1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 ELIZABETH A. STRANGE

First Assistant United States Attorney District of Arizona

KEVIN M. RAPP (Ariz. Bar No. 014249, kevin.rapp@usdoj.gov)

MARGARET PERLMETER (Ariz. Bar No. 024805, margaret.perlmeter@usdoj.gov)

PETER S. KOZINETS (Ariz. Bar No. 019856, peter.kozinets@usdoj.gov) 

ANDREW C. STONE (Ariz. Bar No. 026543, andrew.stone@usdoj.gov)

Assistant U.S. Attorneys

40 N. Central Avenue, Suite 1800

Phoenix, Arizona 85004-4408

Telephone (602) 514-7500

JOHN J. KUCERA (Cal. Bar No. 274184, john.kucera@usdoj.gov)

Special Assistant U.S. Attorney 312 N. Spring Street, Suite 1200

Los Angeles, CA 90012

Telephone (213) 894-3391

BRIAN BENCZKOWSKI

Assistant Attorney General

Criminal Division, U.S. Department of Justice

REGINALD E. JONES (Miss. Bar No. 102806, reginald.jones4@usdoj.gov)

Senior Trial Attorney, U.S. Department of Justice

Child Exploitation and Obscenity Section 

950 Pennsylvania Ave N.W., Room 2116

Washington, D.C. 20530

Telephone (202) 616-2807 

Attorneys for Plaintiff

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United States of America,

Plaintiff, 

v. 

Michael Lacey,

Defendant.

CR-18-422-PHX-SPL (BSB) 

UNITED STATES’ RESPONSE TO 

MOTION TO AMEND THE 

RELEASE CONDITIONS OF 

LACEY’S PRETRIAL RELEASE

(Doc. 503)

INTRODUCTION AND SUMMARY OF ARGUMENT

The United States responds to defendant Michael Lacey’s motion to amend his

conditions of release (Doc. 503). The United States argued at the early stage of these 

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 1 of 18
- 2 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

proceedings that Lacey is a risk of flight in light of the serious charges against him, the 

weight of the evidence, his financial status and ties abroad, and his recent movement of 

$16.5 million of dollars to an offshore account in anticipation of his indictment. The United 

States argued he should be released only on conditions or a combination of conditions 

sufficient to reasonably assure his appearances as required by law. For a variety of reasons, 

Lacey’s recent request to remove electronic monitoring is unavailing and the government 

is not prepared to consent to, and indeed, opposes a change in the current conditions of 

release.

First, Lacey has not articulated any change of circumstances to warrant amending 

his release conditions. He claims he would like to swim and the electronic monitoring 

prevents him from doing so (and may otherwise interfere with a Hawaiian vacation). These

reasons were previously known and are insufficient to support his motion. 

Second, Lacey has been sanctioned by a court in Washington State—and his former 

company, Backpage.com, LLC, was recently sanctioned by an Illinois federal court—for 

making false claims in Backpage-related litigation. As discussed below, this raises 

concerns about whether Lacey would be candid with the Court (including Pretrial Services) 

when responding to questions about travel, finances, etc. 

Third, Lacey has a history of moving money offshore ($16.5 million transferred to 

an undisclosed account in Hungary) to prevent the government from seizing tainted money 

generated from illegal Backpage revenue. These funds have not been located abroad and 

could presumably be used by Lacey if he chooses to flee. 

Fourth, since his arrest, the weight of the evidence against Lacey has increased—

and so has his exposure to a lengthy sentence if convicted. As detailed below, Lacey, in 

his capacity as a Backpage owner, employed several business strategies to increase revenue 

by expanding Backpage’s volume of prostitution ads. These acts rebut his claim that 

Backpage was simply a neutral platform for the posting of advertisements created by third 

parties. Lacey has also acknowledged that Backpage’s advertisements included child sex 

trafficking. The motion should be denied.

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 2 of 18
- 3 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ARGUMENT

A. Lacey Fails to Articulate Changed Circumstances to Warrant a 

Modification of His Conditions

Lacey has recycled his original opposition to pretrial detention (Doc. 23) and is now 

attempting to re-litigate his release conditions after having agreed to certain terms in 

exchange for his release. (Doc. 67.) Lacey had the opportunity to have a detention hearing 

but instead opted to be released on certain conditions. Indeed, his co-defendant—James

Larkin—made the same request (to remove electronic monitoring) after agreeing to release 

on certain conditions, and that request was denied by this Court. (See Docs. 197, 224.) The 

Court found Larkin failed (as Lacey does here) to identify circumstances not known when

he agreed to the release conditions. For this reason alone, Lacey’s motion should be denied. 

Under the Bail Reform Act of 1984, the “judicial officer may at any time amend the 

[release] order to impose additional or different conditions of release.” 18 U.S.C. 

§ 3142(c)(3). The legislative history of this provision is clear that Congress intended to 

require a showing of changed circumstances to justify a modification of conditions: 

“[t]his authorization is based on the possibility that a changed situation or new information 

may warrant altered release conditions.” S. Rep. 98-225, available at 1983 WL 25404, at 

*16 (Aug. 3, 1983); see also United States v. Lafrance, 2016 WL 3882845, at *1 (D. Mass. 

July 13, 2016) (“Defendant has failed to show a substantial change in circumstances that 

warrants such a significant change in the conditions of his release, and the developments 

in this case, as described in the summary of the docket (set out above) similarly shows no 

qualifying change in circumstances for the modification sought. To the contrary, 

Defendant’s case has progressed closer to trial: he has been indicted, discovery has been 

provided, and a superseding indictment broadens the scope of potential liability and 

increases the potential penalties.”).

Courts reviewing requests to amend bond conditions under Section 3142(c)(3) read 

the provision “in conjunction with §3142(f).” United States v. Merola, 2008 WL 4449624, 

at *2 (D.N.J. Sept. 30, 2008) (“Under § 3142(f) of the Bail Reform Act of 1984, the Court 

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 3 of 18
- 4 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

is expressly authorized to reopen the detention hearing of a defendant when material 

information ‘that was not known to the movant at the time of the hearing’ comes to 

light. Courts have interpreted this provision strictly, holding that hearings should not be 

reopened if the evidence was available at the time of the hearing. Thus, the definition of 

‘changed circumstances.’”); see also United States v. Wei Seng Phua, 2015 WL 127715, at 

*1-2 (D. Nev. Jan. 8, 2015) (“Contrary to defendants’ assertions, the government’s factual 

support and reliance on 18 U.S.C. § 3142(f) are justified because this Court must consider 

whether new information exists that was not previously known or presented at the detention 

hearing to determine whether to modify the pretrial release condition at issue.”). As the 

statute provides, a defendant awaiting trial may reopen a detention hearing “if the judicial 

officer finds that information exists that was not known to the movant at the time of the 

hearing and that has a material bearing on the issue” of whether he will flee or is a danger. 

18 U.S.C. §3142(f)(2) (emphasis added).

Here, there was no detention hearing. Instead, the parties negotiated over several 

days and settled on mutually acceptable terms for release. One important term insisted 

upon by the United States was active Global Positioning System (GPS) electronic 

monitoring. Defendant agreed to this term. Lacey is now reneging on that agreement by 

urging facts that were known at the time of his arrest (e.g., he has been a swimmer for “his 

entire life” and occasionally takes beach vacations) to change his release conditions. (Doc. 

503 at 2.) In short, Lacey is asking for a “do over” by asserting that electronic monitoring 

is an inconvenience. This is not a materially changed circumstance justifying modification 

under the Bail Reform Act. 

Co-defendant Larkin previously made the same request to remove the electronic 

monitoring, albeit for different reasons. After agreeing to certain release conditions in 

exchange for his release, Larkin argued that he needed to travel unencumbered by the ankle 

bracelet because of a need to visit his wife and daughter residing in California. The Court 

found that the circumstances that precipitated his request were known at the time he 

reached the agreement on his release conditions. Magistrate Judge Bridget S. Bade’s 

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 4 of 18
- 5 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

analysis of the lack of changed circumstances that applied to Larkin’s request applies with 

equal force to Lacey:

So on April 16, 2018, when the order was entered with those conditions of 

release, he knew all of that information. He knew those facts. So what

you’ve described or what it appears to me that you’ve described is that he’s 

having second thoughts, that he, after having entered into this agreement, 

realizes that he doesn’t like it. That to me is not a changed circumstance. 

(Doc. 237 at 7) (emphasis added.) 

Magistrate Judge Bade denied Larkin’s request to remove the ankle bracelet and 

observed: 

[W]hat you’re arguing for are serial detention hearings. Same circumstances, 

let’s just present them over and over again and see what the Court will do

this time. Let’s judge shop. Let’s get a different judge. Let’s appeal to the district judge. You want to go back and revisit all the issues of flight and danger and the things that would be decided at a detention hearing.

(Id. at 33.) Because Lacey likewise presents no changed circumstances, this request should

be denied.

B. Lacey’s Recent Court Sanctions

On March 25, 2019, a district court in the Northern District of Illinois imposed a 

$250,000 sanction against Backpage for “its fraudulent representations during the course 

of this litigation.” (See Order dated March 25, 2019, in Backpage.com, LLC v. Dart, CV15-06340, attached as Ex. A; see also 446-1 at 14-35.) This is the same case that resulted 

in a Seventh Circuit decision in 2015 that Lacey cited in his motion for the proposition that 

courts have recognized Backpage as “an avenue of expression of ideas and opinions.” 

(Doc. 503 at 6 (citing Backpage.com, LLC v. Dart, 807 F.3d 229, 231 (7th Cir. 2015).) We 

now know that the Seventh Circuit’s decision was premised on Backpage’s fraudulent 

representations. The district court’s recent order recognized that “Backpage.com 

knowingly took positions that were factually unsupported and made numerous false 

statements to advance its claim against Sheriff Dart.” (Ex. A at 5.) “Indeed, it is difficult 

to imagine how Backpage.com could have advanced its claim if, in lieu of the false 

allegations identified above, it had included the admissions it made in the plea agreement.” 

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 5 of 18
- 6 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(Id.) The district court rewrote Backpage’s complaint to demonstrate how it would have 

read if Backpage hadn’t made false representations to the court:

The Sheriff has infringed Backpage’s First Amendment rights by accurately 

advising credit card companies (two of them, anyway) that the great majority 

of ads on Backpage’s adult services web site are for prostitution and that 

Backpage routinely doctors those ads to conceal their unlawful nature. When 

told about these facts by Sheriff Dart, those credit card providers decided that 

they did not want to be publicly linked to a company like Backpage and 

stopped accepting payments for ads placed on Backpage.com. Or at least 

they thought they had stopped accepting such payments. In reality, however, 

Backpage.com devised ways to deceive the card companies about its 

continued used of their cards as payment for access to its adult services 

advertising. It also devised additional means to collect payments for those 

ads and continued to receive substantial revenues from such advertising.

(Ex. A at 5.)

In addition, on May 23, 2018, in the Superior Court of the State of Washington, a 

judge imposed sanctions of two $100,000 awards against Lacey, co-defendant James 

Larkin and others for, among other things, making claims [to the court] that were 

untruthful: 

Another one that the Court can consider in regards to bad faith is procedural bad faith and that is vexatious conduct during the course of litigation, wasting private and judicial resources, making claims that, months later, were found to be untruthful.

(See R.O. v. Medalist Holdings, Inc., No. 17-2-04897, Superior Court State of Washington, 

May 23, 2018, Tr. attached as Ex. B, p. 64-65.) (Lacey has appealed that order.)

Given this recent history, Lacey does not inspire confidence that he would be candid 

to the Court (and his assigned Pretrial Services Officer). The precaution of electronic 

monitoring is warranted for this further reason. See, e.g., United States v. Hir, 517 F.3d 

1081, 1092 (9th Cir. 2008) (for release orders to be effective, “they depend on [the 

defendant’s] good faith compliance”) (quoting United States v. Tortora, 922 F.2d 880, 886 

(1st Cir. 1990) (concluding that similar release conditions contained “an Achilles’ heel 

. . . virtually all of them hinge on the defendant’s good faith compliance” and “the 

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 6 of 18
- 7 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

conditions as a whole are flawed in that their success depends largely on the defendant’s 

good faith—or lack of it. They can be too easily circumvented or manipulated.”)). 

C. Lacey Moved $16.5 Million Off-Shore to Avoid Government Seizure

As detailed in the superseding indictment, Lacey has obstructed the government’s 

interest in seizing tainted funds by using his attorney’s IOLTA to move money offshore in 

anticipation of being indicted. (See Doc. 230, Counts 99, 100 and ¶ 16; see also Email 

dated July 29, 2016, from Lacey to John Becker, attached as Ex. C.) Lacey did this after

he was charged by the State of California with various offenses related to his ownership of 

Backpage and learning Backpage’s CEO, Carl Ferrer, had received an Arizona federal 

grand jury subpoena. Lacey sought advice not only from his attorney in placing funds 

($16.5 million) offshore, but also requested advice from his bank on how to avoid a 

government seizure. (Id.) Lacey did this well before he was facing arrest, an 86-count 

superseding indictment, and, now, considerable evidence implicating him in a 14-year 

criminal enterprise that facilitated prostitution, including child sex trafficking. These funds 

have not been located abroad and presumably may be available to Lacey if he chooses to 

flee. 

D. Nature of the Offense and Strength of the Evidence

Lacey’s rehash of the nature of the offense and the strength of the evidence is 

inaccurate and should be rejected. (See Doc. 503 at 5-7, 12.) The United States argued in 

its original detention motion that the strength-of-the-evidence factor supported a flight-risk 

determination because the grand jury had already returned a 93-count indictment that 

summarized incriminating evidence against Lacey (Doc. 3), and the United States Senate 

had separately issued a 50-page report recognizing the criminal nature of Lacey’s 

contributions to Backpage.1

 (See Doc. 13 at 4-5.) The Senate reported Backpage’s internal 

documents revealed that nearly all of Backpage’s “adult” advertisements were solicitations 

for prostitution, Backpage was fully aware of the true nature of these ads, and Backpage 

 1

https://www.hsgac.senate.gov/imo/media/doc/Backpage%20Report% 

202017.01.10%20FINAL.pdf. 

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 7 of 18
- 8 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

had taken an array of affirmative steps to help its customers (pimps and traffickers) 

“sanitize” and conceal the ads’ illegality.

Since Lacey’s release on conditions in April 2018, the strength of the evidence has 

increased, as supported by the July 2018 Superseding Indictment (Doc. 230, which contains 

a detailed account of additional incriminating evidence). Much of this evidence is 

summarized in Doc. 446 at 9-14, which is incorporated by this reference. As these filings 

explain, Defendants, including Lacey, pursued numerous business practices to increase 

Backpage’s volume of prostitution ads and conceal its activities from law enforcement. 

These practices included “moderation” (redrafting prostitution ads to make them less 

obvious to law enforcement, and posting the revised ads without altering the true nature of 

the illegal transactions they promoted), reciprocal-link programs (cross-referral business 

arrangements with websites like The Erotic Review, which contained “reviews” of adult 

and child prostitutes advertised on Backpage), aggregation/pre-boarding (trolling the web 

for prostitution ads, copying and posting the ads on Backpage, and then contacting the 

pimps or prostitutes involved and offering them free trial periods of advertising), financial 

relationships with “super pimps” (business deals with individuals who placed large 

volumes of prostitution ads on Backpage), and concealment money laundering. (Doc. 446 

at 9-14; see also Doc. 446-1 at 1-76.) Lacey’s motion not only ignores this evidence, but 

is also silent regarding the fact that Backpage’s CEO, Carl Ferrer, and Backpage’s Sales 

and Marketing Director, Dan Hyer, have both pleaded guilty to conspiring to promote 

prostitution in violation of 18 U.S.C. § 1952 (Travel Act). See D. Ariz. No 18-CR-464, 

Doc. 7-2 (Ferrer plea agreement); Doc. 271 (Hyer plea agreement). Lacey’s motion also 

ignores that Backpage.com, LLC and four related entities have pleaded guilty to money 

laundering conspiracy. See, e.g., D. Ariz. No. 18-CR-465, Doc. 8 and attachments.

In response to the United States’ detention motion and, again, in the instant motion 

to amend conditions, Lacey cursorily argues that the strength-of-the-evidence factor favors 

him because the indictment “fails to take into consideration the law regarding protected 

First Amendment activities, and fails to plead the requisite heightened mens rea, among 

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 8 of 18
- 9 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

other errors.” (Doc. 503 at 12.) The United States has repeatedly pointed out that these 

assertions are incorrect and have been consistently rejected in recent years. First, Lacey

does not (and cannot) take the position that Backpage was not knowingly promoting 

prostitution on its website, including child sex trafficking. The evidence of Lacey’s

involvement in the operation and management of Backpage was considerable such that he 

cannot plausibly claim he had no knowledge of the true purpose of Backpage’s business 

model: to derive revenue from prostitution, including child sex trafficking. Lacey certainly 

cannot claim he was unaware of Backpage’s facilitation of prostitution especially in light 

of Ferrer’s, Hyer’s, and Backpage’s recent guilty pleas.

Second, Lacey’s argument that he did not have the mens rea is belied by the 

substantial evidence the United States will present at trial. Below are illustrative instances

where Lacey was intimately involved and had knowledge of Backpage’s facilitation of 

prostitution, including child sex trafficking:

i. The Detroit Backpage Murders

In December 2011, four woman were murdered as a result of advertising on 

Backpage for prostitution. (See Murdered Women in Detroit Linked to Backpage.com, 

Cops Say, published Dec. 27, 2011, attached as Ex. D.) In response to law enforcement 

inquiries into the business practices of Backpage, Lacey (and Larkin and Ferrer) engaged

the services of a public relations company (Sitrick) to handle the fallout from the negative 

publicity surrounding the quadruple murder.

2

 Lacey exchanged emails with the public

relations firm to formulate a response that included deflecting the blame on other 

prostitution websites. This is evidenced by an email to Lacey and others, where an attorney 

(Ed McNally) stated “were better off just muddying the waters out there today with the 

news of the 22 websites.” (Email dated Dec. 29, 2011, from McNally to Lacey, among 

 2 In response to a grand jury subpoena seeking email exchanges between Lacey (and other 

Backpage owners) and the public relation companies, Backpage attorneys took the position that these communications were protected by the attorney client privilege. Senior Judge David C. Campbell found that many of these emails were not afforded these protections and ordered the emails disclosed.

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 9 of 18
- 10 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

others, attached as Ex. E.) At trial, the United States expects to introduce testimony that 

these websites aggregated or copied their content from Backpage. Moreover, one of the

22 websites, The Erotic Review, had a longstanding financial and business relationship 

with Backpage. The Erotic Review was a website where “Johns” provided reviews of the 

services of prostitutes, including underage trafficking victims. (See Doc. 446 at 11-12; 

Doc. 446-1 at 40-76.) Against this background, Lacey knew that the Backpage website

was used for prostitution (resulting in a quadruple murder), and wasn’t just a “neutral 

content platform.” In 2015, four years after Lacey attempted to deflect blame for the

Detroit quadruple murder, another victim was murdered in the Detroit area by a customer 

who responded to her ad on Backpage. (See Doc. 230 (Victim 16) ¶ 175.) This evidence,

and similar emails and witnesses presented at trial, likely will increase Lacey’s prison 

exposure—giving him further incentive to flee. The witnesses include Backpage CEO Carl 

Ferrer, among others.

3

ii. Lacey Knew He Was Facilitating Prostitution and Child Sex 

Trafficking

Lacey’s argument that Backpage was merely a neutral content platform is at odds 

with additional evidence. Evidence that Lacey knew of Backpage’s promotion of 

prostitution advertising is summarized throughout the Indictment and Superseding 

Indictment. (See generally Docs. 3 and 230.) Moreover, from his emails and numerous 

witnesses, Lacey knew Backpage was used to facilitate prostitution, including child sex 

 3 That Carl Ferrer will be testifying about Lacey’s knowledge of Backpage’s efforts to facilitate prostitution (including child sex trafficking) underscores the government’s rationale for seeking disqualification of Ferrer’s former attorneys at the firm of Henze, Cook and Murphy (HCM). (Doc. 118.) HCM co-authored the instant motion, which 

includes arguments contrary to the factual basis of the plea agreement of HCM’s former 

client, Ferrer. In connection with the United States’ Motion to Disqualify HCM, the Court 

ordered that HCM will “only participate in the limited capacity set forth in the pleadings.” (Doc. 338.) Counsel representing HCM in responding to the Motion to Disqualify 

represented that HCM would participate in compliance with Lacey’s conditions of release. (Doc. 176 at 10.) There was no mention of trying to modify the conditions of release by undermining the government’s case, which is at odds with their former client’s cooperation 

against Lacey and the other Backpage owners. HCM further represented “in this narrow 

role, HCM will not be acting in a manner that is materially adverse to Mr. Ferrer’s interests.” (Doc. 176 at 10.) HCM’s involvement in this filing appears to be contrary to the Court’s ruling. 

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 10 of 18
- 11 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

trafficking. For example, in May 2011 he employed a different public relations media 

company (Culloton) to address a CNN news story critical of Backpage. In an email

exchange, Lacey referred to the FBI’s “arrest numbers for all hookers” that the reporter 

used. (Email dated May 1, 2011, from Lacey to Larkin and McNally, attached as Ex. F.) 

Lacey also acknowledged that child sex trafficking occurred on Backpage, but equated

underage sex trafficking victims to “drug dealers us[ing] cell phones, fed-x, underage 

people using phony I.D. to get into bars. Thousands of people patronize local bar [sic] 

legally. You don’t close it when someone underage deceives the owner of the bar.” (Email 

dated January 31, 2012, attached as Ex. G.) Moreover, Backpage’s principals were well 

aware that the moderation practices stripped out coded terms indicative of child sex 

trafficking (e.g., Lolita, new in town, sweet young thing, amber alert, among others) and 

continued to post the ad and receive revenue from the posting. (See Doc. 230 at 16-37.)

There’s more. Lacey responded to a column by New York Times reporter Nicholas 

Kristoff entitled “Where Pimps Peddle Their Goods” that detailed a Backpage child sex 

trafficking victim’s story.4 Lacey acknowledged in a January 23, 2012 email that 

Backpage ran ads that involved child sex trafficking, stating, “of course there are kids who 

get through the system, as there are in bars.” (Email dated January 23, 2012, from Lacey 

to Suskin, attached as Ex. H) Again, Lacey seemed to equate Backpage child sex 

trafficking victims (several of whom were murdered) to underage individuals who sneak 

into bars.

iii. Lacey Through His Attorneys Misled Courts About Backpage’s Business Practices

Lacey, of course, is wrong in his claim that no court has ever accepted the theory 

that a website or website operator may be criminally prosecuted under federal law for 

knowingly facilitating prostitution. (Doc. 503 at 6 n.4.) In United States v. Omuro, the 

 4

https://www.nytimes.com/2012/03/18/opinion/sunday/kristof-where-pimps-peddle-their- goods.html

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 11 of 18
- 12 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

founder of the website www.myRedBook.com was convicted of the same crime charged 

in this case—18 U.S.C. § 1952. Omuro’s website hosted thousands of ads posted by 

prostitutes, and Omuro generated $5 million from fees paid by escorts to post their ads 

more prominently on the website. See United States v. Omuro, N.D. Cal. No. 14-CR-336, 

Doc. 70 at 1-3. Similarly, in United States v. Hurant, the founder of the website 

www.Rentboy.com was convicted of violating 18 U.S.C. § 1952. In his sentencing memo, 

Hurant admitted he “was well aware . . . that the escort ads he posted . . . were thinly-veiled 

proposals of sexual services in exchange for money.” United States v. Hurant, E.D.N.Y 

No. 16-CR-45, Doc. 117 at 6, Doc. 107 at 39.

5 And again, in 2012, the Department of 

Justice obtained the forfeiture of the website www.escorts.com based on similar 

conduct. See https://archives.fbi.gov/archives/philadelphia/press-releases/2012/internetescort-services-firms-charged-with-money-laundering-sentenced-in-federal-court. (See 

also Doc. 42 at 2-5; Doc. 476 at 10-12.)

The results in these cases are hardly surprising and easy to harmonize with the First 

Amendment. Long ago, the Supreme Court recognized that “[w]e have no doubt that a 

newspaper constitutionally could be forbidden to publish a want ad . . . soliciting 

prostitutes.” Pittsburgh Press Co. v. Human Relations Comm’n, 413 U.S. 376, 388 (1973). 

Put simply, the First Amendment does not protect speech promoting criminal conduct. See, 

e.g., United States v. Stevens, 559 U.S. 460, 468-69 (2010) (“From 1791 to the present, 

. . . the First Amendment has permitted restrictions upon the content of speech in a few 

limited areas, and has never include[d] a freedom to disregard these traditional limitations. 

These historic and traditional categories long familiar to the bar—including obscenity, 

defamation, fraud, incitement, and speech integral to criminal conduct—are well-defined 

and narrowly limited classes of speech, the prevention and punishment of which have never 

 5 Hurant has other parallels to this case. In its Hurant sentencing memo, the government stated that although the Rentboy.com website “had disclaimers that claimed that the 

advertisements on the site were for companionship only and not for prostitution,” the 

company’s employees would often reject ads containing explicit offers of sex for money “but allow the ad to be resubmitted with different language. In many cases, Rentboy.com 

employees would just edit the advertisement’s language and approve it.” 

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 12 of 18
- 13 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

been thought to raise any Constitutional problem.”) (citations omitted); United States v. 

Meredith, 685 F.3d 814, 819-20 (9th Cir. 2012) (applying “the First Amendment exception 

that allows the government to regulate speech that is integral to criminal conduct”); United 

States v. Rahman, 189 F.3d 88, 116-17 (2d Cir. 1999) (“[F]reedom of speech . . . do[es] 

not extend so far as to bar prosecution of one who uses a public speech . . . to commit 

crimes.”). See also Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 447 

U.S. 557, 563-64 (1980) (“[T]here can be no constitutional objection [under the First 

Amendment] to the suppression of . . . commercial speech related to illegal activity.”).

Moreover, numerous recent cases against Backpage and Lacey show that Backpage 

wasn’t merely a passive conduit for third-party content, but actively facilitated prostitution. 

In 2015, the Washington Supreme Court denied Backpage’s and Lacey’s motion to dismiss 

a civil lawsuit brought by three minor girls who had been “bought and sold for sexual 

services online on Backpage.com.” See J.S. v. Village Voice Media Holdings, Inc., 359 

P.3d 714, 715-16 (Wash. 2015). This was the same court that later (in a different case) 

sanctioned Lacey and the other Backpage defendants. The court held that, because the 

plaintiffs had plausibly alleged that Backpage does “more than just provide a forum for 

illegal content” and affirmatively shapes the content of users’ ads through “posting rules 

[that are] ‘designed to help pimps develop advertisements that can evade the unwanted 

attention of law enforcement, while still conveying the illegal message,’” the plaintiffs 

should be permitted to conduct discovery “to ascertain whether in fact Backpage designed 

its posting rules to induce sex trafficking.” Id. at 718. In 2017, following extensive 

discovery, the trial judge in the J.S. case denied Backpage’s motion for summary judgment. 

Afterward, Backpage entered a confidential settlement with the plaintiffs.6 In light of these 

 6 The October 2017 settlement in J.S. v. Village Voice Media Holdings et. al was sealed. 

Nevertheless, it apparently was substantial enough to prompt Travelers Property Casualty Co. to seek to deny Backpage’s related insurance claim; Travelers argued it had no duty to indemnify Backpage, citing exclusions that bar coverage for intentional acts, among other things. (See Traveler Property Casualty Company of America v. Village Voice Media Holdings LLC, et al, D. Ariz. No. 2:17-CV-03994.)

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 13 of 18
- 14 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

various courts denying Backpage’s arguments, it is difficult to understand how Lacey can 

argue that the government’s case is travelling under a “novel theory.” (CR 503 at 5.)

A recent decision from the District of Massachusetts further undermines Lacey’s 

representation that he has prevailed in all previous Backpage-related cases. Last year—on 

March 29, 2018—the Hon. Leo Sorokin issued a five-page order denying in part a motion 

to dismiss that Lacey had filed in a civil case brought by a different underage victim who 

had been trafficked via Backpage. See Jane Doe No. 1 v. Backpage.com, LLC, 2018 WL

1542056 (D. Mass. 2018). The ruling explained that, because the plaintiff had made a 

plausible allegation that Backpage had “redrafted [her] advertisement . . . to suggest she 

was an adult,” the alleged conduct was not covered by the CDA’s grant of immunity. Id.

at *1. Here, similarly, the indictment and further investigation after indictment 

demonstrate that Backpage helped edit and redraft prostitution advertisements.

Although it is true that Lacey and Backpage have prevailed in a number of prior 

cases that sought civil remedies or that turned on whether Backpage could be prosecuted 

under state criminal law, those cases are easily distinguishable. (See Doc. 503 at 6-7 at 

n.4.) First, those cases differ for the obvious reason that Section 230 of the Communication 

Decency Act of 1996 (“CDA”) provides a broad grant of immunity in such contexts. This, 

however, is a case brought under federal criminal law—a context in which the CDA has

no application. See 47 U.S.C. § 230(e)(1) (“Nothing in this section shall be construed 

to impair the enforcement of . . . [any] Federal criminal statute.”). Indeed, the 

successful prosecutions in the myRedBook.com, Rentboy.com, and escorts.com cases 

demonstrate that federal criminal liability may be imposed under these circumstances. 

Second, those cases are also distinguishable because, with one exception 

(People v. Ferrer), they were decided prior to the release of the Senate Report in 2017. 

That report resulted from the review of hundreds of thousands of internal Backpage 

documents and other evidence that were not available when the cited cases were decided. 

Third, those cases were decided before the District of Arizona grand jury litigation 

that preceded the indictment in this case—litigation in which Senior Judge David C. 

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 14 of 18
- 15 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Campbell and a unanimous three-judge panel of the Ninth Circuit rejected Backpage’s First 

Amendment-based challenges to the government’s investigation and theory of the case. 

(See Doc. 194 at 7-8, incorporated by this reference.)7

 The Arizona grand jury 

investigation resulted in the production of still more previously undisclosed Backpage 

documents shedding additional light on the company’s internal operations. 

Fourth, Lacey’s cases were all decided before Backpage.com, LLC and its CEO 

pleaded guilty and admitted that the “great majority” of Backpage’s “adult” ads were for 

prostitution services. As Ferrer admitted, during its 14-year existence, Backpage “derived 

the great majority of its revenue from fees charged in return for publishing advertisements 

for ‘adult’ and ‘escort’ services.” (D. Ariz. No. 18-CR-464, Doc. 7-2 at 12-13.) Ferrer 

further admitted:

I have long been aware that the great majority of these advertisements are, in

fact, advertisements for prostitution services (which are not protected by the

First Amendment and which are illegal in 49 states and in much of Nevada). Acting with this knowledge, I conspired with other Backpage principals (including but not limited to M.L, J.L, S.S., D.H., A.P, and J.V.) to find ways

to knowingly facilitate the state-law prostitution crimes being committed by Backpage’s customers. For example, I worked with my co-conspirators to create “moderation” processes through which Backpage would remove terms

and pictures that were particularly indicative of prostitution and then publish

a revised version of the ad. Such editing did not, of course, change the

essential nature of the illegal service being offered in the ad—it was merely intended to create a veneer of deniability for Backpage. 

(D. Ariz. No. 18-CR-464, Doc. 7-2 at 13.) In the factual basis of its plea agreement, 

Backpage.com, LLC confirmed it “derived the great majority of its revenue” from fees 

charged for “adult” and “escort ads,” and “the great majority of these advertisements [were] 

for prostitution services. . . .” (D. Ariz. No. 18-CR-465, Doc. 8-2 at 11.) 

Backpage Sales and Marketing Director Hyer similarly corroborated Ferrer’s 

account and described the moderation process as follows:

Over time, I also became involved (along with Ferrer, Andrew Padilla, and 

Joye Vaught) in Backpage’s efforts to “moderate” the content of the 

website’s escort and adult ads. Once again, I knew that the great majority of 

the ads being “moderated” were actually offering illegal prostitution services—our removal of explicit words and pictures did nothing to change

 7 On May 17, 2018, Judge Campbell issued an order authorizing the United States to disclose the Grand Jury proceedings in this case. 

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 15 of 18
- 16 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

the services being offered. In fact, Padilla and I agreed that I and other Backpage sales and marketing employees use the term “models” in intra- company emails when referring to persons in Backpage ads who appeared to be underage. The use of this term was to avoid looking bad in a lawsuit.

(CR 271, Hyer plea agreement at 10.) In short, “moderation” involved the deliberate and

knowing publication of prostitution ads. As discussed above, these developments have 

undercut the basis for decisions such as Backpage.com, LLC. v. Dart, upon which Lacey 

heavily relies. (Compare Doc. 503 at 6 with Ex. A hereto.)

Lacey (through his numerous civil and criminal attorneys) misled courts across the 

United States about Backpage business practices that were well known to him. Lacey and 

other Backpage owners failed to disclose Backpage’s financial relationship with The Erotic 

Review, its affiliate relationship with a “super pimp” known as Dollar Bill, and moderation 

practices that included stripping out terms indicative of prostitution (including child sex 

trafficking) and posting millions of ads. (See Doc. 230 at 9-37; Doc. 446 at 9-14.) Lacey 

further concealed Backpage efforts at circumventing conventional banking and payment 

processors by concealing Backpage as the recipient of revenue from postings of millions 

of prostitution ads. (See Doc. 230 at 44-49; Doc. 446 at 13-14.) It is noteworthy that the 

Backpage defendants have never attempted to address these business practices in their 

various pleadings and correspondence. As noted above, both the Northern District of 

Illinois and the Superior Court in the State of Washington imposed sanctions for 

Backpage’s misleading statements and obstructive litigation behavior. 

In sum, if convicted of all (or even a portion of) these charges, Lacey—who is

70 years old—faces the very real possibility of spending the rest of his life in prison. 

Such exposure creates a powerful incentive to flee. See, e.g., United States v. 

Townsend, 897 F.2d 989, 995 (9th Cir. 1990) (“Facing the much graver penalties

possible under the present indictment, the defendants have an even greater incentive 

to consider flight.”); United States v. Anderson, 384 F. Supp. 2d 32, 35 (D.D.C. 2005) 

(ordering pretrial detention in white collar case, even though the defendant had no prior 

felony convictions and “no history of violent criminal activity,” in part because “[t]he 

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 16 of 18
- 17 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

combined statutory maximum penalties for the federal crimes with which Mr. 

Anderson is charged is 23 years. . . . At 51 years old, Mr. Anderson potentially could 

spend most of the remainder of his life in prison if convicted.”). In addition to the 

instant federal prosecution, Lacey is facing charges in the State of California, is under 

investigation by the Attorney General in the State of Texas, and is defending numerous 

civil cases across the country. This onslaught of criminal and civil cases provides 

ample motive to flee.

Lacey’s motion to revisit his release conditions raises facts that were well known at 

the time the parties negotiated his release conditions. The only changed circumstances is 

that the evidence is now stronger against Lacey than it was in April 2018. Lacey’s motion 

to amend release conditions by removing electronic monitoring should be denied. 

Respectfully submitted this 2nd day of April, 2019.

ELIZABETH A. STRANGE

First Assistant United States Attorney

District of Arizona

/s Kevin Rapp

KEVIN M. RAPP

MARGARET PERLMETER

PETER S. KOZINETS

ANDREW C. STONE

Assistant U.S. Attorneys

JOHN J. KUCERA

Special Assistant U.S. Attorney

BRIAN BENCZKOWSKI

Assistant Attorney General

Criminal Division, U.S. Department of Justice

REGINALD E. JONES

Senior Trial Attorney

U.S. Department of Justice, Criminal Division

Child Exploitation and Obscenity Section

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 17 of 18
- 18 -

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Certificate of Service

I hereby certify that on this date, I electronically transmitted the attached document to the 

Clerk’s Office using the CM/ECF system for filing and transmittal of a Notice of Electronic 

Filing to the following CM/ECF registrants: James Grant, Paul Cambria, Robert CornRevere, Janey Henze Cook. 

s/Angela Schuetta

U.S. Attorney’s Office

Case 2:18-cr-00422-DJH Document 516 Filed 04/02/19 Page 18 of 18