Backpage.com CEO pleads guilty in prostitution, money-laundering case

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Backpage.com, a classified advertising website that faced persistent allegations of profiting from illegal prostitution, was shut down by the U.S. government Friday as authorities reportedly brought criminal charges against seven of those involved in operating the site.
USA TODAY

PHOENIX — The CEO and co-founder of Backpage.com has pleaded guilty to charges of facilitating prostitution and money laundering, the Department of Justice announced on Thursday, nearly a week after seizing the controversial online classifieds site. 

Carl Ferrer, 57, of Frisco, Texas, 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 prostitution 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 the actions and emails sent by Ferrer that were quoted in a U.S. Senate report released in January 2017.

More: How outsourcing to India gave prosecutors a window into Backpage operations

More: 93-count indictment on sex trafficking charges revealed against Backpage founders

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 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 (online) marketplace for illicit commercial sex, a place where sex traffickers frequently advertised children and adults alike,” he said. “But this illegality stops right now.”

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.

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Cindy McCain on April 6, 2018, lauded the indictment of one of Backpage’s co-founders, Michael Lacey.

“Craig killed his adult section last night in all US markets,” read a September 2010 email from 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 lent 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, recordkeeping 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.

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