings on appeal, and nullified laws in three states, in cases involving allegations that Backpage promoted prostitution (consensual commercial sex among adults) and/or sex trafficking (commercial sex that involves minors, or adults who were induced via force, fraud, or coercion).
Lacey and Larkin sold their interests in Backpage to CEO Carl Ferrer in 2015, but Davis Wright continued to represent Backpage and all three men.
Six days after seizing Backpage, the government revealed that it had secretly flipped Ferrer, who had signed a plea agreement the day before the Backpage arrests, pleading guilty to state and federal money-laundering charges and agreeing to cooperate with the prosecution.
Davis Wright has since withdrawn from representing Ferrer and Backpage while continuing to play a role in the case on behalf of all of the defendants.
In motions and in Judge Logan’s courtroom, government attorneys argued that Davis Wright can no longer continue to represent any of the defendants in the ongoing criminal case, even in an advisory capacity, because to do so would violate Arizona’s rules of professional conduct for lawyers, which forbid attorneys from representing clients whose interests are adverse to a former client.
Assistant U.S. Attorney Peter Kozinets called Davis Wright’s continued involvement in the case “impermissible” under Arizona’s ethical rules, adding that it was “hard to imagine a starker conflict [of interest].”
But defense lawyers pointed out that Ferrer had waived all attorney-client privilege in his deal with the government, and additionally, that he’d previously signed three joint defense agreements with Lacey and Larkin, allowing Davis Wright to remain as counsel if Ferrer withdrew from the pact.
The defense team had previously stipulated that Davis Wright’s role would be limited to First Amendment issues and that the firm’s attorneys would not cross-examine Ferrer.
Additionally, the government seeks to disqualify Lacey’s longtime attorneys from the Phoenix firm of Henze Cook Murphy, on the same professional-conduct rules, despite the fact that their role in the case is restricted to issues concerning their client’s pretrial release and details about his financial assets, which are tied up in the California forfeiture proceedings.
Defense lawyer Michael Piccarreta accused the government of a “multi-prong attack,” which involved seizing the accused’s assets and attempting to kick Davis Wright Tremaine off the case.
When Tucson attorney Michael Piccarreta, who represents former Backpage operations manager Andrew Padilla, addressed Judge Logan, he raised yet another issue: He pointed out that, were the defendants to be convicted after being forbidden to retain their choice of counsel, such a verdict would risk an “automatic reversal” by a higher court on Sixth Amendment grounds. Piccarreta implied that the government is willing to take the risk in order to obtain a “tactical advantage” over the defense.
A past president of the State Bar of Arizona, Piccarreta characterized the disqualification motion as part of a “multi-prong attack” that included the asset seizures and a data dump during the discovery phase of the case, in which the government supplied the defense with 10.5 million documents in “an unusual format.” Parsing the data, he said, will require the use of special software that could result in up to $800,000 in costs, not including the hours that attorneys will have to devote to making sense of the information.
“I think it was definitely a tactical thing to [use] a multi-prong attack to seize assets of the defendants, to render them impecunious, to disqualify the most qualified counsel, to give us disclosure…that would cost hundreds and hundreds of thousands of dollars [to decipher],” he said.
During one testy exchange, Judge Logan asked Piccarreta whether the defense attorney was alleging misconduct on the part of the government lawyers:
Judge Logan: But you’re certainly not making an argument that the United States Government is engaging in some form of prosecutorial misconduct?
Piccarreta: I’m not making that argument at this time. All I’m saying is we have these one, two, three, four incidents. My eyes are open. We’ll see how the case progresses.
Several other motions were on the day’s agenda, including a prosecution request that Judge Logan affirm that the government can keep all of the seized assets until after the trial is concluded.
The trial is not slated to begin until early 2020, and there were indications during the hearing that the massive quantities of documents might lead to delays .
Bienert asked the judge to deny the government’s request, noting that the propriety of the seizure — which he said involves “$100 million in various clients’ assets” — is already being contested in California.
Characterizing the government’s machinations as “an illegal seizure marred by misconduct,” Bienert again invoked Constitutional precedent, noting, “You are not allowed to seize pretrial proceeds or materials from First Amendment matters without a full evidentiary hearing.”
Bienert asserted that prosecutors have failed to show that the seized assets were likely “obtained from a criminal act.”
In fact, Lacey and Larkin were highly successful publishers long before Backpage.com. Beginning with the founding of Phoenix New Times in 1970, the business partners built a coast-to-coast chain of alternative weeklies, Village Voice Media. In 2012, they sold the company, since renamed Voice Media Group, to a group of veteran company executives.
“[T]he government’s in essence telling you, ‘Rubber stamp that we can keep this [money] until sometime in 2020. And if we lose the case, okay, well, we agree they get their stuff back two years later, having been deprived of it all. And if we win the case, we have a right to then establish and trace it to [the alleged criminal acts],'” Bienert argued.
Arguing in support of the forfeiture motion, Assistant U.S. Attorney John Kucera joined the hearing by phone from Los Angeles.
“They’re making noises about the First Amendment, but they’re making no distinction between the proceeds of criminal activity and something more akin to like a prior restraint,” Kucera countered. “The government is not seeking to prohibit any type of First Amendment activity. It is seeking the proceeds of criminal acts.”
Logan then adjourned the hearing without indicating when he might rule on the motions.
Asked outside of the courtroom if he believed the government’s seizure was part of an orchestrated plan to railroad the defendants, Bienert said he was unwilling to go that far, but that the defense team believes the feds used “material misrepresentations and omissions” in applying for warrants to seize the assets.
“We believe that if a judge had seen the true facts in law, it is unlikely [the court] would have issued the warrants to begin with,” Bienert said.