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United States District Court

2:18-cr-00422-DJH, October 26, 2023 P.M.

 UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

_______________ 

United States of America, )

 )

 Plaintiff, )

vs. )

 ) 2:18-cr-00422-DJH 

Michael Lacey, et al., )

 ) 

 Defendants. )

 ) October 26, 2023 

 ) 1:30 p.m. 

__________________________________ )

BEFORE: THE HONORABLE DIANE J. HUMETEWA, JUDGE

REPORTER'S TRANSCRIPT OF PROCEEDINGS

JURY TRIAL - DAY 25 P.M. 

Official Court Reporter: 

Elaine Cropper, RDR, CRR, CCP

Sandra Day O'Connor U.S. Courthouse, Suite 312 

401 West Washington Street, SPC 35 

Phoenix, Arizona 85003-2151 

elaine_cropper@azd.uscourts.gov 

Proceedings Reported by Stenographic Court Reporter

Transcript Prepared by Computer-Aided Transcription

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Case 2:18-cr-00422-DJH Document 1932 Filed 10/28/23 Page 1 of 91
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United States District Court

2:18-cr-00422-DJH, October 26, 2023 P.M.

MISCELLANEOUS NOTATIONS

Item Page 

 Proceedings outside the presence of the jury 5

 Defendant Padilla rests 15

 Defendant Spear rests 15

 Defendant Brunst rests 15

 Defendant Vaught rests 15

 Defendant Lacey rests 15

 Final jury instructions 15

 Government's closing argument 52

RECESSES

 Page Line 

(Recess at 1:54; resumed at 1:59.) 14 1

(Recess at 3:06; resumed at 3:21.) 52 8

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Case 2:18-cr-00422-DJH Document 1932 Filed 10/28/23 Page 2 of 91
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2:18-cr-00422-DJH, October 26, 2023 P.M.

A P P E A R A N C E S 

For the Government: 

 KEVIN M. RAPP, ESQ.

PETER S. KOZINETS, ESQ.

ANDREW C. STONE, ESQ.

MARGARET WU PERLMETER, ESQ.

 U.S. Attorney's Office

 40 N, Central Ave., Ste. 1800 

 Phoenix, AZ 85004-4408 

 kevin.rapp@usdoj.gov 

peter.kozinets@usdoj.gov 

andrew.stone@usdoj.gov 

margaret.perlmeter@usdoj.gov 

AUSTIN M. BERRY, ESQ.

U.S. Department of Justice 

Child Exploitation and Obscenity Section 

1301 New York Ave., NW, 11th Fl. 

Washington, D.C. 20005 

austin.berry2@usdoj.gov 

For the Defendant Michael Lacey: 

 PAUL J. CAMBRIA, JR., ESQ.

 Lipsitz Green Scime Cambria, L.L.P.

 42 Delaware Ave., Ste. 120

 Buffalo, NY 14202

 pcambria@lglaw.com

 

For the Defendant Scott Spear: 

 BRUCE S. FEDER, ESQ.

 Feder Law Office, P.A.

 2390 E. Camelback Road, Ste. 160

 Phoenix, AZ 85016

 bf@federlawpa.com

 ERIC W. KESSLER, ESQ.

 Kessler Law Office

 9237 E. Via De Ventura, Ste. 230 

 Scottsdale, AZ 85253 

eric.kesslerlaw@gmail.com 

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Case 2:18-cr-00422-DJH Document 1932 Filed 10/28/23 Page 3 of 91
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United States District Court

2:18-cr-00422-DJH, October 26, 2023 P.M.

A P P E A R A N C E S (Continued) 

For the Defendant John Brunst: 

 GOPI K. PANCHAPAKESAN, ESQ.

 GARY S. LINCENBERG, ESQ.

 Bird Marella Boxer Wolpert Nessim Drooks 

Lincenberg & Rhow, P.C.

 1875 Century Park E. Ste. 2300

 Los Angeles, CA 90067

 gpanchapakesan@birdmarella.com

glincenberg@birdmarella.com 

For the Defendant Andrew Padilla: 

 DAVID S. EISENBERG, ESQ.

 David Eisenberg, P.C.

 3550 N. Central Ave., Ste. 1155

 Phoenix, AZ 85012

david@deisenbergplc.com 

For the Defendant Joye Vaught: 

 JOY MALBY BERTRAND, ESQ.

 Joy Bertrand, Esq., L.L.C.

 P.O. Box 2734

 Scottsdale, AZ 85252-2734

 joy@joybertrandlaw.com 

 

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2:18-cr-00422-DJH, October 26, 2023 P.M.

P R O C E E D I N G 

(Court was called to order by the courtroom deputy.)

(Proceedings begin at 1:30.)

(Proceedings outside the presence of the jury.)

THE COURT: All right. Please be seated. The jury

instructions have been provided to you in hard copy. I know

that it was only done momentarily but I would ask you just to

look at very quickly the substantive instructions to make sure

that there are no glaring errors.

And Liliana, did I receive a revised form of verdict?

And then the form of verdict has been revised as was

previously discussed. And because the defendants have raised

the imperfections in verdict form as part of their motion for

judgment of acquittal, I am going to as well incorporate that

into my continuing consideration and reserve my determination.

I'll incorporate that argument into that determination.

I just wanted parties to be clear on that.

All right. Is there any reason that we should not

call forward the jury.

MR. STONE: We're not quite done looking at the jury

instructions, Your Honor.

THE COURT: Okay. I'll give you a few more minutes.

Someone on your prosecution and defense team should

be looking at the form of verdict then.

MR. STONE: We have, Your Honor. It looks good. 01:32:56

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COURTROOM DEPUTY: Ladies and gentlemen in the

gallery, cell phones should be silenced and they are not

permitted to be used in the courtroom. Thank you.

MR. STONE: Your Honor, page 43 of the jury

instructions. This is the Count 100?

THE COURT: Yes.

MR. STONE: The third element where it reads: Thirds

defendant Lacey knew that transportation, and then the last

clause where it says: To avoid the transaction reporting

requirement under state or federal law, the statute actually

reads in the disjunctive so it should be "or." There's the

designed in whole or in part to conceal or disguise the nature,

location, source, ownership, or control of the proceeds of the

Travel Act violation or to avoid a transaction reporting

requirement under state or federal law.

THE COURT: Okay. So what I'm missing is after

violations "or to avoid"?

MR. STONE: And we aren't traveling under that

theory, quite frankly, so we would be fine just deleting to

avoid a transaction reporting requirement under state or

federal law.

THE COURT: Any objection?

MR. CAMBRIA: Yes, Your Honor. I think it should

stay the way it is.

THE COURT: Well, the stay the way it is with the 01:35:11

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incorporation of the "or"?

MR. CAMBRIA: No, that isn't the way it is.

THE COURT: Fair point.

MR. STONE: The statute is clear that it's in the

disjunctive.

THE COURT: And I would agree with that so it's

either "or to avoid" or removing "to avoid."

MR. CAMBRIA: No. Give me one second here. The way

it is, it's all right as far as I'm concerned.

THE COURT: All right. Mr. Stone, he has no

objection to it as it is but you want to remove "to avoid"?

MR. STONE: I'm sorry. He's -- Mr. Cambria is okay

with the "or" being put in there?

THE COURT: No. He's okay with the way it's worded

now.

MR. STONE: I'm sure he's okay with the way it's

worded now.

THE COURT: I'm sorry. I'm trying to figure out what

it was that Mr. Cambria just said but my screen froze. Let

me -- 

Can you do a test? It's not moving. 

Yes, yes, please. 

Can I get a clarification again, Mr. Cambria. Wait.

Let me ask you the question. You object to the inclusion, of

"or to avoid a transaction"? 01:37:00

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MR. CAMBRIA: No.

THE COURT: Okay. You agree with the insertion of

"or"?

MR. CAMBRIA: The way I read this, "or" is in here.

THE COURT: Are you on the right -- we're looking at

43.

MR. CAMBRIA: Page 43. The last paragraph, conceal

or disguise the nature, location, et cetera. That's fine with

me.

THE COURT: Well, the question that we're on is in

the very last line "or control of the proceeds of the Travel

Act violations or to avoid a transaction," and what the

Government is indicating, because it is in the disjunctive, to

remove everything after "or control of the proceeds of the

Travel Act violations."

MR. CAMBRIA: Or to avoid a transaction reporting

requirement under state or federal law. I'm okay with that.

THE COURT: Okay. I'm doing this one more time. So

the Government wants to remove after "violations" and end the

sentence there. Is there an objection?

MR. CAMBRIA: Yes.

THE COURT: I think the "or" should be included. And

so we will insert "or" and then leave the remainder of the

language in.

MR. STONE: That's fine. Just the "or" is necessary. 01:39:25

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Thank you.

THE COURT: We'll make that change immediately and

we're printing those for the jury right now, but I'm not going

to give you new instructions. You're just going to have to

pencil in these changes. I'm just making them for the JERS

instruction packet.

All right. Anything else?

MR. EISENBERG: Your Honor, you've asked the defense

whether the verdict form is appropriate and I think as far as

we're all concerned, it is. I haven't checked the exhibit

numbers for each of the counts, but from my recollection, from

looking at this before, they seem accurate but I just -- I

don't have a way of doing that and if it's wrong, we can:

THE COURT: Well, now is the time and I think Mr.

Panchapakesan was the person that took the leader cap on the

verdict form, so I assumed that because he proposed the exhibit

numbers --

MR. EISENBERG: I would have no reason to think that

there is any error.

THE COURT: Okay. Okay. So we're going to make that

modification to the juror packets. Give us a few minutes to do

that.

Any other modifications, nits or anything of the like

from the Government?

Well, as they are huddled, why don't I turn to 01:41:18

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defense and see if there are any modifications, nits, anything

related to the substantive charges?

MR. CAMBRIA: Yes. I object to the very last

instruction on speech.

THE COURT: Duly noted.

MR. CAMBRIA: Thank you.

MR. STONE: Okay, Your Honor. Just one more I

believe. It's page 24. This is dealing with the conspiracy

count.

MS. BERTRAND: Is this the instructions?

MR. STONE: The instructions. Are you there, Your

Honor?

THE COURT: Yes.

MR. STONE: In the paragraph that reads, for a

conspiracy to have existed, the last sentence reads: You must

find that there was a plan to commit at least one of the crimes

alleged in the indictment as an object of the conspiracy with

all of you agreeing to this particular crime, i.e., the Travel

Act violation. I think before it read "violations." You know,

the language is clear that they need to agree to the particular

crime. But there have been multiple Travel Act violations

alleged, so I think the plural would be accurate here.

THE COURT: So would it be more accurate to say just

a Travel Act violation?

MR. STONE: No. Conspiracy, generally, you don't 01:42:43

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need to find one particular crime. You just need to find that

the statute was conspired to be violated. So it's a little

confusing to point it to one crime. Conspiracy is an inchoate

crime so you don't need to have everyone agree to conspiracy to

commit to Count 6. They could acquit on 2 through 51 and find

Count 1.

THE COURT: So it should read: I.e. the Travel Act

violations which the conspirators agreed to commit.

MR. STONE: Or get rid of "the" and just say Travel

Act violations.

THE COURT: Any objection to removing "which the

conspirators agreed to commit"?

MS. BERTRAND: Your Honor, I think this goes back to

the defense's concerns about a variance or amendment of the

indictment and the prior rulings of this Court. I would ask

that the Trial Act -- Trial Act, that's a different matter --

Travel Act violation as currently set forth in the jury

instructions remain. I don't know what my colleagues are going

to say about that but that's my initial take on it.

THE COURT: Well, if there's no disagreement other

than what the Government has proposed, I'm just going to modify

to make the violations plural so let's just include the Travel

Act violations. Keep everything after that.

(Discussion off the record.)

THE COURT: No. Let's leave "the" in, i.e., the 01:44:21

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Travel Act violations.

All right. Anything other than that? From the

Government?

MR. STONE: I don't think so, Your Honor. Thank you.

THE COURT: Anything from the defense in terms of the

substantive charges?

MR. CAMBRIA: No, Your Honor.

MS. BERTRAND: No, Your Honor, as long as our prior

objections are noted, I think we're fine.

MR. EISENBERG: I have none, Your Honor.

MR. FEDER: No.

MR. PANCHAPAKESAN: No, Your Honor.

THE COURT: Okay. We'll add those to the jury's

copy.

While we have a couple minutes while we're waiting

for that, let me ask you to write this down as a to-do and I'll

expect I think probably by maybe Tuesday morning.

I am not convinced, after looking at a little bit of

the case law and the procedure on whether or not the

defendants, should a conviction result on any of the counts,

including the money laundering counts, I'm not entirely sure

that you're entitled to a jury trial. And so I would like some

briefing on that. I've seen some case law that seems to

suggest that it could simply be to the Court. There might be a

distinction in terms of the property seized; but in any event, 01:46:07

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I think that I would like to, number one, have you brief the

matter and tell me whether or not you are entitled to a jury

trial on the forfeiture count. And then set forth how

procedurally you think that would occur and I think that could

be done in seven pages or less. And so by Tuesday morning, if

you would provide me that, that would be very helpful.

And let me just make sure, Mr. Rapp, you have your

equipment ready to go. I assume you're going to be using the

electronic --

MR. RAPP: I am. So you want to roll right in from

reading into closings?

THE COURT: Yes.

MR. RAPP: Then I would like to get the lapel

microphone if I could.

COURTROOM DEPUTY: Okay. I'll put in a new battery.

MR. BERRY: So you're not going to give the jury a

break?

THE COURT: Well, these are very thick instructions.

I don't know. If you think you want, like, ten minutes or

something like that, we'll just see how long it takes for me to

read these.

Okay. We'll take about five more minutes. If anyone

needs to excuse themselves briefly, just be back in five.

MR. STONE: Your Honor, we do have --

THE COURT: Well, we've got counsel leaving so . . . 01:54:03

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(Recess at 1:54; resumed at 1:59.)

THE COURT: Mr. Stone was going to raise some issue.

MR. STONE: Your Honor, the only thing I was going to

point out and we're happy to do the research into the case law

but the rule is -- rules of criminal procedure 32.2(b)(5) which

talks about jury determination and it reads, "In any case tried

before a jury, if the indictment or information states that the

government is seeking forfeiture, the court must determine

before the jury begins deliberating whether either party

requests that the jury be retained to determine the

forfeitability of specific property if it returns a guilty

verdict."

THE COURT: Well, again, I'll expect the briefing on

Tuesday but I was looking at some Ninth Circuit law that seems

to call that into doubt.

MR. STONE: Okay. And we will do that, Your Honor.

THE COURT: All right. Okay. So are we ready?

Is the Government ready?

MR. RAPP: Yes.

THE COURT: Defense ready?

MR. EISENBERG: Yes, Your Honor.

MR. PANCHAPAKESAN: Yes.

THE COURT: All right. Let's have the jury in.

All rise for the jury.

(Jury enters at 2:02.) 02:02:15

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THE COURT: All right. Please be seated.

And the record will reflect the presence of the jury.

And members of the jury, I do appreciate your patience with us.

Again, these are important parts of the process that we have to

determine that don't necessarily require your presence and so I

do appreciate your presence and your patience with us.

And so the defense call its next witness.

MR. EISENBERG: Your Honor, the defense rests, at

least as far as Mr. Padilla goes.

THE COURT: Mr. Feder?

MR. FEDER: Same.

THE COURT: Mr. Lincenberg?

MR. LINCENBERG: Your Honor, the defense rests.

THE COURT: Ms. Bertrand?

MS. BERTRAND: Yes, Ms. Vaught rests. Thank you.

THE COURT: Mr. Cambria?

MR. CAMBRIA: Yes, Mr. Lacey rests, Your Honor.

THE COURT: Is the Government prepared for its

rebuttal case?

MR. RAPP: That won't be necessary. Thank you.

THE COURT: All right. Well, at this juncture,

members of the jury, the parties have rested their respective

cases and so I am going to take a moment to hand you out some

jury instructions and you may follow along.

Okay. I do now see that everyone has been handed a 02:04:29

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copy of the jury instructions. Members of the jury, now that

you have heard all of the evidence, it is my duty to instruct

you on the law that applies to this case. A copy of these

instructions will be available in the jury room for you to

consult.

It is your duty to weigh and to evaluate all the

evidence received in the case and in that process, to decide

the facts. It is also your duty to apply the law as I give it

to you to the facts as you find them, whether you agree with

the law or not. You must decide the case solely on the

evidence and the law. You will recall that you took an oath

promising to do so at the beginning of the case. You should

also not be influenced by any person's race, color, religious

beliefs, national ancestry, sexual orientation, gender

identity, gender, or economic circumstances. Also, do not

allow yourself to be influenced by personal likes or dislikes,

sympathy, prejudice, fear, public opinion, or biases, including

unconscious biases. Unconscious biases are stereotypes,

attitudes, or preferences that people may conscientiously

reject but may be expressed without conscious awareness,

control, or intention.

You must follow all these instructions and not single

out some and ignore others. They are all important. Please do

not read into these instructions or into anything I may have

said or done as any suggestion as to what verdict you should 02:06:04

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return -- that is a matter entirely up to you.

The indictment is not evidence. Defendants have

pleaded not guilty to the charges. Each defendant is presumed

to be innocent unless and until the United States provides

(sic) the defendant guilty beyond a reasonable doubt. In

addition, none of the defendants have to testify or present any

evidence. The defendants do not have to prove innocence. The

United States has the burden of proving every element of the

charges beyond a reasonable doubt.

A defendant in a criminal case has a constitutional

right not to testify. In arriving at your verdict, the law

prohibits you from considering in any manner that the defendant

did not testify.

Proof beyond a reasonable doubt is proof that leaves

you firmly convinced that a defendant is guilty. It is not

required that the Government prove guilt beyond all possible

doubt.

A reasonable doubt is a doubt based upon reason and

common sense and not based purely on speculation. It may arise

from a careful and impartial consideration of all of the

evidence, or from lack of evidence.

If after a careful and impartial consideration of all

of the evidence, you are not convinced beyond a reasonable

doubt that a defendant is guilty, it is your duty to find the

defendant not guilty. 02:07:39

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On the other hand, if after a careful and impartial

consideration of all of the evidence, you are convinced beyond

a reasonable doubt that a defendant is guilty, it is your duty

to find the defendant guilty.

The evidence you are to consider in deciding what the

facts are consists of, first, the sworn testimony of any

witness; and, second, the exhibits received in evidence.

In reaching your verdict, you may consider only the

testimony and exhibits received in evidence.

The following things are not evidence, and you may

not consider them in deciding what the facts are:

One, questions, statements, objections, and arguments

by the lawyers are not evidence. The lawyers are not

witnesses. Although you must consider a lawyer's questions to

understand the answers of a witness, the lawyer's questions are

not evidence. Similarly, what the lawyers have said in their

opening statements, will say in their closing arguments, and

have said at other times is intended to help you interpret the

evidence, but it is not evidence. If the facts as you remember

them differ from the way the lawyers state them, your memory of

them controls.

Two, any testimony that I have excluded, stricken, or

instructed you to disregard is not evidence. In addition, some

evidence was received only for a limited purpose; when I have

instructed you to consider certain evidence in a limited way, 02:09:15

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you must do so.

Three, anything you may have seen or heard when the

court was not in session is not evidence. You are to decide

the case solely on the evidence received at the trial.

Evidence may be direct or circumstantial. Direct

evidence is direct proof of a fact, such as testimony by a

witness about what that witness personally saw or heard or did.

Circumstantial evidence is indirect evidence, that is, it is

proof of one or more facts from which you can find another

fact.

You are to consider both direct and circumstantial

evidence. Either can be used to prove any fact. The law makes

no distinction between the weight to be given to either direct

or circumstantial evidence. It is for you to decide how much

weight to give to any evidence.

In deciding the facts of this case, you may have to

decide which testimony to believe and which testimony not to

believe. You may believe everything a witness says, or part

it, or none of it. In considering the testimony of any

witness, you may take into account the following:

First, the opportunity and ability of the witness to

see or hear or know the things testified to; second, the

witness's memory; third, the witness's manner while testifying;

fourth, the witness's interest in the outcome of the case, if

any; fifth, the witness's bias or prejudice, if any; sixth, 02:10:50

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whether other evidence contradicted the witness's testimony;

seventh, the reasonableness of the witness's testimony in light

of all the evidence; and, eighth, any other be factors that

bear on believability.

Sometimes a witness may say something that is not

consistent with something else he or she said. Sometimes

different witnesses will have different versions of what

happened. People often things or make mistakes in what they

remember. Also, two people may see the same event but remember

it differently. You may consider those differences, but do not

decide that testimony is untrue just because it differs from

other testimony.

However, if you decide that a witness has

deliberately testified untruthfully about something important,

you may choose not to believe anything that witness said. On

the other hand, if you think the witness testified untruthfully

about some things but told the truth about others, you may

accept the part you think is true and ignore the rest.

The weight of the evidence as to a fact does not

necessarily depend on the number of witnesses who testify.

What is important is how believable the witnesses were, and how

much weight you think their testimony deserves.

You have heard evidence that Carl Ferrer, a witness,

made prior statements under oath that were inconsistent with

his testimony at trial. You may consider this evidence in 02:12:34

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deciding whether or not to believe this witness and how much

weight to give the testimony of this witness.

You have heard testimony from Carl Ferrer and Dan

Hyer, witnesses who received favored treatment from the

Government in connection with this case and pleaded guilty to a

crime arising out of the same events for which the defendants

are on trial. These guilty pleas are not evidence against the

defendants, and you may consider Carl Ferrer and Dan Hyer's

pleas only in determining their believability.

For these reasons, in evaluating testimony of Carl

Ferrer and Dan Hyer, you should consider the extent to which or

whether their testimony may have been influenced by their

pleas. In addition, you should examine the testimony of Carl

Ferrer and Dan Hyer with greater caution than that of other

witnesses.

You have heard testimony from Kimberly

Mehlman-Orozco, who testified about her opinions and the

reasons for those opinions. This opinion evidence is allowed

because of the specialized knowledge, skill, experience,

training, or education of this witness.

Such opinion testimony should be judged like any

other testimony. You may accept it or reject it, and give it

as much weight as you think it deserves, considering the

witness's knowledge, skill, experience, training, or education,

the reasons given for the opinion, and all the other evidence 02:14:04

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in the case.

During the trial, certain charts and summaries were

shown to you to help explain the evidence in the case. These

charts and summaries were not admitted into evidence and will

not go into the jury room with you. They are not themselves

evidence or proof of any facts. If they do not correctly

reflect the facts or figures shown by the evidence in the case,

you should disregard these charts and summaries and determine

the facts from the underlying evidence.

Certain charts and summaries have been admitted into

evidence. Charts and summaries are only as good as the

underlying supporting material. You should, therefore, give

them only such weight as you think the underlying material

deserves.

You are here only to determine whether the defendants

are guilty or not guilty of the charges in the indictment. The

defendants are not on trial for any conduct or offense not

charged in the indictment.

A separate crime is charged against one or more of

the defendants in each count. The charges have been joined for

trial. You must decide the case of each defendant on each

crime charged against that defendant separately. Your verdict

on any count as to any defendant should not control your

verdict on any other count or as to any other defendant.

All the instructions apply to each defendant and to 02:15:39

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each count unless a specific instruction states that it applies

only to a specific defendant and count.

The indictment charges that the offenses alleged were

committed on or about a certain date.

Although it is necessary for the Government to prove

beyond a reasonable doubt that the offense was committed on a

date reasonably near the date alleged in the indictment, it is

not necessary for the Government to prove that the offense was

committed precisely on the date charged.

When you begin your deliberations, elect one member

of the jury as your foreperson who will preside over the

deliberations and speak for you here in court.

You will then decide the case with your fellow jurors

to reach agreement if you can do so. Your verdict, whether

guilty or not guilty, must be unanimous.

Each of you must decide the case for yourself, but

you should only do so only after you have considered all the

evidence, discussed it fully with the other jurors, and

listened to the views of your fellow jurors.

Do not be afraid to change your opinion if the

discussion persuades you that you should. But do not come to a

decision simply because the other jurors think it is right.

It is important that you attempt to reach a unanimous

verdict but, of course, only if each of you can do so after

having made your own conscientious decision. Do not change an 02:17:16

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honest belief about the weight and effect of the evidence

simply to reach a verdict.

Perform these duties fair and impartially. You

should also not be influenced by any person's race, color,

religious beliefs, national ancestry, sexual orientation,

gender identity, gender or economic circumstances. Also, do

not allow yourself to be influenced by personal likes or

dislikes, sympathy, prejudice, fear, public opinion or biases,

including unconscious biases. Unconscious biases are

stereotypes, attitudes, or preferences that people may

consciously reject but may be expressed without conscious

awareness, control, or intention.

It is your duty as jurors to consult with one another

and to deliberate with one another with a view towards reaching

an agreement if you can do so. During your deliberations, you

should not hesitate to reexamine your own views and change your

opinion if you become persuaded that it is wrong.

Because you must base your verdict only on the

evidence received in the case and on these instructions, I

remind you that you must not be exposed to any other

information about the case or to the issues it involves.

Except for discussing the case with your fellow jurors during

your deliberations:

Do not communicate with anyone in any way and do not

let anyone else communicate with you in any way about the 02:18:53

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merits of the case or anything to do with it. This restriction

includes discussing the case in person, in writing, by phone,

tablet, computer, or any other means, via email, text

messaging, or any Internet chat room, blog, website or any

other forms of social media. This restriction applies to

communicating with your family members, your employer, the

media or press, and the people involve in the trial. If you

are asked or approached in any way about your jury service or

anything about this case, you must respond that you have been

ordered not to discuss the matter and to report the contact to

the court.

Do not read, watch, or listen to any news or media

accounts or commentary about the case or anything to do with

it; do not do any research, such as consulting dictionaries,

searching the Internet or using other reference materials; and

do not make any investigation or in any other way try to learn

about the case on your own.

The law requires these restrictions to ensure the

parties have a fair trial based on the same evidence that each

party has had an opportunity to address. A juror who violates

these restrictions jeopardizes the fairness of these

proceedings, and a mistrial could result that would require the

entire trial process to start over. If any juror is exposed to

any outside information, please notify the court immediately.

Some of you have taken notes during the trial. 02:20:27

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Whether or not you took notes, you should rely on your own

memory of what was said. Notes are only to assist your memory.

You should not be overly influenced by your notes or those of

your fellow jurors.

The punishment provided by the law for this crime is

for the court to decide. You may not consider punishment in

deciding whether the Government has proved its case beyond a

reasonable doubt -- I'm sorry, has proved its case against the

defendants beyond a reasonable doubt.

A verdict form has been prepared for you. After you

have reached unanimous agreement on a verdict, your foreperson

should complete the verdict form according to your

deliberations, sign and date it, and advise the courtroom

deputy that you are ready to return to the courtroom.

Let me just take a moment to describe the verdict

form to you.

It does include a verdict as to each of the counts

that are charged in the indictment as well as the remaining

counts through 100 and there is a corresponding count table

with an explanation of the date of the alleged act and a

reference to an exhibit number as to each of counts. It's

fairly straightforward and it should follow along with your

instructions.

Now, if it becomes necessary during your

deliberations to communicate with me, you may send a note 02:22:13

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through the courtroom deputy signed by any one or more of you.

No member of the jury should ever attempt to communicate with

me except by a signed writing, and I will respond to the jury

concerning the case only in writing or here in open court. If

you send out a question, I will consult with the lawyers before

answering it, which may take some time. You may continue your

deliberations while waiting for the answer to any question.

Remember that you are not to tell anyone -- including me -- how

the jury stands, numerically or otherwise, on any question

submitted to you, including the question of the guilt of the

defendants, until after you have reached a unanimous verdict or

have been discharged.

The defendants are charged in Count 1 of the

indictment with conspiring to violate the Travel Act in

violation of Section 1952(a)(3)(A) of Title 18 of the United

States Code.

For a defendant to be found guilty of that charge,

the United States must prove each of the following elements

beyond a reasonable doubt with respect to that defendant:

First, beginning in or around 2004, and ending on or

about April 2018, there was an agreement between two or more

persons to commit at least one Travel Act offense as charged in

Counts 2 through 51 of the indictment by promoting, or

facilitating the promotion of, a business enterprise or

enterprises involving prostitution offenses in violation of the 02:24:00

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laws of the State in which they were committed, in violation of

18 U.S.C. Section 1952(a)(3)(A) and Section 1952(b)(1)(i).

Second, the defendant became a member of the

conspiracy knowing of at least one of its objects and intending

to help accomplish it; and, third, one of the members of the

conspiracy performed at least one overt act on or after March

28, 2013, for the purpose of carrying out the conspiracy.

A conspiracy is a kind of criminal partnership -- an

agreement of two or more persons to commit one or more crimes.

The crime of conspiracy is the agreement to do something

unlawful; it does not matter whether the crime agreed upon was

committed.

For a conspiracy to have existed, it is not necessary

that the conspirators made a formal agreement, or that they

agreed on every detail of the conspiracy. It is not enough,

however, that they simply met, discussed matters of common

interest, acted in similar ways, or perhaps helped one another.

You must find that there was a plan to commit at least one of

the crimes alleged in the indictment as an object of the

conspiracy with all of you agreeing as to the particular crime,

i.e., the Travel Act violations, which the conspirators agreed

to commit.

One becomes a member of a conspiracy by willfully

participating in the unlawful plan with the intent to advance

or further some object or purpose of the conspiracy, even 02:25:49

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though the person does not have full knowledge all of the

details of the conspiracy. Furthermore, one who willfully

joins an existing conspiracy is as responsible for it as the

originators. On the other hand, one who has no knowledge of a

conspiracy, but happens to act in a way which furthers some

object purpose of the conspiracy, does not thereby become a

conspirator. Similarly, a person does not become a conspirator

merely by associating with one or more persons who are

conspirators, nor merely by knowing that a conspiracy exists.

In determining the issue of what a person knew or

what a person intended at a particular time, you may consider

any statements made or acts done or omitted by that person and

all other facts and circumstances received in evidence which

may aid in your determination of that person's knowledge or

intent.

An overt act does not itself have to be unlawful. A

lawful act may be an element of a conspiracy if it was done for

the purpose of carrying out the conspiracy. The United States

is not required to prove that the defendant personally did one

of the overt acts.

A conspiracy may continue for a long period of time

and may include the performance of many transactions. It is

not necessary that all members of the conspiracy join in at the

same time, and one may become a member of a conspiracy without

full knowledge of all the details of the unlawful scheme or the 02:27:38

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names, identities, or locations of all of the other members.

Even though a defendant did not directly conspire

with every other defendant or every other conspirator in the

overall scheme, that defendant has, in effect, agreed to

participate in the conspiracy if the Government proves each of

the following beyond a reasonable doubt:

First, that a defendant directly conspired with one

or more conspirators to carry out at least one of the objects

of the conspiracy; second, that a defendant knew or had reason

to know that other conspirators were involved with those with

whom the defendant directly conspired; and, third, that a

defendant had reason to believe that whatever benefits the

defendant might get from the conspiracy probably were dependent

upon the success of the entire enterprise.

It is not a defense that a person's participation in

a conspiracy was minor or for a short period of time.

Each member of the conspiracy is responsible for the

actions of the other conspirators performed during the course

and in furtherance of the conspiracy. If one member of a

conspiracy commits a crime in the furtherance of a conspiracy,

the other members have also, under the law, committed that

crime.

Therefore, you may find a defendant guilty of

committing a Travel Act crime as charged in Counts 2 through 51

of the indictment if the United States has proved each of the 02:29:21

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following elements beyond a reasonable doubt:

First, a member of the conspiracy committed a Travel

Act offense alleged in one of the counts; second, that person

was a member of the conspiracy charged in Count 1 of the

indictment; third, that person committed the Travel Act offense

in furtherance of the conspiracy; fourth, a defendant was a

member of the same conspiracy at the time the Travel Act

offense was committed; and, fifth, the Travel Act offense fell

within the scope of the unlawful agreement and could reasonably

have been foreseen to be a necessary or natural consequence of

the unlawful agreement.

Each member of the conspiracy is responsible for the

actions of the other conspirators performed during the course

and in furtherance of the conspiracy. If one member of a

conspiracy commits a crime in furtherance of a conspiracy, the

other members have also, under the law, committed that crime.

Therefore, you may find a defendant guilty of

committing a Concealment Money Laundering crime as charged in

Counts 53 through 62 of the indictment if the United States has

proved each of the following elements beyond a reasonable

doubt:

First, a member of the conspiracy committed a

Concealment Money Laundering offense alleged in one of the

counts; second, that person was a member of the conspiracy

charged in Count 52 of the indictment; third, that person 02:31:07

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committed the Concealment Money Laundering offense in

furtherance of the conspiracy; fourth, a defendant was a member

of the same conspiracy at the time the Concealment Money

Laundering offense was committed; and fifth, the Concealment

Money Laundering offense fell within the scope of the unlawful

agreement and could reasonably have been foreseen to be a

necessary or natural consequence of the unlawful agreement.

Each member of the conspiracy again is responsible

for the actions of the other conspirators performed during the

course and in furtherance of the conspiracy. If one member of

a conspiracy commits a crime in furtherance of a conspiracy,

the other members have also, under the law, committed the

crime.

Therefore, you may find a defendant guilty of

committing an International Promotional Money Laundering crime

as charged in Counts 63 through 68 of the indictment if the

United States have proved each of the following elements beyond

a reasonable doubt:

First, a member of the conspiracy committed an

International Promotional Money Laundering offense alleged in

one of the counts; second, that person was a member of the

conspiracy charged in Count 52 of the indictment; third, that

person committed the International Promotional Money Laundering

offense in furtherance of the conspiracy; fourth, a defendant

was a member of the same conspiracy at the time the 02:32:47

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International Promotional Money Laundering offense was

committed; and, fifth, the International Promotional Money

Laundering offense fell within the scope of the unlawful

agreement and could reasonably have been foreseen to be a

necessary or natural consequence of the unlawful agreement.

The defendants are charged in Counts 2 through 51 of

the indictment with violating Section 1952(a)(3) of Title 18 of

the United States Code, a statute also referred to as "the

Travel Act." In order for the defendants to be found guilty of

Counts 2 through 51, the United States must prove for each

count the following elements beyond a reasonable doubt:

First, the defendant used any facility in interstate

commerce with a specific intent to promote or facilitate the

promotion of any business enterprise involving prostitution

offenses in violation of the laws of the State in which they

are committed (as specified below ), and

Second, after doing so, the defendant performed an

act that did promote or facilitate the promotion of any

business enterprise involving prostitution offenses,

specifically, by publishing on Backpage.com the ads listed in

Counts 2 through 51 of the indictment.

To prove specific intent, the Government must

establish that each defendant in some significant manner

associated himself or herself with the purpose of promoting or

facilitating the promotion of any business enterprise involving 02:34:33

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prostitution offenses that the defendant knew to be unlawful

under state law.

In the context of this Travel Act case, the terms "to

promote" or "facilitate the promotion of" means intentionally

helping someone else commit a prostitution offense in

violations of state law.

The phrase "business enterprise" means a continuous

course of criminal conduct, that is, engaging or planning to

engage in two or more violations of law, rather than a

sporadic, casual, individual, or isolated violation (page 30).

The phrase "uses any facility in interstate commerce"

as used in the Travel Act, 18 U.S.C., Section 1952(a), means

employing or utilizing any method of communication or

transportation between one state and another, and includes, for

example, the use of telephones, mails, and the Internet.

Counts 2, 4, 27, 29 through 30, 3 (sic), 37, 40, and

43, concern prostitution offenses in violation of the laws of

the state of Massachusetts.

A prostitution offense in Massachusetts occurs when:

One, a person engaged, agreed to engage, or offered

to engage, in sexual conduct with another person; and, two, the

sexual conduct was, or was not -- excuse me, or was to be done

in return for a fee.

The term "sexual conduct" includes sexual

intercourse; anal intercourse; fellatio, or oral sex involving 02:36:32

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contact between the mouth of one person and penis of another

person; cunnilingus, or oral sex involving contact between the

mouth of one person and the female sex organs -- the vagina,

vulva or labia -- of another person; masturbation of another

person; or any intrusion of a part of one person's body or some

other object in the genital or anal opening of another person's

body.

Counts 3, 6 through 11, 18, 25 through 26, and 28

concern prostitution offenses in violation of the laws of the

state of Washington. A prostitution offense in Washington

occurs when:

One, a person engaged, agreed to engage, or offered

to engage in sexual conduct with another person; and, two, the

sexual conduct, agreement, or offer was in return for a fee.

Sexual conduct means sexual contact or sexual

intercourse. Sexual contact means any touching of the sexual

or other intimate parts of a person done for the purpose of

gratifying sexual desire of either party or a third party.

Sexual intercourse means that the sexual organ of the male

entered and penetrated the sexual organ of the female and

occurs upon any penetration, however slight, or any penetration

of the vagina or anus, however slight, by an object, when

committed on one person by another, whether such persons are of

the same or opposite sex, or any act of sexual contact between

persons involving the sex organs of one person and the mouth or 02:38:25

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anus of another whether such persons are of the same or

opposite sex.

Counts 14 through 15, 21 through 22, and 31 concern

prostitution offenses in violation of the laws of the State of

Arizona. A prostitution offense in Arizona occurs when:

A person knowingly engaged, agreed, or offered to

engage in sexual conduct with another person under a fee

arrangement with any person for money or any other valuable

consideration. Sexual conduct means sexual contact, sexual

intercourse, oral sexual contact or sadomasochism -- excuse me.

Let me reread that. Sexual conduct means sexual contact,

sexual intercourse, oral sexual contact, or sadomasochistic

abuse.

Sexual contact means any direct or indirect fondling

or manipulating of any part of the genitals, anus or female

breast.

Sexual intercourse means penetration into the penis,

vulva or anus by any part of the body or by an object.

Oral sexual contact means oral contact with the

penis, vulva, or anus.

Sadomasochistic abuse means flagellation or torture

by or on a person who is nude or clad in undergarments or in

revealing or bizarre costume or the condition of being

fettered, bound, or otherwise physically restrained on the part

of one sole clothed. 02:40:17

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Counts 12 through 13, 23, and 34 concern prostitution

offenses in violation of the laws of the State of California.

A prostitution offense in California occurs when:

An individual solicits, or agrees to engage in, or

engages in any act of prostitution with the intent to receive

compensation, money, or anything of value from another person.

An act of prostitution occurs when a person has

sexual intercourse or does a lewd act with someone else in

exchange for money or other compensation. A lewd act means

touching the genitals, buttocks, or female breast of either the

prostitute or customer with some part of the other person's

body for the purpose of sexual arousal or gratification.

Counts 45 through 47 and 51 concern prostitution

offenses in violation of the laws of the state of New York. A

prostitution offense in New York occurs when:

A person engaged, agreed, or offered to engage, in

sexual conduct with another person for a fee.

Counts 19 through 20 and 50 concern prostitution

offenses in violation of the laws of the state of Texas. A

prostitution offense in Texas occurs when:

A person knowingly offers or agrees to receive a fee

from another to engage in sexual conduct.

Sexual conduct includes deviate sexual intercourse,

sexual contact, and sexual intercourse.

Sexual intercourse means any penetration of the 02:42:08

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female sex organ by the male sex organ.

Sexual contact means any touching of the anus,

breast, or any part of the genitals of another person with

intent to arouse or gratify the sexual desire of any person.

Fee means the payment or offer of payment in the form

of money, goods, services or other benefit.

Deviate sexual intercourse means any contact between

the genitals of one person and the mouth or anus of another

person.

A person acts knowingly or with knowledge with

respect to the nature of his or her conduct, or to

circumstances surrounding his or her conduct, when he or she is

aware of the nature of his or her conduct or that the

circumstances exist.

Counts 16 through 17 concern prostitution offenses in

violation of the laws of the state of Colorado. A prostitution

offense occurs in Colorado:

A person performed, offered, or agreed to perform,

any act of sexual intercourse, fellatio, cunnilingus,

masturbation or anal intercourse with any person who is not his

or her spouse, in exchange for money or other thing of value.

Or when:

A person solicited another for the purpose of

prostitution. Colorado law provides the following definitions:

Anal intercourse means contact between human beings 02:43:43

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of the genital organs of one and the anus of another.

Fellatio means any act of oral stimulation of the

penis.

Cunnilingus means any act of oral stimulation of the

vulva or clitoris.

Masturbation means stimulation of the genital organs

by manual or other bodily contact exclusive of sexual

intercourse.

Thing of value includes real property, tangible and

intangible personal property, contract rights, choses in

action, services, confidential information, medical records

information, and any rights of use or enjoyment connected there

with.

Counts 38 and 42 concern prostitution offenses in

violation of the laws of the State of Ohio. A prostitution

offense occurs in Ohio when:

A person engaged in sexual activity for hire.

Or when: A person recklessly induces, entices, or

procures another to engage in sexual activity for hire in

exchange for the person giving anything of value to the other

person.

Ohio law provides the following definitions:

Sexual activity means sexual conduct or sexual

contact, or both.

Sexual conduct means vaginal intercourse between a 02:45:10

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male and female; anal intercourse, fellatio, and cunnilingus

between persons regardless of sex. And, without privilege to

do so, the insertion, however slight, of any part of the body

or any instrument, apparatus, or other object into the vaginal

or anal opening of another. Penetration, however slight, is

sufficient to complete vaginal or anal intercourse.

Sexual contact means any touching of an erogenous

zone of another, including without limitation the thigh,

genitals, buttock, public -- excuse me, pubic region or if the

person is a female, a breast, for the purpose of sexually

arousing or gratifying either person.

For hire means for pay or compensation.

Counts 36 and 49 concern prostitution offenses in

violation of the laws of the state of Nevada. A prostitution

offense in Nevada occurs when:

A person engaged in prostitution or solicitation

thereof, except in a licensed house of prostitution.

Prostitution means engaging in sexual conduct with

another person in return for a fee, monetary consideration or

other thing of value.

Sexual conduct means sexual intercourse, oral-genital

contact or any touching of the sexual organs or other intimate

parts of a person for the purpose of arousing or gratifying the

sexual desire of either person.

Counts 24 and 44 concern prostitution offenses in 02:46:56

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violation of the laws of the state of Michigan. A prostitution

offense in Michigan occurs when:

A person engaged or offered to engage the services of

another person, not his or her spouse, for the purposes of

prostitution, lewdness or assignation, by the payment in money

or other forms of consideration.

Count 32 concerns prostitution offenses in violation

of the laws of the state of Louisiana. A prostitution offense

in Louisiana occurs when:

A person engaged indiscriminate sexual intercourse

for compensation, or solicited another with the intent to

engage in indiscriminate sexual intercourse for compensation.

Sexual intercourse means anal, oral or vaginal sexual

intercourse.

Count 48 concerns prostitution offenses in violation

of the laws of the state of Florida. A prostitution offense in

Florida occurs when:

A person offered to commit, committed, or engaged in

prostitution, lewdness, or assignation or a person solicited,

induced, enticed, or procured another to commit prostitution,

lewdness or, assignation.

Prostitution is the giving or receiving of the body

for sexual activity for hire but excludes sexual activity

between spouses.

Lewdness is any indecent or obscene act. Indecent 02:48:38

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means wicked, lustful unchaste, licentious, or sensual

intention on the part of the person doing the act.

Sexual activity means oral, anal, or vaginal

penetration by, or union with, the sexual organ of another;

anal or vaginal penetration of another by any other object; or

the handling or fondling of the sexual organ of another for the

purpose of masturbation; however, the term does not include

acts done for bona fide medical purposes.

Assignation includes the make of any appointment or

engagement for prostitution or lewdness or any act in

furtherance of such appointment or engagement.

To solicit means to command, encourage, hire, or

request another person to engage in specific conduct.

To procure means to persuade, induce, prevail upon or

cause a person to do something.

Count 39 concerns prostitution offenses in violation

of the laws of the state of Alabama. A prostitution offense in

Alabama occurs under the following:

One, a person commits an act of prostitution, which

is, any natural or unnatural sexual act, sodomy, or sexual

contact for monetary consideration or other thing of value.

Two, a person solicited, compelled, or coerced any

person to have sexual intercourse or participate in any natural

or unnatural sexual act, deviant sexual intercourse, or sexual

contact for monetary consideration or other thing of marketable 02:50:22

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value.

Three, a person agreed to engage in sexual

intercourse, deviant sexual intercourse, or sexual contact with

another or participated in the act for monetary consideration

or other thing of marketable value and give or accept monetary

consideration or other thing of value in furtherance of the

agreement.

Four, a person knowingly did any of the following:

A, caused or aided a person to commit or engage in

prostitution. B, procured or solicited patrons for

prostitution. C, provided persons or premises for prostitution

purposes. D, received or accepted money or other thing of

value pursuant to a prior agreement with any person whereby he

or she participated or is to participate in the proceeds of any

prostitution activity. E, operated or assisted in the

operation of a house of prostitution or a prostitution

enterprise.

Count 41 concerns prostitution offenses in violation

of the laws of the state of Arkansas. A prostitution offense

in Arkansas occurs when:

A person engaged in, agreed, or offered to engage in

sexual activity with any other person in return for or in

expectation of a fee.

Sexual activity means sexual intercourse, deviate

sexual activity, or sexual contact. 02:52:01

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Sexual intercourse means penetration, however slight,

of the labia majora by a penis.

Deviate sexual activity means any act of sexual

gratification involving, A, the penetration, however slight, of

the anus or mouth of a person by the penis of another person;

or, B, the penetration, however slight, of the labia majora or

anus of a person by any body member or foreign instrument

manipulated by another person.

Sexual contact means any act of sexual gratification

involving the touching, directly or through clothing, of the

sex organs, buttocks, or anus of a person or breast of a

female.

Count 5 concerns prostitution offenses in violation

of the laws of state of Maine. A prostitution offense in May

occurs when:

A person engaged in, or agrees to engage in, or

offers to engage in, a sexual act or sexual contact in return

for a pecuniary benefit to be received by the person engaging

in prostitution or a third person.

Sexual act means, one, any act between two persons

involving direct physical contact between the genitals of one

and the mouth or anus of the other, or direct physical contact

between the genitals of one and the genitals of the other; two,

any act between a person and animal being used by another

person which act involves direct physical contact between the 02:53:35

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genitals of one and the mouth or anus of the other, or direct

physical contact between the genitals of one and the genitals

of the other; or, three, any act involving direct physical

contact between the genitals or anus of one and an instrument

or device manipulated by another person when that act is done

for the purpose of arousing or gratifying sexual desire or for

the purpose of causing bodily injury or offensive physical

contact.

Sexual contact means any touching of the genitals or

anus, directly or through the clothing, other than as would

constitute a sexual act, for the purpose of arousing or

gratifying sexual desire or for the purpose of causing bodily

injury or offensive physical contact.

The United States does not have to prove that the

referenced states' laws were actually violated, only that each

defendant had intent to promote, manage, establish, carry on,

or facilitate the promotion, management, establishment, or

carrying on, of any business enterprise involving prostitution

offenses in violation of the state law, and committed a

subsequent overt act in furtherance of the unlawful activity.

Defendants are charged with violating the Travel Act

by facilitating state law prostitution offenses, conspiracy to

violate the Travel Act, and money laundering. Although some

testimony and evidence in the trial occasionally may refer to

human trafficking, sex trafficking, or child sex trafficking, 02:55:20

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no defendant is charged with crimes of human trafficking, sex

trafficking, or child sex trafficking or with facilitating

those crimes. So, you should not conclude from any use of

those terms during the trial that any defendant has been

charged with a trafficking crime or facilitating a trafficking

crime.

Defendants Lacey, Spear, and Brunst are charged in

Counts 53 through 62 of the indictment with Concealment Money

Laundering in violation of Section 1956(a)(1)(B)(i) of Title 18

of the United States Code. For a defendant to be found guilty

of that charge, the United States must prove, for each count,

each of the following elements beyond a reasonable doubt with

respect to that defendant:

First, the defendant conducted a financial

transaction involving property that represented the proceeds of

a violation or violations of the Travel Act;

Second, the defendant knew that the property

represented the proceeds of some form of unlawful activity; and

Third, the defendant knew that the transaction was

designed in whole or in part to conceal and disguise the

nature, the location, the source, the ownership, or the control

of the proceeds of the Travel Act violations.

A financial transaction is a transaction involving

the movement of funds by wire or other means that affects

interstate or foreign commerce in any way. 02:57:02

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The phrase "knew that the property represented the

proceeds of some form of unlawful activity" means that the

defendant knew that the property involved in the transaction

represented proceeds from some form, though not necessarily

which form, of activity that constitutes a felony. I instruct

you that violating the Travel Act is a felony.

Defendant Lacey, Brunst, and Spear are charged in

Counts 63 through 68 of the indictment with transporting funds

to promote unlawful activity in violation of Section

1952(a)(3)(A) of Title 18 of the United States Code. For a

defendant to be found guilty of that charge, the United States

must prove, for each count, each of the following elements

beyond a reasonable doubt with respect to that defendant:

First, the defendants transported money from a place

in the United States to or through a place outside the United

States or to a place in the United States from or through a

place outside the United States; and

Second, the defendant acted with the intent to

promote a violation of the Travel Act.

Defendant Lacey is charged in Count 100 of the

indictment with transporting money for the purpose of

laundering in violation of Section 1956(a)(2)(B) of Title 18 of

the United States Code. For defendant Lacey to be found guilty

of that charge, the United States must prove each of the

following elements beyond a reasonable doubt: 02:58:53

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First, defendant Lacey transported money from a place

in the United States to or through outside the United States;

Second, defendant Lacey knew that the money

represents the proceeds of a violation or violations of the

Travel Act; and

Third, defendant Lacey knew the transportation was

designed in whole or in part to conceal or disguise the nature,

location, source, ownership, or control of the proceeds of the

Travel Act violations or to avoid a transaction reporting

requirement under state or federal law.

Defendant Lacey is charged in Counts 69 through 70,

81, 83 through 84, 86, 88 through 92, and 94 through 99;

defendant Spear is charged in Counts 71 through 78, 85, and

83 -- 

(Reporter seeks clarification.)

THE COURT: I stand corrected. 93; and defendant

Brunst is charged in Counts 69 through 70, 78 through 84, and

86 through 93 of the indictment with transactional money

laundering in violation of Section 1957 of Title 18 of the

United States Code. For a defendant to be found guilty of that

charge, the United States must prove, for each count, each of

the following elements beyond a reasonable doubt with respect

to that defendant:

First, the defendant knowingly engaged in a monetary

transaction. An act is done knowingly if the defendant is 03:00:51

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aware of the act, and does not act or fail to act through

ignorance, mistake, or accident. You may consider evidence of

the defendants' words, acts, or omissions, along with all the

other evidence, in deciding whether the defendant acted

knowingly.

Second, the defendant knew the transaction involved

criminally derived property.

Third, the property had a value greater than 10,000;

Fourth, the property was in fact derived from

violations of the Travel Act; and

Fifth, the transaction occurred in the United States.

The term "monetary transaction" means the deposit,

withdrawal, transfer, or exchange, in or affecting interstate

commerce, of funds or a monetary instrument by, through, or to

a financial institution.

The term "financial institution" means an insured

bank, commercial banks or credit union.

The term "criminally derived property" means any

property constituting, or derived from, the proceeds obtained

from a criminal offense.

The United States must prove that each defendant knew

that the property involved in the monetary transaction

constituted, or was derived from, proceeds obtained by some

criminal offense. The United States does not have to prove

that each defendant knew the precise nature of that criminal 03:02:16

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offense, or knew the property involved in the transaction

represented the proceeds of a violation of the Travel Act.

Although the United States must prove that, of the

property at issue, more than $10,000 was criminally derived,

the United States does not have to prove that all of the

property at issue was criminally derived.

Defendants Lacey, Spear, and Brunst are charged in

Count 52 of the indictment with money laundering conspiracy in

violation of Section 1956(h) of Title 18 of the United States

Code. For a defendant to be found guilty of that charge, the

United States must prove each of the following elements beyond

a reasonable doubt with respect to that defendant:

First, there was an agreement to commit money

laundering.

Second, the defendant knew the objective of the

agreement;

Third, the defendant joined the agreement with the

intent to further its unlawful purpose.

The Government has the burden to prove beyond a

reasonable doubt that a defendant acted with a criminal intent

and did not act in good faith. Good faith encompasses a belief

or opinion honestly held and an absence of malice or ill will.

If a defendant carries out his or her actions in good faith,

there is no criminal intent. A person who acts on behalf of an

opinion honestly held is not punishable under the charges in 03:03:55

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the indictment merely because the belief or opinion turns out

to be inaccurate, incorrect, or wrong. If the Government fails

to meet its burden to prove a defendant lacked good faith, you

must return a not guilty verdict.

All speech is presumptively protected by the First

Amendment to the United States Constitution. However, the

First Amendment does not protect speech that proposes an

illegal transaction. Prostitution is illegal in 49 states and

most of Nevada. It is the Government's burden to establish

that each of the ads alleged in this case is an ad for

prostitution and not for another purpose such as an ad for an

escort, dating, or massage service. If you find that an ad

proposes an illegal transaction, it is not protected by the

First Amendment.

Members of the jury and counsel, at this time, it

might be good just to take about a ten-minute break. We've

gone through a lot of instructions and when you return from the

break, it will be the Government's closing argument so we can

start afresh.

Please leave those instructions on your seat. We are

going to collect them. We are going to give you a clean copy

of the jury instructions when the case is handed to you.

As the case is not officially handed to you at this

moment, because we have to go through closing summations and

then I'll give you some short additional instructions, I 03:05:41

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instruct you not to come to any conclusions, not to discuss the

matter amongst yourselves, just to continue to keep that open

mind and I will have Liliana come and get you in about 15

minutes I think.

All right. Please all rise for the jury.

(Jury departs at 3:06.)

THE COURT: All right. We'll stand in adjournment.

(Recess at 3:06; resumed at 3:21.)

THE COURT: All right. Please be seated and we will

have the jury in.

All rise for the jury.

(Jury enters at 3:22.)

THE COURT: All right. Please be seated. The record

will reflect the presence of the jury.

Mr. Rapp, you may begin your closing argument.

MR. RAPP: Thank you, Your Honor.

Counsel, ladies and gentlemen of the jury, the end is

near. The jury instructions were riveting.

This is a very simple case. It is. I know it looks

like there's a lot of exhibits here and you heard two months of

testimony, but prostitution is illegal and these defendants ran

a criminal enterprise for 14 years and they knew it and they

were told about it again and again.

What's the evidence in this case? What is the

evidence that Backpage promoted prostitution? Well, who did 03:23:36

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you hear from? You heard the testimony of Carl Ferrer and Dan

Hyer and Jess Adams, all insiders of Backpage. They told you

how they built this conspiracy, how they created this website

by the internal prostitution marketing strategies of

aggregation and the relationships with the super posters and,

most importantly, The Erotic Review.

You heard the testimony of the victims. They came in

here. You got to observe them. They bravely took the stand,

all young women now, and told you how they were posted on

Backpage.

They went through all the codes and all the terms and

all the images and how they were posted. You heard testimony

and letters from law enforcement explaining to Backpage, you're

running a prostitution website. You heard testimony from

non-governmental organizations, NCMEC, Polaris, the Auburn

Theological Seminary. They all confronted these defendants,

you have prostitution on your website.

The defendants' own words in the form of their own

internal emails demonstrate that three knew they were running a

prostitution website and they were promoting prostitution.

And defendants' own responses to being confronted.

Well, what's the motive. Well, it's as old as the

scriptures; right? When they say it's not about the money,

it's really about the money. Look at these figures for 2013,

2014, 2015. And that's not even the entire life of this 03:25:53

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conspiracy from 2004 to 2018.

Mr. Lacey is over $100 million. Mr. Brunst, $20

million. Mr. Spear, $10 million. They have literally millions

of reasons for not shutting down this website.

Well, what's the corporate structure here? Who's in

charge; right? Where does the buck stop? Well, Mr. Lacey,

he's the majority owner. He's on the editorial side of these

alternative newspapers, but he becomes, as you know, all too

well, he becomes the face of Backpage. He is showing up at

these meetings. He is sending emails. He's writing his own

articles about it.

And Mr. Brunst, the Chief Financial Officer, right,

$20 million in three years. He knows where every dime is

coming from.

And once they unload this website on Carl Ferrer,

Mr. Brunst, sitting over there, becomes what we like to call

the bag man. He's the one that goes around and makes sure that

they pay every month.

And Mr. Spear, the Executive Vice President, well,

he's -- of course he's the one who is right in the room when it

happens because he's giving directions on all of these internal

prostitution marketing strategies.

Well, remember this exhibit, this is Exhibit 5. Down

there it says on August 31, Mr. Brunst' attorney stood up

before you and said he was never employed by Backpage and he 03:27:58

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offered this particular exhibit as the defense exhibit and said

look at all of these entities. Mr. Brunst didn't have anything

to do with Backpage. He was so distracted by all of these

alternative newspapers. He was doing audits and all of that.

But what did we hear from Carl Ferrer? What did we

hear from him? Every year the alternatives were in a financial

death spiral; right? They weren't making any money. These

people had built this -- Mr. Lacey in particular built up these

17 alternative newspapers with investigative reporting and all

different markets around the country.

But when it comes to 2012, goodbye. Who needs it;

right? Because this is really what happens by 2012. It's sort

of de facto happening up until that point because the

newspapers are hemorrhaging money.

And what's actually paying for them? The goose that

laid the golden egg, Backpage. That's what's paying for

everything, and this is what the structure looks like. Take

away these other people. They go off and they run the

alternative newspapers. Take away all the 17 and you're left

with one entity that is generating revenue month after month

after month, hockey stick growth.

Well, they build this up to a point where they would

really like to unload it. Right? You see that a couple of

times during the testimony of Carl Ferrer. First in 2011.

Let's get rid of this thing. We have built it up. Let's try 03:29:56

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to sell it. So here's this power point. This is Exhibit 120.

Mr. Brunst, the CFO of Village Voice Media, but also,

importantly, Backpage.com.

Same exhibit, this is this PowerPoint, this shows you

some important things as of 2011 that they have to acknowledge.

That 94 percent of the revenue is generated from the Adult

category and we know it's really the Female Escort; right? But

they give -- this gives you some plausible deniability,

Mr. Brunst, acknowledges in this PowerPoint: There are

opportunities to grow revenues and profits. We had this

plausible deniability as to where the money is really being

generated.

Female escort page views. 818 million page views.

Do you think Mr. Brunst, based on his statement in

his opening statement, do you think he was acting in good faith

with his plausible deniability? Exhibit 1480, this really

tells the whole story, doesn't it? This really tells you where

the money is coming from. It's not coming from all of these

other categories on the website. It's not coming from

Apartments and Automotives and jobs. It's coming from the

Adult category to the tune of $138 million from October 2010 to

November 2012. Look at all the other non-adult totals. A

paltry $8 million.

Do you think they have plausible deniability? No.

This is Exhibit 1049B. This is a slide to have a 03:32:15

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look at. This really just sort of talks in business-speak but

if you really read between the lines, you know what they are

talking about; right? Backpage.com initially seeded with

content from newspapers, traffic driven by referrals from

search engines and Village Voice Media newspaper sites. What

they really mean is The Erotic Review. This is 2014.

Site expansion driven by growing city site portfolio

and continued focus on a high-quality user experience. How do

you like that business speak? High quality user experience.

Do you know who they are really talking about there? The

users, the johns. The johns who are coming to the Female

Escort section. That's what that really means. But you can

see here how they exponentially expanded, 450 cities in the

United States. And Mr. Ferrer was asked, "Well, how many

postings would you get a day?"

He said, "Look, I would have to just estimate

somewhere between two to 3,000 postings a day in the Adult

section in any given large market."

Also May 2014, this is really deceptive. This is

their second attempt, 2014, they try to sell it again; right?

Now, we know that the Adult category has 91 percent,

this Jobs category 47 percent. But it's really not accurate,

right, because you remember Mr. Ferrer saying, hey, we just --

we just bought these fees. We wanted to give Backpage the look

of a legitimate website but it really was just a prostitution 03:34:07

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website.

My colleague got up in front of you seems like years

ago, but I guess it was two months ago, and talked about how

the building of Backpage broke down into two phases, growth

phase and then that second phase of just maintaining this

instead exponential growth of revenue.

The prostitution marketing strategies that no one

knew about. I mean people thought there was something going on

with The Erotic Review but it wasn't until Carl Ferrer, right,

came in, that they really knew about this.

These are not only the building blocks of the

website, these are the building blocks of the conspiracy.

Aggregation, we know what that is, stealing content

from other prostitution sites. The super post relationship.

You heard all of these names of Dollar Bill and Somad and Shawn

Kim. These were these people who were bringing in volume

postings to Backpage and they were given certain discounts;

right?

And then the reciprocal link relationship with The

Erotic Review. Well, super poster relationship, here's just

one exhibit. You saw many exhibits and you saw some exhibits

from William Mersey, also known as Dollar Bill. This is an

email that Mr. Padilla was fielding, this is where 4200 ads

were inadvertently deleted and Mr. Padilla was doing what he

could to get those restored. You see this is from Dollar Bill 03:35:58

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in NYC down there.

Stealing from other prostitution sites, this was

something Mr. Spear was sort of heading up and directing people

to do and this is an email where he's talking about attached

are the three documents that have been presented in the last

couple of weeks dealing with growing Backpage in Dallas and

moving that aggregation process to other cities; right?

Here's actually attached. This is 10 A. Hi, I saw

your ad on the net. Have you tried posting it on Backpage.com?

I can post your ad today so that you can try out the site. It

costs you nothing. I do all the work here. Can I have your

email address please? Female Escort section.

The Erotic Review, this is what -- this is what super

charges the website. This is what puts it on steroids. This

is what gives it velocity so that it can compete with

Craigslist and then when Craigslist shuts down its Adult, then

they are the only game in town.

Well, we know about the budget meetings, Brunst,

Spear, Ferrer and Adams. This is that Exhibit 23 you saw that

on a couple of different occasions. We struck a deal with The

Erotic Review with reciprocal link. It created a huge brand

awareness in this niche industry and increased page views from

the TER by 120,000 per day. This is the latter part of 2007.

And then you saw, maybe more than you wanted to the

Google Analytics reports but they tell the story. The Google 03:37:48

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Analytics reports tells them how great this relationship is and

you remember all the exhibits of the reciprocal link where they

were making sure that those links appeared on each other's

websites.

Exhibit 1984, 1995, this relationship stayed on for

the life of this criminal enterprise because it was so

important. And The Erotic Review by far was the largest

referral site. But the next three referral sites were

prostitution review sites. This is where there is no plausible

deniability. They have no plausible deniability as to this

relationship because you know because you saw it on your

screens, maybe too many times. You saw what the reviews were.

You know that this is 100 percent prostitution.

Here's this email between Mr. Ferrer and Mr. Spear.

Mr. Ferrer telling him we get 2 million page views, 150,000

from The Erotic Review per month. This is in 2007. Mr. Spear,

right over here, he knows, he knows all too well how important

The Erotic Review is. He knows that it's generating millions,

millions.

And here's the actual banner ad, remember there was a

lot of talk about this banner ad. This is the banner ad, do

you see that over there on the right? Backpage.com, find

escorts here. Oh, geez, these escorts. We really know that's

prostitution. No, escorts is prostitution. It's right smack

dab on The Erotic Review; right? Here it is. If you go to The 03:39:53

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Erotic Review and you read this explicit review, all you have

to do is look over on the right and you see the banner ad and

you go right to Backpage and you can find that person who was

reviewed on the site.

And what did they pay for this link? 567A. Remember

this David Elms, Elms Web Services, remember all the emails

exchanges between Carl Ferrer and David Elms about this

relationship and, hey, pay me. And they were paying them --

him in 2007 and Carl Ferrer said 4,000 was nothing. We were

happy to pay him. We were happy to pay him because this

relationship was so critical to our success.

So here's 2046, this is the banner ad of The Erotic

Review, don't get ripped off again. This is what you would

find on Backpage.com. This is the evidence of this symbiotic

and very profitable relationship.

Here they even change it. They think, well, maybe

Find Escorts here. That might be a little bit much so

Mr. Spear -- they have an exchange over what they are going to

change it to. This is 574. Backpage.com. We're not going to

put Find Escorts Here. We're going to put Apartments, Jobs,

and Escorts. You know full well from the testimony from

Mr. Ferrer that apartments and jobs are hardly making any

money. It's really the Escorts.

This is an important email because its sort of speaks

volumes. This is the Exhibit 28. This is an email from Jim 03:41:46

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Larkin to Scott Spear and Carl Ferrer. Authorities, 43 more

indicted in Desert Divas' prostitution bust. But it's the

subject line that's important: Johns accused of favorably

rating escorts on Erotic Review in exchange for discount. This

is in May of 2009. Wonder why he's sending this to them,

because he knows how important this is and this isn't getting

the publicity they would like. They would like to stay under

the radar under The Erotic Review and just cash the checks.

Here's the New Times. This is 573A. This is a

portion of the article in the -- in their own newspaper that

actually has a review from The Erotic Review. Oh, gosh, we

didn't know what The Erotic Review was. It's in their own

newspaper. It's being published in the same building that

Backpage is housed in.

CNN, right? This comes kind of later, doesn't it?

This is in response to Selling the Girl Next Door. Hey, don't

rebroadcast that because it's really unfair. But this is a

portion -- you know, CNN, it's always breaking news; right?

Breaking news. Well, this isn't breaking news to them because

they already know they have the relationship with The Erotic

Review. Many of the ads also contained an identification

number for a separate website call The Erotic Review. You

might not know this, The Erotic Review is a site where the men

rate the sexual performance of the women they buy. The

inclusion of The Erotic Review numbers on Backpage.com ads 03:43:40

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offers strong evidence that these current ads are in fact for

illegal prostitution.

CNN, they call them out on this; right? The media is

beginning to sort of sniff around and think hey, there's a

reason you guys are successful. There's a reason why you're

becoming the only game in town after Craigslist shuts down.

Wall Street Journal. This jumps ahead to 2016. Hi Liz. We

need to get an answer on the TER numbers pretty soon. I would

be happy to talk now, or we can plan to talk on Monday at 6

a.m.

Wall Street Journal, 2016, John McKinnon is asking

them questions. What's with these numbers in your postings.

We're hearing this is has something to do with your

prostitution website, do you think they have plausible

deniability?

Paige two, moderation. Again, this is where they

really can monetize stuff; right? This is the super charge.

Carl Ferrer's testimony on 9-12 of '23 on that stand: We

sanitized the site. It means we make it less obvious

prostitution. 

And after you saw all of these ads and the strip

filter and all of that testimony, it all makes sense; right? 

Here's Andrew Padilla to Joye Vaught: Attached is

the Word doc with my captions. Please go over this compilation

of my photos. 03:45:23

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Do you think this is really a prostitution website?

Here's the photos, 103A. How about this? Exhibit 56. This is

Andrew Padilla to a moderator Jeff Lyons copying Joye Vaught

over here. Until further notice -- and this is in all caps --

do not leave notes in user accounts. Backpage, and you in

particular, can't determine if any user on the site is involved

with prostitution. Leaving notes on our site that imply that

we're aware of prostitution, or in any position to define it,

is enough to lose your job over.

Why do you think Mr. Padilla over here is so

concerned about that? Maybe some, I don't know, law

enforcement investigator might find those notes some day.

Might end up here.

This is the direction to the moderators from

Mr. Padilla and Ms. Vaught very much so. We're not going to

talk about it. That's the dirty little secret; right? The

secret sauce here to the success of Backpage is the

relationship with The Erotic Review and taking out terms that

are indicative of sexual acts, taking out images that are

clearly indicative of sexual acts or the exchange of money for

sex and then letting it post. That's the key. That is the key

to the success of Backpage.

And the engine room of that success is right here.

Mr. Padilla and Ms. Vaught.

So here's sort of the smoking gun, right, on The 03:47:07

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Erotic Review. This is Exhibit 647. All right. We've got

enough pressure from the National Attorney Generals

Association, the media is coming after us. We're going to get

rid of those links but you know what, we're going to keep those

numbers in it and those numbers stay until it's taken down.

And here's the attachment, 647A, okay. Here's what's

allowed. You can leave in this, reviews and six-digit number.

This wasn't actually -- isn't The Erotic Review. It's just

another prostitution review site, U.S. Sex Guide. This is what

you can leave in. You can leave this in.

You know, if they misspell The Erotic Review, if they

put that E backwards, you can leave that in, too, because this

is important to the building of the website.

Here's Ms. Vaught giving some daily direction to one

of her moderators: Hello. We are going to allow users to post

pictures with their hands near their crotch again. We still

will delete pictures where they have their hands in their

panties or directly on their genitalia. If it's near their

crotch, well, we have a little plausible deniability on that.

If you have any questions, let me or Andrew know.

Exhibit 16 and 17. Here's Joye again giving some

important moderation instruction to her moderators: We

restored these images that were deleted by the Avion crew.

This is in 2015. They don't break the rules. Just let

everybody know. Here's the pictures. 03:49:03

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I'm going to take -- this is Andrew: I'm going to

take anything good that I can find from the Hemu list you

copied and I'll go through our filters. I'm going to include

misspellings for all of the, quote/unquote, solid sex for money

terms. The solid sex-for-money we're going to take it out but

if there's some wiggle room here, let's leave it in.

This is from Ms. Vaught: Hi. Abuse has been getting

complaint emails from this user about her pictures being

removed. As far as I can tell, they are all okay to leave.

Let me know if you have any questions except for the 150 as

part of this posting. 

And you can look at the pictures on the right. You

think this is prostitution based upon what you heard not only

from Carl Ferrer and Dan Hyer, but also the women who were

posted in these ads. They explain this to you; right?

Hi Monica. You have two of our most important cities

now, Illinois and Washington, on the weekends. This is

Ms. Vaught telling this is where they are getting pressure.

And we heard some of that, didn't we? We heard like the Mayor

of Seattle and Seattle Police Department were giving them all

sorts of grief about their website.

So we've got to focus on these two markets, Illinois

and Washington. There's 47 other, you know, markets that we're

going to let.

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easy on certain types of violations. We should reserve locking

ads to instances where there is a clear offer for

sex-for-money, not one of those offers where there's some

wiggle room or graphic images of sex acts, blatantly exposed

genitalia. Those ones we can -- we should -- we should block

those. But the ones that are sort of coded with misspellings

and the images are not as blatant, those are the ones we can

post.

How about this ambiguity? Well, you know, they have

made some arguments a little bit through cross-examination and

opening statements sometime back, the defense and said, well,

you know, how do you know? How do you know what's going on in

these postings? You just don't know. I mean you have to go

meet with them.

But this is a smoking gun on Mr. Padilla. It implies

some exchange of bodily fluids. He's talking about posters

with images of lactating women which kills our, quote/unquote,

companionship argument.

Joye Vaught: Hello. We are going -- to her large

moderation team. We're going to start allowing the users to

post the word "prostate" again. Do you think that's a

companionship posting she's talking about?

This is Exhibit 532. This is from Andrew to his

moderation staff: You can start using the image restoration

feature located at the bottom of the ad page. If you see an 03:52:46

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image there that should not have been removed, select the

Restore radio button and update the ad. Here's -- he then

gives them a bunch of examples. On left this one should be

deleted but you can keep the one on the right. 

And if you look at this Exhibit 532, you will see

very similar examples that Mr. Padilla is providing the

moderation staff.

This is from Joye. Hi guys. Wanted to check in with

you all about pictures. This is an example of a picture we

would not remove from an ad. There is no nipple showing or any

genitalia. We don't allow pixillation as a cover-up for nudity

but it is fine when it's used to blur the face.

1817, you've got to sort of read between the lines on

this one because you heard some testimony, remember, this sort

of came out on cross-examination of Carl Ferrer. When they got

subpoenas, they were good enough to comply with -- we'll talk

about that in a little bit. They were good enough to comply

with those subpoenas; right? They would say hey, here's the

postings but guess what? These same people are posted on these

other websites. You should go look at them; right?

Do you remember what Carl Ferrer said about that?

Well, that was just kind of public relations. That's kind of a

PR deal. Yeah, but this was sort of a distraction, like, hey,

go look at these other sites. Don't focus on us.

This one is interesting because here's what 03:54:23

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Ms. Vaught. She knows full well based upon this email. She's

saying this to a moderator: Hey, do you guys normally send out

Evil Empire and Naked City links when you reply to the cops?

If you do, you can stop. Because we own those sites. Don't

give them the sites that we own. Give them some other site;

right? We don't want them coming back to us.

This one is ambiguity. This is one of her

moderators. She's talking about somebody who is a poster. Is

she well-known? That suggests a lot. Right? Is this somebody

who is posting a lot with us? Is she well-known to us? In

other words, is she somebody that is frequently posting that we

ought to give some kind of consideration to because she looked

drugged and has bruises. That's really why I decided to make a

referral. 

What does Joye say? Well, she doesn't look under 18.

These are the kind reports cops question us about. I find them

all the time.

If you remember through cross-examination in the

opening statement there was a lot of talk about how much help

they were giving the law enforcement. It was part of the great

job. Went there every day for nine years while we were running

this prostitution website and I was helping out the police.

Does this look like she's helping out anybody?

Notice and knowledge. What notice, externally did

they get, about the fact that they were running a prostitution 03:56:09

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website? Well, we heard about the CNN, Amber Lyon report,

Selling the Girl Next Door. The New York Times, there's this

whole series of articles written by this gentleman Nicholas

Kristof featuring certain women who had been posted on

Backpage.

The Auburn Theological Seminary, open letter in their

meeting. The Wall Street Journal of course was doing articles.

633 this is sort of a fake ad; right? This is Amber Lyon, do

you remember what she says? I have to get this picture from me

dad when I was 14 in a bathing suit. Based on the posting you

have seen, this is pretty tame; right? But she posted this and

the phone rings off the hook.

And does Mr. Lacey know about it? 637. He's asking

Carl about it. Why would we isolate this ad? What would NCMEC

do with this ad? What do they look for? What is being guarded

against? Carl says: We would not have reported this ad.

I mean, that's the whole point. You don't really

even know who the person is in the ad. And unless it's

something really egregious, I guess that's -- based upon his

testimony -- that's when they report it.

Remember this. We saw an excerpt of that.

(Video played.)

MR. RAPP: Thank you.

The Amber Lyons report, remember that? They all saw

it. They all talked about it. They sent a letter, don't 03:59:29

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rebroadcast it. These champions of the First Amendment.

You're misrepresenting things in that report. Not true. They

call him out. We just saw the response about The Erotic

Review. But they know. They are put on notice about what's

going on on their website.

Now, they are confronted with prostitution on

Backpage by these NGOs and you remember the witnesses who came

in. You heard from NCMEC. This was the PowerPoint. Remember

John Shehan toward the end of the case. He testified he was

outside the door. He heard this blowup between the president

of NCMEC at the time, a man by the named of Ernie Allen. There

was some loud yelling. He goes in. You can tell that it

appears that Mr. Lacey is the one who is having the argument

and then he shows this PowerPoint. This is another instance

where they are put on notice of The Erotic Review.

And Mr. Spear is sitting right there.

Now, just think, just juxtapose this. March 1, 2011.

Remember the email, 2007 between Mr. Ferrer and Mr. Spear

talking about the page views, 150,000 page views on The Erotic

Review. Just think about that. Remember the exchange where

he's saying, hey, you know, let's change the banner ad from

Find Escorts Here to put on The Erotic Review and changes it to

Apartments, Jobs, and Escorts. Think about that. Think about

Mr. Spear sitting in this meeting.

He knows more about The Erotic Review than anybody 04:01:27

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from Backpage sitting in that meeting but they are confronted

with this. This is 652A.

The Internet is selling sex. Online classifieds,

forum boards, provider review sites, The Erotic Review, image

and indexing sites. They give them case examples. Hey, here's

people -- now by the way, on this NCMEC meeting, Backpage asked

for this NCMEC meeting. All right? It wasn't NCMEC reaching

out to Backpage: Hey, we would really like to talk to you

about your prostitution website. We think we've got some

things to tell you about it.

They asked to meet with them. They go out there and

meet with them. We've got our safety and security guy with us,

Hemu Nigam. He exchanges some emails before this meeting and

then they get in the meeting and then they are confronted with

the fact that, hey, you've got this review site connected to

the postings on your ad.

First review -- and I know you've seen these. I'm

not going to read it, obviously, but they tell them since 2006,

she has been reviewed more than 100 times. Kristena continues

to be advertised online as of February of 2011. This is

important. This is what they are pointing out there to

Mr. Spear and Mr. Lacey as Mr. Ferrer is sitting in there.

This is the link, the Backpage link on The Erotic

Review. Mr. Spear, Mr. Lacey, your website is linked on a 100

percent prostitution website. What do you think about that? 04:03:22

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Well, little did they know that they have been paying them,

that they have been having this formalized relationship.

Mr. Ferrer is going out to meet with this David Elms and David

Elms disappears at one point and they keep this relationship

going. They show them case examples.

They even walk out of there with documents. Remember

Carl Ferrer talks about that. Hey, this Ernie Allen actually

gives us hard copies. And of course I do what I do and I sort

of research them and I send them out to Mr. Spear.

Here it is. 684A. This was a sort of a fake ad;

right? This is sort of like Amber Lyons and we've heard this

over and over during the course of this trial. If you recall

Megan Lundstrom. She also described the same thing, right,

that she got these kind of burner phones and vanilla visas and

she was at some sort of a conference and she posted an ad and

phone rang off the hook. You know, Amber Lyons didn't have a

monopoly on this but this is one that NCMEC posted and they are

trying to tell Backpage, look, you've got a problem on your

website. You've got a probable on your website and we're

showing you this PowerPoint that shows The Erotic Review

connection. We're giving you this. One -- add one city one

day, 40 men called to pay for sex with her. We received an

average of 40 calls per add in a 24-hour period for each of the

ads that we placed. And Mr. Ferrer sends this information to

Mr. Spear. 04:05:05

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But now Mr. Shehan, he wasn't in the meeting; right?

He just heard the shouting but Carl Ferrer was there. Do you

remember what Carl Ferrer says during the NCMEC meeting? Look,

Mr. Lacey shows up kind of late. And Mr. Allen sort of says:

Look, I get it. You guys want show us this PowerPoint about

how great your website is and all the great things you're doing

with moderation. But let's be honest, you've got prostitution

on your website. And Mr. Lacey over here blows up.

Hey, this isn't your mission. Your mission is

exploited children, not prostitution. Let us worry about that.

And we see that again, right, at the Auburn

Theological.

MR. CAMBRIA: Objection. Goes beyond the record.

THE COURT: Well, there's an objection.

MR. RAPP: I got it.

THE COURT: Overruled. Mr. Cambria, and, again,

members of the jury, I've just instructed you that what the

lawyers say is not evidence and it's your memory that controls

of what the testimony and evidence is.

MR. RAPP: This is Exhibit 171. Remember Carl Ferrer

says, look, we meet with NCMEC after this great March 1 meeting

that just sort of was a disaster. We try to engage with them

and we have these series of meetings and you hear this guy's

name, Don Moon, he's there, too. And we're just kind of

slow-dancing them. We're listening to them. We're not going 04:06:39

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to implement a recommendation that is going to impact our

revenue. That's what we're going to do but we're going to put

the best face on this. We're going to meet with you, meet with

you. By 2013 NCMEC says, look, you're not really implementing

our recommendation. You can infer that NCMEC didn't really

think that Backpage was sincere in their efforts to rid the

site of prostitution and they give them this letter.

This is 171. Remember Mr. Shehan on the stand. He

goes through four things. Look, this is what we made with

these recommendations to them. This is now distilled down in

this letter of 2013. NCMEC gives it to them and says that's

it. We're done with you.

And this is what you need to do and of course they

don't do it. Some of this prior -- number one at the time the

ad is created submitted by the user but prior to the ad being

posted online, takes steps internal to verify the identity and

age of the user who has submitted the ad. What does Carl

Ferrer say about that? We're not going to do that.

Take steps internally to verify the identity and age

of any individual depicted in the ad. We're not really going

to do that.

Prior to an ad being posted, if a possible minor is

believed to be featured within a submitted ad or an ad is

believed to involve possible child sexual exploitation, not

post the ad or allow it to go live on the site. Conduct 04:08:22

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searches of internal systems, report the possible child sexual

exploitation to law enforcement. Retain the relevant material,

digitally hash the photos, that never happened. Flag

identifiers associated with the ad.

Once an ad has been posted -- this is number three.

Once an ad has been posted publicly, if there's suspected child

exploitation within the ad, remove the ad from public view.

Conduct searches of internal systems to 35 and review all other

ads, report the possible child sexual exploitation to law

enforcement. That was the last letter NCMEC gave to them.

Goodbye.

You guys -- every time we have these meetings, you

just kind of repeat the same thing and nothing is ever done.

On the same day, March 1 of 2011, Mr. Ferrer and

Mr. Spear, they go down and meet with Polaris, this gentleman

by the name of Brad Myles, you might remember him. He

testified on the same day that John Shehan testified, on

September 19. This is Carl's testimony. On September 19,

2023, Carl relates this meeting that he has with Brad Myles.

Now, remember, Polaris has a different mission than the

National Center of Missing and Exploited Children; right?

Polaris is into trafficking, adult prostitution as well.

And so given the fact that on March 1 in the morning,

things don't really go that well with Mr. Lacey. He kind of

peels off. He didn't go to this but Mr. Spear does. He goes 04:10:16

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there and according to Mr. Myles, he doesn't say much. But

what Carl tells us is --

MR. CAMBRIA: Your Honor, I object again. He's going

off -- there's no testimony, what he just said.

THE COURT: And, again, the objection is noted but

the instruction to the jurors is that their memory of the

evidence and testimony controls.

MR. RAPP: And you can infer as well. You can infer

that that meeting did not go well in the morning at NCMEC and

maybe you can infer from the facts that it wasn't a good idea

for Mr. Lacey to go down to Polaris.

Well, Carl Ferrer tells us they were focused on human

trafficking and prostitution being part of human trafficking,

especially in Asian massage parlors.

And what, if anything, did you know about

prostitution being involved in Asian massage parlors? We knew

it was already there, because the site in New York City was

under Body Rubs, nothing by Asian massage parlors and they are

Dollar Bill's clients and Sean Kim's clients. This is the

super poster relationship.

Once again they go down to Polaris to kind of learn.

You saw an email from Mr. Spear. Hey, we really want to hear

about -- Mr. Myles, we really want to hear about what you have

to offer. They already know. They just go to NCMEC and they

already know about The Erotic Review. They go down to Polaris 04:11:44

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and Brad Myles is telling them, look, you know, let me tell you

a little bit about these Asian massage parlors and some of the

trafficking issues and kind of shows them pictures and shows

them pictures off of Backpage but they already know. Like it's

no revelation to Mr. Spear and Mr. Ferrer.

Well, what about training? Well, the company did not

take up Polaris on the request for training. It would be bad

for business. All right. And why would that have been bad for

business?

Well, based on the Polaris standard, he would have

had us remove virtually every ad in the Body Rubs category,

certainly in markets like New York City. So they weren't even

going to implement some of the recommendations that Polaris

made.

Brad Myles' testimony, this is jumping ahead to

October 18, just a week or so ago. My concern was that -- when

asked, here's his answer about the meeting: My concern was

that law enforcement is only able to respond to a fraction of

the ads that were on Backpage, and the majority of ads that are

posted there don't get a law enforcement response.

So if you're only getting subpoenas for a fraction of

the ads that do. The majority of ads aren't being attached or

looked at by law enforcement; and, therefore, the majority of

the problem is still existing and being facilitated. So

responding to subpoenas is a very small measure compared to the 04:13:21

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volume of the totality of the problem that's existing. That's

what they tell Mr. Spear and Mr. Ferrer.

Okay. Did you express to Mr. Spear and Mr. Larkin

any concerns that you had about what you observed on the site?

The concerns -- this is Mr. Myles: The concerns that

I expressed were that the measures that they were taking I

thought were incremental measures, but wouldn't fully address

the trafficking that was happening on the site and that

trafficking would continue to find a way to exist even despite

those measures.

And he tells them, ultimately, you need to shut down

the website. There's no way with the dribs and drabs of law

enforcement who send a subpoena to you. You know, a court

order, a subpoena that compels you to provide the postings.

And there was a lot of testimony through

cross-examination and even in opening statements. This is --

this is why -- at least from Mr. Padilla and Ms. Vaught, this

is, gosh, we were responding to these subpoenas. It was only

dribs and drabs, two to 3,000 postings a day in 450 markets at

its peak and they would get a court order and they would run

off the postings and send it to law enforcement. That's their

partnership?

Mr. Myles goes on. There are different networks of

trafficking and I described that there were a number of Asian

massage parlors or illicit massage businesses that were posting 04:15:16

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advertisements on Backpage and that I had believed were at high

risk of engaging in trafficking of women.

Okay. And then with respect to that particular

topic, the Asian brothels, did -- did any of the Backpage

representatives have any follow-up questions to that?

There were a number of follow-up questions about that

particular type of trafficking.

But they already knew about it; right? They sort of

show them these ads from Backpage and they look at them and can

identify. These are our ads. Yes, it looks like this person's

being trafficked.

Auburn Theological Seminary. Mr. Luria. This is his

observations of that meeting. Mr. Lacey was frustrated that we

were having this meeting. He didn't understand why religious

leaders would stick their noses in his -- in Backpage's

business, and that he also said something to the effect of

adults, consenting adults can do what consenting adults want to

do.

What was your conclusion?

My conclusion was that he, Mr. Lacey, believed

prostitution was occurring on the website and that it was

legitimate.

Is there any basis to that conclusion?

Let's look at a few other things here. Michael Lacey

at Auburn -- this is now Carl Ferrer's testimony. You get the 04:16:38

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other side. 

What was your understanding of the message that was

given to you?

Prostitution on the sites leading to child

prostitution and from the Auburn Theological Society, one child

is too many. What response, if any, does -- if there is, does

Mr. Larkin and Mr. Lacey, do they respond to that statement? 

Well, after hearing the statement, Mr. Lacey responds

that that's not a realistic policy; that's a bumper sticker.

We also know not only did they have this meeting;

right? We heard testimony that the Auburn Theological Society

took out this half page ad in The New York Times criticizing

Backpage and asking them to take down the website.

Here's 1827A. This is January 31 of 2012. This is

Mr. Lacey. One bad case amongst how many millions of ads that

involve no one underage. He kind of read that, you can kind of

infer that what he's saying is, hey, there's prostitution on

the website. But there's only all of these meetings that we

are having with NCMEC and Polaris, there's only a few that are

underage victims. And here's this whole false equivalency that

we've heard a little bit about in opening statement from the

defense. We've also heard it through cross-examination. They

are sort of having the same false equivalency here. Drug

dealers use cell phones, Fed Ex. When you bust them, you don't

advocate shutting down the phone service, overnight deliveries. 04:18:26

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Underage people use phony ID to get into bars. Thousands of

people patronize the bar legally. You don't close it when some

underage deceives the owner.

So false equivalency here is obvious; right? Based

upon their meetings with NCMEC is, we're not going to do age

verification. We're not going to do it and what he's saying

here is, hey, Backpage, is, just like a bar.

Well,if you go to a bar and maybe you're 22 or maybe

you're underage and you have a fake ID and you kind of show up

at the bar in person, right, and somebody, a human is actually

looking at you and saying: You don't look old enough to drink.

Let's see your ID. You know, this ID doesn't look like you.

Or maybe you just don't have an ID that says you're over 21.

This is the false equivalency. Backpage was a prostitution

website. They didn't do any age verification even though they

are asked to do it. Too expensive.

Here's their age verification. How old are you? I'm

18. Go ahead and post. That's the age verification.

But with two cases, it is not yet a tsunami of

underage trafficking.

Confronted by law enforcement and elected officials.

Subpoenas, the National Association of Attorneys General, Mayor

of Seattle, Seattle Police Department, United States Senate.

Here is an email between Mr. Lacey and Mr. Spear in

2010 from Mr. Lacey to Mr. Spear, is there any evidence of 04:20:26

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child trafficking anywhere? 

We have had subpoenas that deal with this exact

issue. This is Mr. Spear. He knows better than anybody

because he's sort of their the micromanager, as Mr. Ferrer

says. He's there on a day-to-day basis. He's handling

moderation. He's handling all sorts of aspects of the website.

More details and specifics later today. But we get a

ton of subpoenas that we comply with on a daily basis.

And as Mr. Ferrer said, in total amount of time, the

14 years from 2004 to 2018 he estimated that they received

20,000 subpoenas and the vast majority of those were criminal

cases involving prostitution. Isn't that just evidence enough,

frankly, that they were running a criminal enterprise that was

facilitating and promoting prostitution, just the mere fact

that they are getting these subpoenas?

And by the way, these subpoenas, they don't actually

stop prostitution; right? It's sort of after the fact, like

some law enforcement -- you heard the law enforcement agents

who came in and talk, yes, we've identified somebody that we

believe is engaging in prostitution and we need those postings

and we sent you a subpoena and you complied with this Court

order and you gave it to us. They never stopped anybody from

doing it. They just did their duty and complying with the

court order.

Anyways, subpoenas show them that their website is a 04:22:04

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prostitution website.

The National Attorney Generals Association. There's

blatant prostitution ads are rampant. Request that you

immediately take down the adult services portion. This is in

September of 2010.

In October -- going back to October of 2009, this is

the State Attorney Generals: Backpage should eliminate

allowing users to provide direct links to their accounts on

either The Erotic Review or CityVibe websites or any other site

whose sole purpose is to provide forum for prostitution

profiles. Notice, Exhibit 902.

We appreciate meeting with you recently in New York

regarding our concerns with prostitution ads and other sexually

explicit images posted in the Adult Services section on

Backpage.

This goes into 2011. This is regarding Backpage's

ongoing failure to effectively limit prostitution and sexual

trafficking activity on its website. Nearly naked persons in

provocative positions are pictured in nearly every Adult

Services advertisement on Backpage.com and the site requires

advertisements for escorts and other similar services to

include hourly rates.

Where did we hear that from? We heard that from the

victims who testified to their postings:

It does not require forensic training to understand 04:23:30

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that these advertisements are for prostitution. This hub for

illegal services has proven particularly enticing for those

seeking to sexually exploit minors. You're put on notice.

Seattle, the Seattle Mayor, Backpage is an accelerant

of underage prostitution.

In 2011 alone, the Seattle PD detectives have

uncovered four documented cases of child prostitution openly

advertised on the Backpage.com website.

And you recall that Carl Ferrer was the one that they

sort put out front, hey, go meet with this mayor. Go meet with

the Seattle PD, but he brings back those postings and he sends

them to Mr. Lacey.

Now, this is 1200A. This is -- this is the one of a

series of articles from this writer from The New York Times,

Nicholas Kristof. He did a series of articles on Backpage.

This is one of them. And this is one being emailed to Mr.

Lacey. And Mr. Lacey, as you know from some of the emails, he

had a lot of trouble with Mr. Kristof or a had a lot of

disagreements with him.

But this, Mr. Kristof's -- as you heard from the

testimony, they always feature a particular victim; right?

Somebody that he has featuring in his article.

And around the same time let's not forget about

Mr. Brunst, the CFO down there, the nonoperational CFO. He's

watching every dime; right? 04:25:16

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And about this same time in 2012, as you all know,

the Backpage pressure has reached red hot. These are some kind

of -- you can read through the Capital Partners, CP Stock

Purchase and Revised Operating Agreement.

He even then in 2012, Mr. Brunst is aware that they

are going to have difficulties with their banks. We need to

deal with their banks, who are being very difficult with the

Backpage turmoil.

Admissions. Well, this is an exhibit, 1911, this is

an admission of Mr. Lacey that he favors the legalization of

prostitution. But he's referring here to one of Kristof's

articles. Kristof's first column on former hooker just flat

wrong on the facts. She was a Government witness before

Backpage even started. And he's telling this person: I

believe in legalized prostitution.

I mean, is there any question here that he knows he's

running a prostitution website? With all the meetings and the

letters and his own admission here.

This is Exhibit 18 in this case. This is Mr. Lacey,

this is about one of the Nicholas Kristof. Mr. Lacey sending

to an individual by the tame of Tony Ortega. So he

acknowledges in this one: So it is possible she was using

Backpage in Boston when under pimp's control.

So he's sort of acknowledging that maybe Mr. Kristof

had the facts right. 04:27:08

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Backpage understood -- this is in response, this is

113A. This is in response to the Seattle Mayor and Seattle PD

and he writes this article. You remember this. He writes this

article. Backpage.com understood.

For the very first time, the oldest profession in the

world has transparency. What does that mean? What do you mean

it has transparency? It has record-keeping. What does that

mean? What record-keeping? These people are using vanilla

Visa cards and gift cards and then later cash. They are not

even using their own emails in many cases. What's the

record-keeping and what's the safeguards? This is an

admission.

Remember Mr. Ferrer, he gets ahold of this and said

wait a minute. You can't say this in an article. We're

running a prostitution website. Don't mention prostitution.

This is part of the same article. This actually

shows that Mr. Lacey, though, a majority owner and sort of not

into the day-to-day business of Backpage, certainly he's not

sauntering down to the moderation crew and asking everybody how

things are going. He's not doing that. But he actually knows

about what's in these postings. Craigslist Therapeutic Massage

category, the what-aboutisms. What-aboutisms. Oh, what about

Craigslist and what about these other sites? That's sort of

their refrain. Craigslist shuts down. Also features ads that

clearly refer to prostitution, including posts from masseuses 04:29:08

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because you remember Carl Ferrer said a good chunk of our adult

site is the body rubs, is the therapeutic massages. They are

offering outcall services to local hotels.

This is an acknowledgment by Mr. Lacey of an in-depth

understanding of the whole incall/outcall as being a coded term

for prostitution, 113A.

The conspiracy -- 

Judge, do you want me to keep going?

THE COURT: Let me just query our jurors.

Mr. Rapp is going to continue on and is there any

objection to going at least to 4:45?

Would that be sufficient, Mr. Rapp?

MR. RAPP: Sure. I don't think I'll be done, though.

THE COURT: I'm sorry. What did you just say?

MR. RAPP: I said I don't think I'll be finished.

THE COURT: Oh. Okay.

Well, members of the jury, because we've always

promised you an end time of 4:30 and occasionally we've gone to

4:45, apparently the Government still has a continuation of its

summation argument to you. And in that instance, while we're

at the juncture that they are in the middle or possibly toward

the end of their summation, I think giving them an appropriate

time to finish and to have you continue to be attentive, we

will reconvene and have the Government continue its summation

tomorrow. 04:31:01

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Now, I know my courtroom deputy has queried you about

a start at 8:45 and that is because the Court has to conclude

at noon tomorrow. And so with that understanding, if you can

be ready and prepared to come in for the Government to continue

the summation, that's how we will proceed promptly at 8:45.

Now, again, it's critically important, as I have

instructed you thoroughly and almost daily, I think daily,

multiple times a day, there is still a lot of people to hear

from. We have the Government summation, each defendant's

counsel is going to speak with you and then if they wish to,

the Government will speak with you one last time.

So it's critically important at this juncture not to

come to any conclusions, not to continue to avoid any sort of

conversations internally amongst yourselves or externally

outside of this courtroom, not to read any publications, to

turn away, to turn off the television if something should

happen and report the information to me should that occur.

And with that, I will see all here at 8:45 sharply.

Please all rise for the jury.

(Jury departs at 4:32.)

THE COURT: All right. Again, there are very many of

you in the seating area. Please remain for a few moments so

that the jurors can leave uninterrupted.

And counsel, as you've just heard, we are going to

begin promptly at 8:45 and so after Mr. Rapp, then Mr. Cambria, 04:33:03

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but as I mentioned, I will end tomorrow at noon.

All right. We will stand in recess.

(Whereupon, these proceedings recessed at 4:33 p.m..)

* * * * * 

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C E R T I F I C A T E 

I, ELAINE M. CROPPER, do hereby certify that I am

duly appointed and qualified to act as Official Court Reporter

for the United States District Court for the District of

Arizona.

I FURTHER CERTIFY that the foregoing pages constitute

a full, true, and accurate transcript of all of that portion of

the proceedings contained herein, had in the above-entitled

cause on the date specified therein, and that said transcript

was prepared under my direction and control, and to the best of

my ability.

DATED at Phoenix, Arizona, this 28th day of October,

2023.

s/Elaine M. Cropper 

_________________________________ 

 Elaine M. Cropper, RDR, CRR, CCP 

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