A three-judge panel of the Ninth Circuit rejected Michael Lacey and Jim Larkin's appeal involving the feds' 2018 seizure of their assets, saying it lacks jurisdiction at this stage.
Ruling strictly on procedural grounds, a three-judge panel of the Ninth Circuit Court of Appeals recently dismissed a challenge to the federal government’s seizure of millions of dollars in assets belonging to longtime publishers and journalists Michael Lacey and Jim Larkin, the former owners of the now-defunct classified listings site, Backpage.com.
In a four-page memorandum dated August 19, the jurists unanimously accepted the government’s logic that the panel currently lacks authority over a lower court’s order rejecting First Amendment arguments raised by Lacey and Larkin’s lawyers.
Without commenting on the merits of those arguments, the panel affirmed that it had “no appellate jurisdiction” to review the district court’s denial, ruling that the test for “determining appellate jurisdiction” remained the same “even when seizure warrants are challenged under the First Amendment.”
It was a setback for Lacey and Larkin in what has been a titanic struggle over the seizure over all of the men’s assets two years ago when they were arrested in Phoenix and charged with conspiracy, money laundering and the facilitation of prostitution in violation of the U.S. Travel Act.
The government spuriously contends that Lacey and Larkin are responsible for the illegal conduct of third parties, allegedly linked to adult ads posted by users to Backpage, which Lacey and Larkin sold in 2015.
Federal and state courts repeatedly found the publication of such ads to be legal, protected by both the First Amendment and Section 230 of the Communications Decency Act, a federal law that generally holds interactive websites harmless for third-party content.
“They’re doing everything they can to legally starve the defendants.” — Michael Piccarreta, former president of the Arizona State Bar
But in a bid to financially hamstring the two men’s defense, prosecutors used warrants issued by federal magistrates in the Central District of California to seize 89 bank accounts, including monies earned from Lacey and Larkin’s onetime ownership of a 17-paper alt-weekly chain, Village Voice Media.
The feds also placed liens on all of the men’s properties, preventing them from being sold or otherwise used to raise funds. Lacey and Larkin’s homes were raided by the FBI. Their personal possessions, cars, even their wives’ jewelry, were confiscated as “evidence of wealth.”
Lacey and Larkin’s lawyers argue that the seizures are unconstitutional, and have challenged them, variously, under the First, Fourth, Fifth and Sixth Amendments, twice going before Ninth Circuit panels, seeking appellate relief.
In the wake of this latest ruling, one attorney for the two men, speaking off the record, tells Front Page Confidential (FPC) that Lacey and Larkin are reviewing their legal options, such as a motion for reconsideration by the same panel or a request for an en banc review by the entire Ninth Circuit bench.
But the consequences of this legal donnybrook extend beyond Lacey and Larkin and their fight for freedom — to all publishers, online or not.
The Power of the State
According to a June 2019 analysis done by the Pew Research Center, only 2 percent of federal criminal defendants go to trial.
Most — 90 percent — plead guilty, with courts dismissing the cases of the remaining 8 percent.
Of those who go to trial, less than half prevail.
And if you seriously believe that over 91 percent of all federal defendants are guilty as charged, there’s a Nigerian prince out there who needs your online assistance in securing his fortune.
The federal government has vast resources to bring to bear against those it wants to bury. And civil asset forfeiture is one of many weapons in its arsenal. This widespread, much-denounced law enforcement tool pre-dates the U.S. Constitution, and extends back to the days of seizing pirate vessels on the high seas.
Presently, it’s prosecutors who tend to resemble the rapacious pirates of yore, wielding asset forfeiture like a well-sharpened cutlass. The process involves local or federal authorities taking possession of cash or property, which they allege has been used in the furtherance of a crime or is the result of one. To get it back, you have to go to court and prove that the assets are clean.
In U.S. v. Lacey and Larkin, prosecutors have used the legal tactic to separate the defendants from their money, which otherwise would be a lifeline in a criminal case expected to last 12 weeks or more, with millions of documents to review, and up to 100 government witnesses.
By seeking the bulk of the seizures through federal courts in Los Angeles, prosecutors essentially opened up a second front in the legal war against Lacey and Larkin, forcing the defense to wage battle in another state while the criminal case continued in Phoenix federal court.
(Note: Civil asset forfeiture also offers a lower standard of proof for the prosecutor: instead of the “beyond a reasonable doubt” standard used in criminal cases, the burden is the “preponderance of the evidence,” or a better than 50 percent chance that the allegation is true.)
According to a June 2019 analysis done by the Pew Research Center, only 2 percent of federal criminal defendants go to trial. Most — 90 percent — plead guilty . . . Of those who go to trial, less than half prevail.
In addition to seizing all of Lacey and Larkin’s assets, the government seized trust accounts set up for or belonging to members of their families. And prosecutors seized millions of dollars set aside for the work of their First Amendment attorneys with the firm Davis Wright Tremaine (DWT), though government lawyers failed in an attempt to kick DWT off the case entirely.
The feds were more successful, however, in seizing money set aside for the defense of former Backpage employees Andrew Padilla and Joye Vaught, forcing their private attorneys to withdraw from the case. The court subsequently appointed public defenders to represent Padilla and Vaught, who are two of Lacey and Larkin’s four co-defendants.
In an interview with FPC last year, Padilla’s onetime lawyer, former Arizona State Bar president Michael Piccarreta told Front Page Confidential that the asset seizures were part of the prosecution’s cutthroat plan to win at all costs.
“With the seized monies, it’s been nothing but gamesmanship from the beginning,” Piccarreta said. “They’re doing everything they can to legally starve the defendants.”
First Amendment Ping Pong
Lacey and Larkin filed their initial First Amendment challenge to the government’s asset seizures in August 2018 before federal Judge R. Gary Klausner.
Their lawyers sought an adversarial hearing to argue that the First Amendment barred the pretrial seizure of a publisher’s assets. The seizure warrants were based only on probable cause, and the First Amendment requires a higher standard, Lacey and Larkin’s attorneys argued.
If you seriously believe that over 91 percent of all federal defendants are guilty as charged, there’s a Nigerian prince out there who needs your online assistance in securing his fortune.
As First Amendment attorney Robert Corn-Revere with Davis Wright Tremaine would later write in an appellate brief filed on May 19:
“The controlling legal principle here is simple: The Government cannot seize proceeds of a publishing venture based on allegations the publication was ‘illegal’ until after the Government has established the speech at issue is unprotected by the First Amendment.”
Corn-Revere asserts that the government cannot simply presume speech, in this case the publication of adult advertising on Backpage, is illegal. That is the very issue to be determined in the criminal trial, which is currently scheduled to begin January 12, 2021, in Phoenix. In fact, there is a mountain of evidence showing that Backpage abided by the law, and a number of federal and state courts already have so ruled.
But the government outmaneuvered Lacey and Larkin’s initial request for a hearing by seeking a stay in the civil proceedings, arguing that the civil case in L.A. could adversely affect the criminal case in Phoenix, where the government is also seeking the criminal forfeiture of Lacey and Larkin’s assets.
Judge Klausner agreed and issued the stay on October 23, 2018, suggesting that Lacey and Larkin could raise the issue with the federal court in Phoenix. When they did just that, the trial judge in the criminal case at the time, the Honorable Steven P. Logan, ruled that he could not interfere with asset seizure warrants issued by another court.
A few days after Klausner’s stay, Lacey and Larkin filed a notice of appeal to the Ninth Circuit.
Interestingly, jurisdiction was a contentious issue in this first appeal, as it would be on the second and most recent appeal.
A three-judge panel in the first appeal accepted jurisdiction, and following oral arguments in July 2019, issued a ruling, vacating Klausner’s stay and remanding the case back to his court for further “adjudication” of the issues raised by Lacey and Larkin.
In December 2019, Klausner formally rejected Lacey and Larkin’s First Amendment arguments, writing, “As a threshold issue, commercial speech related to illegal activity is not protected under the First Amendment.”
Lacey and Larkin’s attorneys again filed for appeal.
Rubber, Meet Road
Now that a new panel of the Ninth has dismissed that second appeal, the fight over the seized assets continues in Klausner’s court, while Lacey and Larkin await the opportunity to prove their innocence.
Prosecutors aim to put both men, now in their 70s, in prison for the rest of their lives, based on the criminal acts of third parties — people Lacey and Larkin don’t know — based on ads the two men never saw.
To encourage this outcome, the government has engaged in a number of scurrilous tactics, from failing to preserve the single most important piece of evidence in the case, Backpage itself, in a searchable, read-only format, to slandering Lacey and Larkin as having been involved in “child sex trafficking,” when they have never been charged with any form of trafficking. Nor could they be.
Keeping the two men from their assets as long as possible is perhaps the most pernicious of the prosecution’s tactics. Not only does it prevent that money being used for Lacey and Larkin’s defense, it also allows the government, in a roundabout way, to violate the First Amendment rights of publishers.
“The implications of the government’s estimation of its authority is hardly exaggerated,” Corn-Revere wrote in the appeals brief cited above. “It would permit the government to seize Mark Zuckerberg’s assets based on accusations that Facebook facilitates recruiting by terrorist organizations, or Craig Newmark’s assets because of reports about murders connected to Craigslist posts.”
These are not fanciful hypotheticals, by the way. Social media giants largely have proven ineffective at keeping all harmful and illegal content off their sites.
For example, in 2018, Bloomberg Businessweek found that “at least a dozen U.S.-designated terror groups maintain a presence on Facebook,” including “Hamas and Hezbollah in the Middle East, Boko Haram in West Africa, and the Revolutionary Armed Forces of Colombia (FARC).”
On another front, according to a 2019 New York Times piece, Facebook accounts for “over 90 percent of [Child Sexual Abuse Material, aka, child pornography] flagged by tech companies last year,” and, “Facebook has announced that the main source of the imagery, Facebook Messenger, will eventually be encrypted, vastly limiting detection.”
Regarding Craigslist, in 2016, The Washington Post reported that more than 100 murders had been linked to postings on the site.
Craigslist also had an adult services section, until they did away with it in 2010. But after the passage of FOSTA/SESTA in 2018, a federal law that de facto outlawed adult advertising online, Craigslist nixed its personals section as well, stating, “Any tool or service can be misused.” CNN noted that Craigslist personals section included “similar ads” to its censored adult section.
So, with both Republicans and Democrats talking about doing away with Section 230, the Backpage prosecution can be seen as a test case for taking on Silicon Valley.
Nor would legacy media or other means of expression, such as film, be immune to such backdoor violations of the First Amendment.
As Corn-Revere wrote in his opening appellate brief in January, if allowed to stand, the government’s seizure of Lacey and Larkin’s assets sets a dangerous precedent, one that would “entirely undermine the fundamental basis of much First Amendment law” and open “a massive loophole that would allow the government to circumvent many critical precedents that protect freedom of speech and of the press.”
And for the time being, it stands.
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