Co-founder pleads guilty
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.