The #BackpageTrial resumes at 9 a.m., Monday, Oct. 23, in Phoenix’s federal court. For regular updates during breaks in the proceedings, follow @stephenlemons on Twitter/X.

If the Law Doesn’t Fit, You Must Acquit . . .

After nearly six weeks of testimony in Phoenix’s federal court in the Backpage trial, the prosecution rested its case on Friday, Oct. 20, and the defense immediately moved for a judgment of acquittal, arguing that the government failed to present sufficient evidence to sustain a conviction.

Referred to by the legal shorthand, “Rule 29,” the motion, if granted by U.S. District Court Judge Diane Humetewa, could end the trial before the defense begins presenting its case, which is expected to begin Tuesday afternoon.

Defense attorneys argued passionately that the government has not proved the essential elements of the underlying charges: facilitating misdemeanor state prostitution offenses under the U.S. Travel Act, allegedly because each of the five defendants either worked for or partly owned the classified listings site, Backpage.com, a competitor of Craigslist.org before the government seized and destroyed it on April 6, 2018.

The language of the Travel Act, a Kennedy-era statute passed to target the mafia, is both tortured and specific. The law makes it illegal for anyone to use “the mail or any facility in interstate or foreign commerce” to “promote, manage, establish, carry on, or facilitate . . . any unlawful activity,” which is defined as “any business enterprise involving gambling, liquor . . .  narcotics or controlled substances . . . or prostitution offenses in violation of” state or federal law.

According to the prosecution, veteran newspaperman Michael Lacey and his four co-defendants somehow achieved this criminal legerdemain via adult-themed ads posted by Backpage’s users in the site’s massage, escort, and dating sections.

Fifty ads are listed in the indictment, and the prosecution cannot show and has not attempted to show that any of the five defendants on trial ever saw these ads or was aware of who posted them.

This is a major problem, defense attorney Gopi Panchapakesan told Humetewa during oral arguments over the motion on Friday, because the Travel Act is a “specific intent” crime, a phrase referring to the knowledge of wrongdoing required by the law.

Panchapakesan, who represents former chief financial officer Jed Brunst, argued that the government failed to show that any of the defendants had the “specific intent” to promote or facilitate a “business enterprise” involving prostitution.

The attorney pointed out that the government apparently believes the “business enterprises” at issue consist of the individuals who posted the ads, presumably, a prostitute and/or a pimp.

“The defendant must know the ad,” Panchapakesan argued, adding, “You cannot promote a business enterprise if you don’t know it exists.”

According to Panchapakesan, “generalized knowledge” of possible illegal activity connected to an advertisement is not enough under the law. He pointed to a May 2020 ruling by a prior judge in the case, Judge Susan Brnovich.

In it, Brnovich wrote that the defendants were not indicted for “facilitating the amorphous notion of `prostitution.’”

Rather, they were indicted for “facilitating (via published ads) on 50 distinct occasions where prostitutes, prostitution-related businesses, or other groups were involved in the business of prostitution.”

Brnovich recused herself for unknown reasons in late 2021 shortly after granting a defense motion for mistrial in the first, abortive Backpage trial. Regardless, her ruling stands as part of the “law of the case,” Panchapakesan said.

Panchapakesan cited various precedents, one being the 1972 U.S. Supreme Court Case, U.S. vs. Gibson, in which the high court found that under the Travel Act, a prosecutor must show that the defendant “in some significant manner associated himself with the purchaser’s criminal venture for the purpose of its advancement.”

The court wrote:

“Were we not to define intent in the Travel Act in this manner, the act would be plagued by the very overexpansiveness which Congress sought to rule out by inclusion of an express mens rea requirement.”

Mens rea, Latin for “guilty mind,” is a legal term referring to the criminal intent of the alleged lawbreaker.

Some statutes distinguish between a “specific” intent and a “general” intent to commit a crime.

Conspiracy Ad Infinitum

All five defendants, including former Backpage employees Andrew Padilla and Joye Vaught, are charged with 50 Travel Act counts and one count of conspiracy to violate the Travel Act. Lacey, Brunst, and executive vice president Scott Spear face additional money laundering and conspiracy counts.

Regarding the alleged “conspiracy” to violate the Travel Act, Panchapakesan argued that it “has to be bound by something,” and if not the 50 ads, what then? After all, the indictment focuses on “50 ads out of millions” that ran on the site.

The defendants would need specific knowledge of each ad, not just general knowledge of the untold millions of advertisements that ran on Backpage. In fact, Panchapakesan noted, Congress specifically passed FOSTA/SESTA in 2018 to get around the fact that existing laws were not suited to prosecuting Backpage.

Regarding the money-laundering counts, the transactions involved were lawful and there was no attempt at concealment, Panchapakesan said. Some of the money laundering counts involve the 2015 sale of Backpage to a Dutch holding company ultimately owned by the man who created and ran the interactive platform, Carl Ferrer, now the government’s star witness.

Though the government has depicted the sale as a “sham,” it was, in fact, what’s known as a “seller-financed deal,” in which Lacey and his former business partner, the late Jim Larkin, loaned Ferrer the money to buy them out.

As Backpage at its height was making more than $100 million per year. Hypothetically, Ferrer could have paid off the $600 million sales price in less than six years.

This was the “legitimate sale of a business,” Panchapakesan, and Ferrer was making principal and interest payments on the loan to the former owners. The transaction was governed by a loan agreement, and when Ferrer got behind in his payments at one point, he entered into “forbearance” agreements on the loan, in which he was only required to pay the interest.

Lacey’s attorney Paul Cambria joined the Rule 29 motion, repeating Brnovich’s statement about the defendants not being charged with “facilitating the amorphous notion of `prostitution.’” Otherwise, why were these 50 specific ads charged?

Citing court precedents, Cambria also argued that any First Amendment instruction to the jury must make clear that unless an ad is “illegal on its face,” it is presumptively protected by the First Amendment. Police officers testifying for the prosecution said they could not make an arrest for prostitution based solely on these ads.  The vague language and risqué photos in the ads did not provide cops with the requisite probable cause.

Regarding the money laundering charges, two of which involve funds Lacey moved offshore before the indictment was handed down, Cambria argued that the government had not made a prima facie case that there was anything illegal about the transactions.

There was “no concealment,” “no fake names,” and “no fake companies,” said Cambria. And, per the testimony of a former IRS investigator, all information about the transactions was “readily available,” allowing the investigator to create a flow chart showing the movement of money from Backpage to those who sold the company to Ferrer: Lacey, Larkin, Brunst, and Spear.

Bruce Feder, attorney for Scott Spear, said Backpage voluntarily instituted many of the suggestions its critics made, and there had been “no testimony” that his client knew of the 50 ads in the indictment or knew who created the ads.

Everyone’s Guilty But Us

No doubt the government views Backpage’s operations manager, Andrew Padilla, and his assistant, Joye Vaught, as collateral damage. They were merely employees of the company. They weren’t owners or high-ranking execs.

The feds wanted them to roll. Both refused plea deals that would have required their “cooperation”; i.e., testifying against the others.

Vaught’s attorney, Joy Bertrand, told the court that Vaught was “hired to police the site,” and was “uniquely situated in this case.” She didn’t sign up for any “conspiracy,” and there’s “no evidence she knew what Carl Ferrer was doing.”

Indeed, Ferrer couldn’t pronounce her name correctly on the stand and struggled to identify her for the court. She wasn’t present at any of the meetings cited by the government, and she was practically “used as a human shield” by Ferrer.

Concerning the plea deal where all charges would eventually be dropped if she sang like Ferrer, Bertrand said Vaught told her, “I’m not going to lie to save my skin.”

David Eisenberg, Padilla’s attorney, estimated that Padilla oversaw the moderation of approximately 13.5 million ads on Backpage from Sept. 2013 to Feb. 2018.

The moderation rules “kept changing,” Eisenberg said. Padilla “was not the person who made those rules.” Rather, he had “the thankless task to implement those rules,” with 400 moderators in the U.S. and abroad at Backpage’s peak.

Prosecutors “overcharged this case,” he told the court, and its allegation of a boundless conspiracy was “almost at a point of absurdity.”

Arguing for the government, Assistant U.S. Attorney Peter Kozinets said the testimony showed that “escort meant prostitute” and that Padilla and Vaught were tasked with “making the ads look less like prostitution ads.”

They “ran the moderation department,” which he called “the engine room” of Backpage. They were the “tip of the spear,” according to Kozinets?

“Tip of the spear”? Really?

Such assertions, made against mere employees of a company that operated legally in the U.S. from 2004 till 2018, are proof positive that federal prosecutors regard every ordinary innocent man, woman, and child in this country as a criminal — exempting themselves, of course.

The other content on the site? It was meant to “deceive,” said Kozinets, to portray Backpage as a general interest classified listings site when “the entire revenue model was prostitution.”

And yet, testimony from government witnesses undercuts this. Dan Hyer, Backpage’s former marketing director, who, like Ferrer, has struck a deal with the feds, described how Backpage was created specifically to challenge Craigslist.org, which also had adult-themed ads as well as ads for a panoply of non-adult goods and services.

And Ferrer testified that if the adult portion of Backpage had been jettisoned, the site still would’ve been profitable.

Kozinets asserted that the sale to Ferrer was a fraud, but if that were the case, why did Ferrer pay principal and interest on the loan? If Ferrer paid off his massive IOU, the former owners would have had zero claim on the business.

But Kozinets stumbled when Humetewa asked him about the 50 ads. Each count was related to “a particular ad on a particular day” and didn’t there have to be evidence of “a substantive act” in furtherance of promoting a “business enterprise” related to those ads, she asked?

Kozinets assured her there was “ample evidence,” or at least, “enough to put it in front of the jury.”

Just “enough to put it in front of a jury”?

Yep, that seems to sum up the government’s entire case.

The #BackpageTrial resumes at 9 a.m., Monday, Oct. 23, in Phoenix’s federal court. For regular updates during breaks in the proceedings, follow @stephenlemons on Twitter/X.

Please also see:
Backpage Attorneys Undercut Testimony of NCMEC and Polaris Honchos
and
Groundhog Day: Prosecutors Elicit Inflammatory Testimony in #BackpageTrial, Defense Moves for Mistrial