Exhibit A 

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United States of America,

Plaintiff, 

v. 

Michael Lacey, et al.,

Defendants.

No. CR-18-422-PHX-SMB

UNITED STATES’ PROPOSED 

STATEMENT OF THE CASE

The government submits the following Statement of the Case and respectfully 

request the following be read to the jury in lieu of the Superseding Indictment:

This is a criminal case brought by the United States government. On July 25, 2018, 

a federal grand jury returned a 100-count Superseding Indictment charging six defendants: 

Michael Lacey, James (Jim) Larkin, John “Jed” Brunst, Scott Spear, Andrew Padilla and 

Joye Vaught with all or some of the following charges: (1) conspiracy to commit violations

of the Travel Act; (2) violations of the Travel Act; (3) conspiracy to commit money 

laundering; (4) concealment money laundering; (5) international promotional money 

laundering; (6) transactional money laundering; and (7) international concealment money 

laundering related to their roles in the creation, ownership, development, or management 

of the website www.backpage.com. Each defendant has pleaded not guilty to all charges 

and is presumed innocent. The United States has the burden of proving an individual guilty 

beyond a reasonable doubt. 

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The Superseding Indictment alleges that Backpage.com was an online classified 

website that was well known for being the internet’s leading source of prostitution 

advertisements. Backpage had markets in nearly every major city in the United States 

where prostitutes, pimps and traffickers could pay to post advertisements on 

www.backpage.com. The postings were thinly veiled solicitations for sex for money. 

Backpage derived the overwhelming majority of its revenue from these ads. These 

practices enabled Backpage to earn over $500 million in prostitution-related revenue 

during its fourteen years of existence.

Backpage was created in 2004 by defendants Michael Lacey (who at times held 

approximately a 45% ownership interest in Backpage), James Larkin (who at times held 

approximately a 43% ownership interest in Backpage), and a third individual, Carl Ferrer. 

Defendant Spear (who at times held approximately a 4% ownership interest in Backpage) 

served as Executive Vice President of one of Backpage’s parent companies. Defendant

Brunst (who at times held approximately a 6% ownership interest in Backpage) served as 

the Chief Financial Officer of Backpage. Defendants Padilla and Vaught served as 

Backpage’s Operation Manager and Assistant Operations Manager, respectively. Between 

2004 through 2015, Mr. Lacey and Mr. Larkin oversaw the website’s policy and strategic 

direction. In or around April 2015, Defendants Lacey, Larkin, Spear, and Brunst claimed 

to sell their interest in Backpage. However, they retained a significant financial interest 

and operational control over the website after the sale. They also continued to receive 

millions of dollars from Backpage. 

Michael Lacey is charged in the superseding indictment with Count 1, Conspiracy 

to Violate the Travel Act; Counts 2-51, Violations of the Travel Act by Facilitating 

Prostitution; Counts 53-62, Concealment Money Laundering; Counts 63-68, International 

Promotional Money Laundering; Counts 69-70, 81, 83-84, 86, 88-92, and 94-99, 

Transactional Money Laundering; and Count 100, International Concealment Money 

Laundering. 

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James Larkin is charged in the superseding indictment with Count 1, Conspiracy to 

Violate the Travel Act; Counts 2-51, Violations of the Travel Act by Facilitating 

Prostitution; Count 52, Conspiracy to Commit Money Laundering; Counts 53-62, 

Concealment Money Laundering; Counts 63-68, International Promotional Money 

Laundering; and Counts 80 and 87, Transactional Money Laundering.

Scott Spear is charged in the superseding indictment with Count 1, Conspiracy to 

Violate the Travel Act; Counts 2-51, Violations of the Travel Act by Facilitating 

Prostitution; Count 52, Conspiracy to Commit Money Laundering; Counts 53-62, 

Concealment Money Laundering; Counts 63-68, International Promotional Money 

Laundering; and Counts 71-78, 85 and 93, Transactional Money Laundering. 

John “Jed” Brunst is charged in the superseding indictment with Count 1, 

Conspiracy to Violate the Travel Act; Counts 2-51, Violations of the Travel Act by 

Facilitating Prostitution; Count 52, Conspiracy to Commit Money Laundering; Counts 53-

62, Concealment Money Laundering; Counts 63-68, International Promotional Money 

Laundering; and Counts 69-70, 78-84, and 86-93, Transactional Money Laundering. 

Andrew Padilla and Joye Vaught are charged in the superseding indictment with 

Count 1, Conspiracy to Violate the Travel Act; and Counts 2-51, Violations of the Travel 

Act. 

The United States alleges the Defendants were aware that the vast majority of the 

“adult” and “escort” ads appearing on Backpage were actually prostitution ads and took 

steps to intentionally promote and facilitate that illegal activity. During Backpage’s early 

years, the company’s employees were trained to identify prostitutes who were posting ads 

on rival websites and to create free ads on Backpage for them in an attempt to recruit the 

prostitutes’ future business. These affirmative content-creation efforts were described 

internally as “content aggregation” or the “Dallas Plan,” and was vital to Backpage’s early 

growth and success. 

The United States alleges that Backpage employed other business strategies 

specifically designed to promote and facilitate prostitution. For example, for several years, 

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Backpage had a reciprocal link agreement with The Erotic Review (“TER”). TER was a 

website where customers could post explicit “reviews” of their encounters with prostitutes, 

including descriptions of prices charged for particular sex acts. Backpage paid thousands 

of dollars to TER in return for assistance in getting TER’s customer base to start using 

Backpage. 

In addition to creating prostitution-related content, the United States alleges that 

Backpage utilized a variety of strategies to conceal the true nature of the ads being posted 

on its website. At times, Backpage employed computerized filters and human moderators 

to edit or block ads that explicitly offered sexual services for a fee. Internal company 

emails suggest, that despite these editing practices, Defendants were well aware that the 

overwhelming majority of the website’s ads involved prostitution.

Asthe years passed, Backpage received increased criticism from anti-sex trafficking 

organizations, child advocacy groups like the National Center for Missing and Exploited 

Children (NCMEC), and the state attorneys general due to the number of ads featuring 

child sex trafficking. Publicly, Backpage sought to create the perception that it was 

diligently attempting to prevent the publication of such ads while declining – for financial 

reasons – to take necessary steps to address the problem. 

The United States alleges that the vast majority of Backpage’s revenue represented 

the proceeds of illegal activity. In fact, by 2015, the major credit card companies stopped 

processing payments for Backpage and some banks closed Backpage’s accounts out of 

concern they were being used for illegal purposes. In response, the United States alleges 

Defendants began to pursue an array of money laundering strategies. For example, 

Defendants instructed customers to send checks or money orders to a post office box, 

deposited the payments into bank accounts held in the names of entities with no apparent 

connection to Backpage, and then gave customers “credits” on Backpage to purchase new 

ads. Defendants also wired Backpage’s proceeds to bank accounts in foreign countries and 

redistributed the funds to Defendants as compensation or redeposited the funds in bank 

accounts held in the United States. 

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In or around April 2015, Defendants Lacey, Larkin, Spear, and Brunst appeared to 

sell their ownership interests in Backpage and several related entities for around $600 

million to various Dutch entities. In reality, the Dutch entities were controlled by 

Backpage’s Chief Executive Officer Carl Ferrer, who “borrowed” approximately $600 

million from entities controlled by the four Defendants to finance the purchase. As a result 

of this financial arrangement, Defendants Lacey, Larkin, Spear, and Brunst retained 

significant financial interest and operational control of Backpage after the transactions 

were completed. 

In January 2017, after conducting a lengthy investigation, the United States Senate 

Subcommittee on Permanent Investigations issued a report entitled “Backpage.com’s 

Knowing Facilitating of Online Sex Trafficking.” In response to this report, Backpage 

claimed to shut down the “adult” section of its website. However, all that meant was that 

the prostitution ads migrated to other sections of the website, where they remained until 

the website was shut down by federal law enforcement authorities in April 2018. 

For purposes of the Superseding Indictment, the United States has identified 17

specific victims who posted, or had posted on their behalf, ads offering sexual services for 

money. Of the 17 victims, five were children at the time their ads were posted on 

Backpage. 

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