Carl Ferrer, the chief executive of Backpage.com whose name was conspicuously absent from an indictment of seven other Backpage officials unsealed Monday, has pleaded guilty in state courts in California and Texas and federal court in Arizona to charges of money laundering and conspiracy to facilitate prostitution. In addition, he agreed to testify against the men who co-founded Backpage with him, Michael Lacey and James Larkin, who remained in jail Thursday in Arizona on facilitating prostitution charges.
Backpage, in addition to hosting thinly veiled ads for prostitution since 2004, was accused of hosting child sex trafficking ads on its site and even assisting advertisers in wording their copy so they didn’t overtly declare that sex was for sale, federal investigators allege. In a remarkable three-paragraph admission in his federal plea agreement, Ferrer wrote that “I conspired with other Backpage principals … to find ways to knowingly facilitate the state-law prostitution crimes being committed by Backpage’s customers.”
Ferrer also acknowledged creating a “moderation” process to remove terms and pictures indicative of prostitution. “Such editing did not,” Ferrer wrote, “of course, change the essential nature of the illegal service being offered in the ad — it was merely intended to create a veneer of deniability for Backpage.” He said that these “editing practices were only one component of an overall, companywide 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.”
Federal and state authorities quietly took Ferrer on a three-state guilty plea tour beginning last week, but it was only revealed Thursday. Court records show that Ferrer pleaded guilty to conspiracy to facilitate prostitution and money laundering in federal court in Phoenix on April 5, with the hearing and documents sealed. Backpage.com also pleaded guilty, by Ferrer as the CEO, to a money laundering conspiracy in Phoenix, where Backpage was created. Ferrer then on Monday appeared in state court in Corpus Christi, Tex., where he personally pleaded guilty to money laundering, and he pleaded Backpage and other related entities guilty to human trafficking of a teenaged girl, and money laundering by concealing the proceeds from facilitating criminal activity.
On Thursday, Ferrer turned up in Sacramento, where he was first charged along with Lacey and Larkin in 2016, and again pleaded guilty to money laundering. He was then released on bond. His California plea agreement indicates prosecutors will seek no more than five years in prison, and federal prosecutors agreed that any sentence in Arizona would run concurrently to that. The Texas plea agreement also caps Ferrer’s prison exposure at five years, court documents show.
Ferrer’s sudden capitulation launched a wild seven days for Backpage. A day after Ferrer’s first secret plea, the federal government arrested seven of Ferrer’s former colleagues, including Lacey and Larkin, and shut down Backpage’s websites in the U.S. and around the world. The indictments were unsealed Monday, and the lack of charges for Ferrer raised questions about whether he was cooperating.
Then on Wednesday, President Trump signed into law “FOSTA,” the Fight Online Sex Trafficking Act, a bill inspired by the stories of children being prostituted on Backpage, raped for months or even years, and sometimes murdered. In addition to removing a liability shield for websites that host prostitution ads, it enables victims and state attorneys general to file lawsuits against such sites.
Trump signs ‘FOSTA’ bill targeting online sex trafficking, enables states and victims to pursue websites
Lacey and Larkin founded the Phoenix New Times alternative weekly newspaper in 1970 and eventually expanded it into a chain of weeklies that included New York’s Village Voice, hiring Ferrer along the way. In 2004, Lacey, Larkin and Ferrer created Backpage as an online way to sustain a classified advertising income after Craigslist destroyed print classified ads nationwide.
Eventually the trio sold the newspapers and just kept Backpage, which records obtained by the Senate investigations subcommittee found was enormously profitable. After Craigslist, under pressure from anti-trafficking groups, shut down its adult services ads in 2010, Backpage’s profits soared to more than $100 million per year in both 2013 and 2014, according to the federal indictment. Lacey and Larkin and two other co-defendants, Scott Spear and Jed Brunst, claimed that they sold Backpage in 2015 to two Dutch companies. But the new indictment alleged that Ferrer controlled those entities, that Ferrer borrowed most of the $600 million purchasing price from the four men supposedly selling Backpage, and that all five retained control of the sites in 97 countries.
In his California plea, Ferrer agreed to take down every Backpage website he could within five days, and to forfeit all domains related to Backpage within 14 days. The federal indictment seeks to seize 10 residences in California, Arizona, Texas and Illinois and 25 bank accounts, as well as 35 website domains.
When credit card companies and banks began refusing to process payments for the ads, Backpage found ways to shift money through various accounts to collect the profits, which Ferrer admitted in federal court was money laundering. “I worked with my co-conspirators to find ways to fool credit card companies into believing that Backpage-associated charges were being incurred on different websites,” as well as route Backpage money through seemingly unrelated entities, and to use companies which processed cryptocurrencies.
“I have long been aware,” Ferrer wrote, “that the great majority of these advertisements are, in fact, advertisements for prostitution services (which are not protected by the First Amendment and which are illegal in 49 states and in much of Nevada).”
California was the most persistent at trying to prosecute Backpage in criminal court, filing pimping and money laundering charges against Lacey, Larkin and Ferrer in 2016. A judge threw them all out in 2016, saying the site was protected by the Communications Decency Act, which was amended this week. Then-California Attorney General Kamala Harris refiled the charges, and a judge again threw out the pimping charges but allowed the money laundering charges to proceed. That is what Ferrer pleaded guilty to Thursday.
“This is such an important step forward for the many people who’ve been combating human trafficking,” said Maggy Krell, a former assistant attorney general in California who worked on the case until leaving the office last month. She was in court for Ferrer’s plea Thursday. “There is no one in the entire world who made more money off sex trafficking than the owners of this website. Seeing it shut down and having their business model become clearly illegal is really gratifying. If one case can change the world, it’s this case.”
Earlier this week, Lacey and Larkin had hearings in which they were ordered to remain in jail pending full detention hearings next week. The other five defendants, all former top officials of Backpage, were released.
NOTE: This post has been updated with the details of Ferrer and Backpage’s pleas in Texas.