Co-founder pleads guilty

The Arizona Republic - - Front Page - Me­gan Cas­sidy and Richard Rue­las

The for­mer CEO of Back­page.com has pleaded guilty to a con­spir­acy charge in­volv­ing fa­cil­i­tat­ing pros­ti­tu­tion and money laun­der­ing, the U.S. De­part­ment of Jus­tice an­nounced on Thurs­day, nearly a week af­ter seiz­ing the con­tro­ver­sial clas­si­fied site.

Carl Fer­rer, 57, of Frisco, Texas, who is also a co-founder of the web­site, could spend up to five years in prison or pay a max­i­mum fine of $250,000, ac­cord­ing to the plea agree­ment, which re­quires him to co­op­er­ate with the gov­ern­ment in shut­ting down the site.

The an­nounce­ment of Fer­rer’s plea comes three days af­ter the gov­ern­ment un­sealed a sweep­ing fed­eral in­dict­ment against Fer­rer’s for­mer co-work­ers. In that in­dict­ment, Back­page co-founders Michael Lacey and James Larkin, as well as five other ex­ec­u­tives, face 93 charges in­volv­ing fa­cil­i­tat­ing pros­titu-

tion through the Back­page site and money laun­der­ing.

Fer­rer was not listed as one of those de­fen­dants, but the ini­tials C.F. were named through­out the in­dict­ment. That per­son tracks with the ac­tions and emails sent by Fer­rer that were quoted in a U.S. Se­nate re­port re­leased in Jan­uary 2017.

In a plea agree­ment signed April 5 — one day be­fore the Back­page seizure — Fer­rer pleaded guilty to con­spir­acy to fa­cil­i­tate pros­ti­tu­tion us­ing a fa­cil­ity in in­ter­state or for­eign com­merce and to en­gage in money laun­der­ing.

A DOJ press re­lease said sev­eral Back­page-re­lated cor­po­rate en­ti­ties, in­clud­ing Back­page.com LLC, have en­tered guilty pleas to con­spir­acy to en­gage in money laun­der­ing.

Fer­rer’s plea agree­ment re­quires him to take “all steps within his power” to shut­ter the Back­page web­site, and to pro­vide tech­ni­cal assistance to the gov­ern­ment to do so.

“If the de­fen­dant fails to take all steps within his power to im­me­di­ately shut down the web­site, this plea agree­ment shall be null and void and the United states shall be free to pros­e­cute the de­fen­dant for all crimes of which it then has knowl­edge,” the plea agree­ment reads.

In a press state­ment, U.S. At­tor­ney Gen­eral Jeff Ses­sions praised the seizure of Back­page.

“For far too long, Back­page.com ex­isted as the dom­i­nant mar­ket­place for il­licit com­mer­cial sex, a place where sex traf­fick­ers fre­quently ad­ver­tised chil­dren and adults alike,” he said. “But this il­le­gal­ity stops right now.”

Fer­rer, ac­cord­ing to the Se­nate re­port, worked in the clas­si­fied-ad­ver­tis­ing sec­tion of a Dal­las-based New Times pa­per and lob­bied Lacey and Larkin in 2004 to move those ads into cy­berspace.

Back­page had sev­eral sec­tions where goods and ser­vices, such as fur­ni­ture and au­tos, could be of­fered. But by 2011, ac­cord­ing to an in­ter­nal his­tory ob­tained by Se­nate in­ves­ti­ga­tors, more than 93 per­cent of its weekly ad rev­enue came from adult ads.

Un­der Fer­rer’s di­rec­tion, Back­page em­ployed vary­ing mod­er­at­ing sys­tems that pur­ported to stop bla­tant ads for pros­ti­tu­tion from ap­pear­ing on the site. It be­gan with an au­to­mated sys­tem, ac­cord­ing to the Se­nate re­port.

Fer­rer, ac­cord­ing to the in­ter­nal emails, was heav­ily in­volved in deal­ing with mod­er­a­tors hired to po­lice the ads, both in the United States and in In­dia.

He would dis­cuss, in emails, whether var­i­ous terms should be al­lowed. The stan­dards of ads would vary based on whether the site was un­der scru­tiny from law en­force­ment or the me­dia, the emails showed.

For ex­am­ple, af­ter CNN aired a re­port in Jan­uary 2011 crit­i­cal of Back­page, Fer­rer sent an email sug­gest­ing the terms “daddy” and “lit­tle girl” be added to a list of banned terms.

Craigslist was the dom­i­nant op­tion for racy “es­cort” ads that ad­vo­cates and law en­force­ment be­lieved were fronts for pros­ti­tu­tion ac­tiv­ity. Craigslist, bow­ing to pres­sure, closed its adult sec­tion in 2010.

Back­page, ac­cord­ing to in­ter­nal emails re­leased to the U.S. Se­nate un­der sub­poena, saw a po­ten­tial wind­fall.

“Craig killed his adult sec­tion last night in all US mar­kets,” read a Septem­ber 2010 email from Back­page CEO Carl Fer­rer. “It is an op­por­tu­nity for us. Also a time when we need to make sure our con­tent is not il­le­gal.”

Fer­rer was also in­volved, ac­cord­ing to the Se­nate re­port, in at­tempt­ing to ob­scure Lacey and Larkin’s fi­nan­cial in­volve­ment in Back­page through a sale to Fer­rer. The two loaned Fer­rer $600 mil­lion to pur­chase the com­pany, the re­port said.

The in­dict­ment quotes from an ed­i­to­rial in which Lacey bragged that Back­page was help­ing im­prove the pros­ti­tu­tion in­dus­try.

“Back­page is part of the so­lu­tion,” Lacey wrote, as quoted in the in­dict­ment. “For the very first time, the old­est pro­fes­sion in the world has trans­parency, record keep­ing and safe­guards.”

Af­ter re­view­ing Lacey’s ed­i­to­rial, ac­cord­ing to the in­dict­ment, Larkin told Fer­rer to pre­vent “any of this in­for­ma­tion from be­ing made pub­lic.”

Fer­rer, ac­cord­ing to the in­dict­ment, edited the pas­sage out.

Fer­rer’s plea agree­ment in­cluded a fac­tual ba­sis, in which Fer­rer ad­mits he was aware that most of the ads placed on Back­page were for pros­ti­tu­tion ser­vices.

The state­ment says Fer­rer and his “co-con­spir­a­tors” cre­ated a mod­er­a­tion process in which Back­page would re­move pho­tos and phrases that were clearly re­lated to pros­ti­tu­tion.

The web­site then would re­pub­lish the re­vised ver­sion of the ad.

This, the state­ment said, cre­ated a “ve­neer of de­ni­a­bil­ity for Back­page.”

“These edit­ing prac­tices were only one com­po­nent of an over­all, com­pany-wide cul­ture and pol­icy of con­ceal­ing and re­fus­ing to of­fi­cially ac­knowl­edge the true na­ture of the ser­vices be­ing of­fered in Back­page’s ‘es­cort’ and ‘adult’ ads,” the state­ment said.

The state­ment went on to say that over time, many banks, credit-card com­pa­nies and other fi­nan­cial in­sti­tu­tions re­fused to do busi­ness with the web­site, due to its il­le­gal na­ture.

To get around this, the state­ment said Fer­rer and other Back­page ex­ec­u­tives would work to “fool” credit-card com­pa­nies into be­liev­ing Back­page-associated charges were be­ing in­curred on dif­fer­ent web­sites.

Carl Fer­rer

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