Judge Delays Trial of Ex-Backpage Owners and Execs Till May 5, 2020

The federal notice of censorship that now greets visitors to Backpage.com.
Over prosecutors' objections, U.S. District Court Judge Susan Brnovich ordered the trial date for former Backpage owners and execs pushed back about four months to Cinco de Mayo 2020.

On Monday, July 1, federal Judge Susan Brnovich ruled against the wishes of prosecutors and in favor of a defense motion to reset the start date for the trial of six ex-Backpage honchos, allowing two newly-appointed defense attorneys an additional four months of prep time in a wildly complex case, which has far reaching implications for the internet and the First Amendment.

The former owners and executives of the now-defunct online listings colossus were scheduled to go to trial January 15, 2020 on charges related to the promotion of prostitution, money laundering and conspiracy. But acceding to requests from lawyers for Andrew Padilla, Backpage’s onetime operations manager, and Joye Vaught, the company’s ex-assistant operations manager, Brnovich rescheduled the first day of trial for May 5, 2020 and reset several pretrial deadlines.

Padilla and Vaught are relative small-fry in the case. Out of a 100-count indictment, the feds have charged them with 51 counts: 50 for promoting prostitution in violation of the federal Travel Act, and one count of conspiracy. But they have avoided more serious charges of money laundering. Their co-defendants include Backpage’s co-founders, veteran newspapermen Jim Larkin and Michael Lacey, who are looking at the possibility of life in prison if convicted on the scores of counts they face.

Photo of a businessman in tie and jacket.
Backpage’s former operations manager Andrew Padilla before a U.S. senate hearing in January 2017.

Federal prosecutors seek to hold the defendants criminally liable for alleged illegal acts resulting from adult ads placed on Backpage.com by third parties. The feds unsealed the original indictment on April 6, 2018, arresting the defendants, raiding Lacey and Larkin’s homes and seizing and shutting down Backpage in an egregious example of direct government censorship. Of the accused, only Lacey and Larkin were forced to make bail at $1 million apiece.

Though the criminal charges were brought in Arizona, the federal government chose to go through the Central District of California in order to seize millions of dollars in assets as part of the operation, most of it belonging to Lacey and Larkin. As journalist and former Assistant U.S. Attorney Christine Biederman explained in a recent WIRED piece, the tactic is seen by many as a way to pressure the defendants to plead guilty by depriving them of the necessary funds to mount an expensive legal defense.

“The strategy is simple,” writes Biederman. “No money? No lawyers. QED.”

The defense is challenging the feds’ seizures, arguing that they are illegal under the First Amendment, which bars the government from the prior restraint of speech, such as seizing the assets of a publishing enterprise based merely on probable cause. On Tuesday, July 9, a three judge panel of the Ninth Circuit Court of Appeals in Pasadena, California will hear oral arguments regarding the asset seizures.

But with this latest ruling from Brnovich, the feds’ high-stakes gambit has had unintended consequences. The reason why Padilla and Vaught have new counsel who need several weeks to get up to speed is in part due to the feds’ seizure of bank accounts set up to pay for the defense’s legal expenses.

Padilla and Vaught originally were represented, respectively, by Tucson attorneys Michael Piccarreta and Steve Weiss, who were being paid through special accounts referred to as Interest on Lawyer Trust Accounts, or IOLTA accounts. According to court documents, Piccarreta began representing Padilla in January 2017, long before the indictments were handed down. Weiss became Vaught’s lawyer on March 30, 2018.

Photo of woman seated before a mic.
Federal Judge Susan Brnovich at her May 9 confirmation hearing before the U.S. Senate Judiciary Committee.

As Piccarreta and Weiss explained to the court in a February filing, at the time of the April 2018 arrests, prosecutors told other defense attorneys in the case that “the government was not seizing funds in attorney trust accounts.” This information later was related to Piccarreta and Weiss, and in fact, it is standard practice for prosecutors to leave such attorneys’ accounts unmolested.

But on Halloween 2018, the government changed course and obtained “ex parte seizure warrants for the attorney trust accounts of counsel for Mr. Padilla, Ms. Vaught, and other law firms who were not attorneys of record in the criminal case.”

Piccarreta and Weiss wrote that they only learned of the seizure warrants about a week after they were issued. The government advised them that they could keep any earned fees through the end of November 2018. From December 1 on, neither attorney was paid for their work on the case. The warrants eventually expired, but Piccarreta and Weiss said they did not dare touch the money as the government threatened that the result could be a criminal investigation of the attorneys.

Earlier that October, prosecutors had unsuccessfully sought to disqualify the defendants’ longtime First Amendment attorneys from the firm of Davis Wright Tremaine. Similarly, the government tried and failed to knock Lacey’s personal attorneys from the firm of Henze Cook Murphy off the defense.

The government seized funds in an IOLTA account for Davis Wright Tremaine set up to pay for the defense. Inadvertently, a number of other funds that had nothing to do with the Backpage case were frozen, causing a mess that took weeks to unravel.

As for the warrants out of California, defense attorneys were doing everything but standing on their heads trying to get a hearing to challenge them, but at the government’s request, the federal court in California deferred to the criminal case in Arizona. Meanwhile, also at the insistence of prosecutors, the judge at that time in the criminal case, Steven P. Logan, refused to interfere with another court’s warrants. (Logan has since recused himself for unknown reasons, with the case now assigned to Brnovich.)

Given this increasingly torturous process and the fact that their clients were indigent and their IOLTA accounts frozen, Piccarreta and Weiss moved in February to dismiss the charges against Padilla and Vaught “due to government interference” with the defendants’ Sixth Amendment right to counsel. If the judge refused, the lawyers asked to withdraw from the case.

Brnovich sided with the government on the motion to dismiss, but she allowed Piccarreta and Weiss to withdraw and ordered the clerk of court to appoint new counsel for Padilla and Vaught.

Enter veteran defense attorneys David Eisenberg and Joy Bertrand, who on May 3 were assigned to represent Padilla and Vaught, respectively, in accordance with the U.S. Criminal Justice Act, which allows the court to appoint defense attorneys for indigent defendants.

Eisenberg, a former federal prosecutor, filed a motion to continue the trial at the beginning of June to vacate the January 15, 2020 start date, pointing out that in addition to more than 10 million pages of discovery already produced by the government, there were 500 terabytes of server data to be reviewed, of which the defense only had access to about 60 terabytes.

The server data requires expensive, specialized software to view. And there are other problems, such as defense counsel not being able to access Backpage’s “internet systems, servers and data bases in the state they existed at the time the government seized the servers.”

The government itself, in an application to designate the case “complex,” noted that the charges span over a decade and involve “thousands upon thousands of ads” posted to Backpage, as well as “numerous” national and international financial transactions, “voluminous” items seizes by the government, and innumerable interview reports of the many witnesses in the case.

“Indeed, trial within less than ten months from the date of appointment in a case like this would deny the defendant effective assistance of counsel,” Eisenberg argued.

Vaught’s lawyer, Bertrand, joined Eisenberg’s request, stating in a notice to the court that even if she “spent every working hour,” for 40 hours a week, over 31 weeks reviewing documents, she would have to read “8,065 pages per hour,” which was impossible.

In his response to Eisenberg’s request, Assistant U.S. Attorney Kevin Rapp argued that a “considerable amount of discovery relevant to Padilla has been available since January 2017.”

Which might have been a convincing line of attack if Padilla’s original attorney were still on the case.

Rapp doesn’t address the charges against Vaught in his filing, but his description of the case against Padilla begs the question as to why Padilla was ever arrested to begin with. (A question that rightfully could be asked regarding all of the defendants.)

Rapp writes:

Padilla’s role in the offense was limited to his position as the head of Backpage’s moderation department. In other words, he was not present during the frequent management meetings where business practices (e.g., The Erotic Review, Rubmaps and other reciprocal link relationships, etc.) were discussed, he was not endorsed on numerous emails that involved public relation strategies, did not attend meetings with various organizations (i.e. NCMEC, Auburn Theological Seminary, Polaris, etc.) and law enforcement agencies (Washington State Attorney General’s Office, Cook County Sheriff’s Office, etc.), and did not have a percentage ownership in the company. These factors, among others, clearly distinguish him from the four primary defendants. Additionally and importantly, Padilla is not charged with money laundering (Counts 52- 100).

Did the government charge Padilla and Vaught in order to get them to plead and testify against Lacey and Larkin? If so, what better way to apply the screws than by seizing their chosen attorneys’ IOLTA accounts.

Brnovich’s ruling may be a victory for the defense, but the biggest pre-trial fights are still to come, including the case before the Ninth Circuit, and motions in the Arizona court to dismiss the case on First Amendment grounds and to compel the feds to turn over crucial evidence to the defense.

Stay tuned.

And ICYMI, read:
Michael Lacey and Jim Larkin Defiant in New Documentary by Reason Magazine
and
WIRED Magazine Warns Silicon Valley: Backpage Founders’ First Amendment Fight Is Yours Too

About Stephen Lemons

Stephen Lemons is an award-winning investigative journalist with more than 20 years of experience covering everything from government corruption to white-supremacist gangs. In addition to Front Page Confidential, his work has appeared in Phoenix New Times, the Los Angeles Times, Salon.com, and the Southern Poverty Law Center’s Intelligence Report magazine.

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