UNITED STATES DISTRICT COURT

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

_________________

United States of America, )

) No. CR-18-0422-PHX-SMB

Plaintiff, )

)

vs. ) Phoenix, Arizona

) September 8, 2021

Michael Lacey, ) 9:27 a.m.

James Larkin, )

Scott Spear, )

John Brunst, )

Andrew Padilla, )

Joye Vaught, )

)

Defendants. )

_____________________________ )

BEFORE: THE HONORABLE SUSAN M. BRNOVICH, JUDGE

REPORTER'S TRANSCRIPT OF PROCEEDINGS

TRIAL - DAY 4 - A.M. SESSION

(Excerpt - Opening Statements of Mr. Bienert and Mr. Feder)

Official Court Reporter:

Christine M. Coaly, RMR, CRR

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

401 West Washington Street, Spc 37

Phoenix, Arizona 85003-2151

(602) 322-7248

Proceedings Reported by Stenographic Court Reporter

Transcript Prepared by Computer-Aided Transcription

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A P P E A R A N C E S

For the Government:

U.S. ATTORNEY'S OFFICE

By: Mr. Peter S. Kozinets

Mr. Kevin M. Rapp

Ms. Margaret Wu Perlmeter

Mr. Andrew C. Stone

40 North Central Avenue, Suite 1200

Phoenix, Arizona 85004

U.S. DEPARTMENT OF JUSTICE

By: Mr. Reginald E. Jones

1400 New York Avenue, NW, Suite 600

Washington, DC 20530

U.S. ATTORNEY'S OFFICE

By: Mr. Daniel G. Boyle

312 North Spring Street

Los Angeles, California 90012

For the Defendant Lacey:

LIPSITZ GREEN SCIME CAMBRIA

By: Mr. Paul J. Cambria, Jr.

Ms. Erin E. McCampbell-Paris

42 Delaware Avenue, Suite 120

Buffalo, NY 14202

For the Defendant Larkin:

BIENERT KATZMAN

By: Mr. Thomas H. Bienert, Jr.

Ms. Whitney Z. Bernstein

903 Calle Amanecer, Suite 350

San Clemente, CA 92673

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UNITED STATES DISTRICT COURT

For the Defendant Spear:

FEDER LAW OFFICE

By: Mr. Bruce S. Feder

2930 East Camelback Road, Suite 160

Phoenix, AZ 85016

For the Defendant Brunst:

BIRD MARELLA BOXER WOLPERT NESSIM DROOKS

LINCENBERG & RHOW

By: Mr. Gopi K. Panchapakesan

1875 Century Park E, Suite 2300

Los Angeles, CA 90067

For the Defendant Padilla:

DAVID EISENBERG, PLC

By: Mr. David S. Eisenberg

3550 North Central Avenue, Suite 1155

Phoenix, AZ 85012

For the Defendant Vaught:

JOY BERTRAND, LLC

By: Ms. Joy M. Bertrand

P.O. Box 2734

Scottsdale, AZ 85252

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P R O C E E D I N G S

(Excerpt.)

THE COURT: Thank you. Please be seated.

And good morning, everybody. Welcome back. I hope

you had a nice weekend.

We're going to start with the defense openings.

Before we do that, I just wanted to let you know that since

some of you are sitting in the back in different bleacher-type

seats, we will be rotating you every once in a while so that

you all share in the back seats and get a different

perspective.

So, just for those of you in the back, I don't know

how comfortable those seats are, but we will be rotating you.

Mr. Bienert.

MR. BIENERT: Thank you, Your Honor.

Good morning, everyone. My name is Thomas Bienert and

I represent defendant, James Larkin. And so I'm going to talk

to you now about the defense perspective, and I'm going to talk

about some general themes --

And I assume this is not so loud it's bothering

people. It works.

I'm going to talk about some general defense themes,

then I'm going to talk about my client, Mr. Larkin.

First of all, this is a case about free speech and the

limits on the government to prosecute those who provide a

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location, a platform for other people to place legal speech.

Now, the government, the prosecutor, Mr. Jones, said, by my

count, 18 times in his opening to you: Why'd they do it?

Why'd they do it? And he repeatedly said -- his version that

he wants you to believe -- greed. And we'll talk about that.

But there is a good reason they did it. They didn't

do it for greed. The short answer is they did it because these

defendants, starting with my client, Mr. Larkin, and his

partner, Mr. Lacey, have spent 50 years as journalists always,

always, always standing up for the right of everyone to speak

legally as long as it was legal speech. That's why they did

it.

Mr. Larkin, if you can stand up.

This is my client, Jim Larkin.

And if we can go ahead and put this up.

He's not a pornographer. He's not a pimp. He's not a

pedophile. He is not a trafficker. He's a journalist. And

since the early 1970s, he has written newspapers. He has won,

along with his colleagues at the paper, they have been

nominated for thousands of journalism awards. They've even won

a Pulitzer Prize. Thousands of awards. Real journalism. And

he does -- everything that is going on in this case, it's for

one simple principle right here, Article I, First Amendment:

Congress shall make no law -- if you look at the second line --

prohibiting the free exercise -- strike that -- abridging the

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freedom of speech or the press. That's the First Amendment.

Legal speech is allowed in this country, that's why he did it,

and that's the same thing he's been doing for 50 years.

Thank you, Mr. Larkin.

What you're going to learn is that Mr. Larkin and

Mr. Lacey and the people who worked at their paper, in 50 years

have learned that if people aren't allowed to speak freely

about what's lawful, even if people don't like it, that's when

the government abuses its power. That's when people who can't

stand up for themselves, who don't have a voice, get stifled.

And, ironically, this case, you will see from the evidence, is

an abuse of power.

The first thing I'm going to point out, the vast

majority of what the prosecutor told you the evidence will show

you is flat out untrue. Flat out untrue. What you're going to

see from the evidence here is that the deception -- and I use

that word because Mr. Jones used it about 20 times -- deception

repeatedly was made by the government in the things they talked

to you about, what they said this case is about, and what they

will tell you that the evidence is going to show. There is the

deception, and I'm going to talk to you about some of that.

First, first deception, escort does not equal

prostitution. What you'll see the government did repeatedly,

and they will do this entire trial, is that they will

repeatedly take something that is legal, escort and escort ads,

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and simply replace the word prostitution where it said escort.

And it is on this basis that Mr. Jones makes all these totally

inaccurate, unprovable, and you will never hear evidence to

establish that all of these ads are prostitution, or all of

these ads, or most of them, are prostitution. No. They're

all, every ad he showed you, they're all legal escort ads. And

we're going to look at that.

The second big deception, trafficking. An evil word.

All of us would agree with that. Trafficking, children being

trafficked against their will, women being trafficked against

their will. By my count, he said the word child or child

trafficking 47 times in his opening. He then went on, for good

measure, another 13 times and just said trafficking in general.

You will not see a single, not one, example of any of

these six defendants ever knowingly involved in trafficking

anyone, man, woman, or child. It doesn't exist. And, by the

way, it's a federal crime to traffic children or adults. That

crime is not charged here. It's not why we're here.

If they had a trafficking case against these

defendants, you would have seen it. It's a dodge. It is

deception. And we know why. We all spent three days here

talking about people's views, and not a single person here said

I'm in favor of trafficking. Of course not. No one is in

favor of trafficking, but it's a lightning bolt. It gets you

riled up. Please watch the evidence and ask yourself with each

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witness, where is the trafficking, where is anybody, any

defendant that purposefully or even knowingly helping push

someone against their will for anything? You won't see it. In

fact, what you're going to see is quite the opposite.

Support from the law enforcement community. Backpage

was the number one referral and helper to law enforcement in

catching traffickers. No one did more to catch traffickers

than Backpage. Here's some examples.

I wanted to personally thank you again for all you

have done to assist with this matter. I know your company is

vilified nationally because it is an easy target. I've told

numerous people that Backpage is law enforcement friendly and

does not support human trafficking.

I've even mentioned how if Backpage is ever shut down,

another website will take over, likely overseas, that will not

be so helpful to law enforcement. While I don't agree with

online prostitution advertisement, the line between legal and

illegal is incredibly gray.

There will always be a demand for sex, illicit or

otherwise, and thus there will always be a venue where people

go to find it or advertise it. I'd rather have a partnership

than an adversarial relationship with your company, so that

when the need arises, we can work together to go after those

that are exploiting and trafficking others. That's the Denver

Police Department.

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Here's the FBI in 2012. Thank you. I appreciate your

proactive efforts to protect our children. Again, thank you.

The FBI again in 2012. Thank you very much for

forwarding this. It's great to know you guys are behind us in

catching up with these pimps.

And the next two the same thing. FBI child

exploitation task force, 2015. There is a violent pimp

associated with these postings that was arrested and his two

victims have been rescued and are doing well. Can't do this

without your help.

Cleveland, 2015. Hello and thanks for the quick

response. We recovered a young girl last night. She's been

missing for more than a year. By the way, they can be removed

now.

Backpage, you will learn, went so far to assist law

enforcement that they put ads up or kept ads up to help them

find people. It is deception to say that Backpage was ever

trying to hurt any children or knew about it. Whenever they

learned, they tried to help.

And let me say this. This word children is being

thrown around. You guys are going to see a lot of scantily

clad people, probably more than you need to, but,

unfortunately, that's what the case is about. But here's what

you will never see. You will never see someone who looks like

an underage child in any of those ads. Every one of these ads

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looks like a mature young woman, and they all have on them --

they represent that they're over 18. And you'll see them. But

get -- you must know, there is no children, per se. Now,

illegal, and certainly people under 18 should not be victimized

or trafficked, but nothing here would ever alert them. And

we'll talk about it more.

Now, let's talk a little bit about what the case is

about from Backpage's perspective. Because, of course, before

you can really assess the defendants, you've got to know a

little about them.

Now, what the government has done here is they take

this one slice of all of a big empire of newspapers in history

and they just focus on it, like the Zapruder film in the

Kennedy assassination, when you watch that frame, by frame, by

frame. And what they know it does, and what you're going to

see, is it blows everything up, as though all everybody at

Backpage and the newspapers ever did was look at pictures of

children. Not true. Backpage is a publication, as I indicated

to you. These are newspaper people.

And what they have done all along -- we can come back

to that -- the point I wanted to make here is what the evidence

will show you is when Backpage was confronted with after-thefact anecdotes, hey, there was somebody trafficked here, this

is an illegal person -- an illegal act going on with this, they

would repeatedly add to the things they did to try to catch

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people better.

But what they would not do, because they're First

Amendment absolutists, was they would not shut down legal

speech. So they came up with a three-pronged approach, and you

will see it consistently: Allow all ads that are legal, even

if it's content that maybe the folks at the company aren't into

themselves; do not allow ads that are illegal to post; and

then, help law enforcement catch those that try to do bad

things. And you'll see that that's what they did, repeatedly,

trying to strike a balance between not throwing the First

Amendment out, but being responsible to help catch people who

abuse it. Because, of course, there is a big difference

between consenting adults who voluntarily participate in escort

services, stripping, sensual massage, all these types of things

that are legal, and people who are doing things against their

will.

So, for starters, every Backpage -- every person who

goes to Backpage would see posting rules. And they all

basically said, you can't post here unless you're going to

follow the rules. You got to agree. Don't put obscene

information on here. Don't do soliciting for illegal

prostitution. And, of course, don't put anything on here that

exploits any minors or assists in human trafficking. And it

says all in red here: If you do this with minors, you're going

to be subject to prosecution. And that's exactly what they

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tried to do.

So let's go back and learn a little bit about how we

get here. As I said to you, Mr. Lacey and Mr. Larkin founded,

here in Phoenix, the Phoenix New Times, back in the early '70s,

kind of anti-government, anti-Vietnam War publication that

grew. And I've got a copy, a random copy. This one is from

1991. But, basically, it has kind of hard-hitting journalism.

The front page here highlights an article by Mr. Lacey

where he's basically challenging the then police chief, Ruben

Ortega, on whether or not he is unfairly attacking minorities.

And there is a bunch of other articles in here. There is also

movie reviews, cooking reviews, advertisements for everything

from stereos, to TVs, to adult services.

And Backpage comes from the back page, literally. And

what you'll see is -- come back to that. The back page was

classified ads. And they allowed classified ads, as long as

they were legal, in a wide variety of things. So if we just

look at this one. Just say no to baldness. Something near and

dear to me 20 years ago. Obviously, hasn't worked. And I'll

submit to you that, at the end of this case, you'll realize

these defendants are no more responsible for what the third

parties said about their adult advertising ads, than the guys

who advertise to guys like me that they could cure my baldness.

They don't work on baldness. They don't sit there and see how

it works. They simply provided space, like a bulletin board,

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for people who want to pay to post their legal ads.

Other ads, just random, bankruptcy, divorce, $95. A

lot more expensive than that now. Speak with a psychic. And,

oh, yes, several adult ads. And these are just three of them:

Dial a stripper; striptease; girls, girls, girls. There are

plenty of them here. This goes all the way back. It's all

part of their First Amendment view that we will offer a

location for people who don't normally have a voice to voice

it. That's what this newspaper was.

It all comes back right here, First Amendment. Free

speech. If it's legal, they're going to allow it; if it's not

legal, they won't. It's that simple.

And, by the way, this business model is one that they

followed from the Village Voice from New York, which, by the

way, they owned. Village Voice was started by famous

playwright, Norman Mailer. It was owned for about ten years by

Rupert Murdoch of Fox, who started Fox news and is the big Fox

empire. It is another legitimate paper. And the key to these

alternative papers is, one of my favorite words, they are free.

I see some of you don't have the blessing of youth

anymore like me, and we're all old enough to remember juggling

those frickin' quarters and dimes and dollar coins to try to

get a newspaper. And, with me, the machine would always shut

on my hand. You had to pay for papers. People who didn't have

discretionary money didn't get papers. These guys wanted to

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make it available to everyone free. So these ads, baldness,

bankruptcy, criminal defense attorneys, liposuction, you name

it, and even adult services is what caused it to be free for

everyone else, especially those that normally didn't get a

chance to get the newspaper. And it's a business model that

worked very well.

First of all, again, just to go back, when I mentioned

awards, they didn't just get nominated for awards, they

literally won, these journalists, over 1,800 journalistic

awards: Pulitzer Prize, James Beard awards, investigative

reporter awards, the Livingston. All of these are very well

recognized, established awards for journalism.

This model grew and soon it expanded to 17 newspapers

nationwide, all following the same model. So if you look at

this, it's kind of a messy chart, this is an organization chart

of VVM, Village Voice Media, which is the company that owned

all these papers. And up here in the left you'll see the

owners. But the bottom line is Mr. Lacey and Mr. Larkin were

almost equal owners, and then two of the defendants, Scott

Spear and Jed Brunst, were smaller owners, and then a couple of

their sons, elder children, had a very small percentage. And

what they did, they owned and ran 19 different companies, 19

companies all over the country.

And you'll see that they had newspapers in Houston,

Dallas, San Francisco, Oakland, Los Angeles, Denver, Miami, the

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list goes on, and on, and on. And, significantly, one of the

many companies, which is in the -- the long row going across,

the third from the right -- should have blown it up for you,

but I didn't -- is Backpage. Backpage is simply 1 of 19

companies that these four men were above.

And, significantly, my client, who was the CEO of the

mothership company, Village Voice Media, had a thousand

employees all over the country. Backpage was based in Dallas

for almost all of the relevant time here. My client was based

here in Phoenix. So the point is -- and I'm not backing off

from this. You're going to see my client was generally aware

of what was going on at Backpage, but he wasn't sitting there

doing the day-in, day-out work. He wasn't looking at ads. He

wasn't going in and verifying that, for example, when the guy

who actually was the CEO of Backpage, a guy named Carl Ferrer,

what exactly he was doing, except to monitor things,

continually provide them what they needed, and said follow the

rules. And he would be updated on what the rules were and what

they were doing.

But, please know, this idea that someone who is

running 19 companies all over the country with a thousand

employees is going to be sitting down and looking at, for

example, the particular ad by a particular young lady in

wherever, Chicago, just not how the business worked. It was

setting up standards to be followed and insisting that they be

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followed. And they were. They insisted on it.

Now, let's talk a little bit just on the personal

side, because this whole company is flourishing. My client,

Mr. Larkin, Jim, he's the Phoenix guy. He grew up here, spent

his whole life here. Went to Catholic high school here. Went

to Phoenix Community College. And that's when he wound up

thereafter getting into journalism with Mr. Lacey.

He's got six children. I'm going to ask if they can

stand up. And his wife Molly. We have several here.

He raised six children. You're looking at his wife

Molly and four of them.

You guys can all have a seat.

In his personal life, he does not participate or

partake in the kind of activities that you are going to hear

about today, much like he never participated or partook in many

of the activities that his newspaper allowed to be printed

about, or people to send in advertisements. But he followed a

big rule, the First Amendment means something. Because, in his

experience, if you don't allow it, when you start letting the

government decide what you can and can't say, think, or write,

even when it's legal, the government wins and the little man

loses. That's his motive.

And, you know what, you're going to hear a lot of ugly

stuff here, because the government's only going to focus on it,

not going to show you all the stuff that isn't ugly. But I'm

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going to tell you, I will be standing in front of you in, I

don't know, Monday, Tuesday -- oh, yeah, four months, we're

going to sit here and listen to all this, nothing -- you're not

going to have anything earth shattering. At the end of the

day, you're going to be right back where I told you you would

be, I predict.

But here is where it's going to come down. This is

the whole case right here. We'll call it the Larkin and Lacey

method: Legal, illegal. An ad that is legal, it can run. An

ad that is not legal, what do you think? Let's do this one in

red. Cannot be put up in illegal form. There it is.

You know what's interesting -- and I'll come back to

this -- Mr. Jones talked for two hours, he never showed you a

single ad that was an illegal ad on its face. He never showed

you a single ad that any one of these six defendants,

especially Mr. Larkin, ever saw, ever knew anything about. The

people in the ads, they didn't know. The purported businesses

that are supposed to show you that there was a business

enterprise of prostitution, had no idea. This entire case is

totally untethered from these defendants, and, in particular,

my client.

This entire case is because this is controversial

stuff, and I grant you that. Many people don't like it. Many

people don't like that adult services can be legal, and now

that the internet is there, that it's everywhere. But

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controversial does not equal illegal. They're just not even

related. One is totally different than the other. And what

you're going to see here is -- and you'll have your own views.

You're entitled to them. You may like, dislike, be neutral on

this type of adult consensual services, but that's a different

issue than what's illegal. It's not illegal.

But let's continue. So the newspapers were

flourishing. Everything was good. In the late '90s -- and I

want to say this. There is all this talk about greed. In the

1990s, Mr. Larkin and Mr. Lacey and the other two owners,

they -- Mr. Brunst and Mr. Spear -- they sold a big interest in

VVM, the big company that owned all the papers. And they kept

control of them, but they sold it. And you know what they

made, certainly my client, millions. My client was a wealthy

man before the turn of the century, before Backpage.com was

even a blip on the screen, before any of the facts you'll hear

in this case. He didn't need the money. And everything you

heard about, and you will hear about here, was not for money.

And I'll come back to that in a bit.

But, as anybody over 30 years old knows, times were a

changing at the turn of the century, right? Old people like me

used to love to get up every day and get my morning coffee and

read my paper, but it became harder and harder to do because

the internet took over and all of these newspapers weren't

doing as well as they used to. Everything was going online.

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So all Backpage.com is is the papers aren't going to keep going

as hard copy papers all in one place, so they get put online.

So all 17 of these newspapers, each one becomes an

online newspaper, and all of the advertising for them, instead

of being at the back page of each paper, becomes its own online

back page. Hence the name, Backpage.com. And the money from

Backpage.com is what was used to pay for, among other things,

these other 17 and 18 newspapers, just like they were in the

old days.

Now, the government, again, just tries to make it

sound like the whole world was about these escort ads, but it

wasn't. Here's a table of contents of Backpage, and it covers

everything. You could put ads in there for pretty well

anything you can imagine: Local places, events and things to

see and do; community things, childcare, classes, buy, sell,

trade. They talked about an old sofa. I think we're going to

hear a lot about an old sofa. You could sell a car. Sell your

car. Musicians, I want to play music, I want to hear music,

and so on, and so on, and so on.

And, significantly, over here, one of these sections

is called adult. There it is, adult. Now, they're going to

make this whole thing seem like that's all anybody ever spoke

about or talked about, not true. It was part of a bigger

puzzle. But there was certainly emphasis on this, and we'll

talk about it.

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But one of the other deceptions that the government

repeatedly did is this idea that 94 percent of the money was

from adult and prostitution. No. What you're going to learn

is 85 percent of the ads, over 80 percent of the ads were in

these other categories. Adult, though, people would pay more

for adult. Now, what does that tell you? Again, no judgment

here. The reality is, there is a high demand for consensual,

lawful adult voluntary services. The proof is in the pudding,

right. A lot of people call about it. A lot of people

interested in it.

We're not -- none of us are naive enough not to

realize, you can go anywhere any time, from a news shop, to a

7-11, to online, and you can see adult stuff in this day and

age. It's there. Backpage got its share of it. In

particularly, as they told you, one of the few things we agree

on, these guys weren't looking to make a lot of money on this.

They were trying to keep their papers afloat. And then when

Craigslist decided to shut down its adult services, poof,

Backpage, I mean, Backpage got big. And what's that

expression, drinking water from a firehose.

And what you're going to see is during that time

frame, I'll call it 2010, 2011, flood of new stuff going on,

lots of reactions to try to address what was happening, to

address it responsibly, and to keep trying to walk that line

between: We believe in the First Amendment. We're not going

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to give up the fact that people can have speech and say what

they want in an ad, if it's legal, but we are going to try to

police this stuff.

And what you're seeing is in 2000, kind of '9 or '10

to 2012, this sort of increase, continual revamping of the way

they can police this site. Changes made all the time. And, by

the way, one of the things you'll learn in this case, changes

not only that are consistent with what everyone else in the

internet space was dealing with, but were cutting edge, at the

forefront.

These changes where people were grappling with, where

do we draw lines, what do we allow or not allow online, were

all happening in the new millennium. That first decade, 2000

to 2015, it's like, this is new. How do we do it? And people

are figuring it out as they go. But what you're going to hear

about Backpage, always, always, always with the advice of

experts, lawyers, consultants, people who would come in and

say, here's how you can and should do this properly.

Now, what's interesting is this is how everything gets

paid for, remember, the newspapers. One of the slides that

Mr. Jones put up to try to make it sound nefarious, and it was

nice of them to put -- you know, news flash, my client's

e-mails don't have a mugshot of him next to them all the time.

You're going to see -- I'm going to tell you right now, you

will see so many little digs and tweaks by these guys that are

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done for no reason other than to make everyday common

activities look nefarious. They put his mugshot here. It

wouldn't normally be there. But this is an e-mail he had. And

let's look at this earth-shattering e-mail.

Congratulations to Carl. Another great month. You're

leading the way for the whole VVM enterprise onto the Web.

That's in 2008. This is Mr. Larkin saying, hey, Carl Ferrer,

who is running the online stuff, wow, you're getting a lot of

business. That's great. Every businessman and every

businesswoman in every business wants to succeed. This e-mail

tells you nothing to suggest that they're acting illegally.

They are getting business. Doesn't shed any light on whether

it's good or bad.

But here's what it does support. You're leading the

way for the whole VVM enterprise, in other words, Backpage

online is the same in the online world as Backpage in the hard

copies. It's just instead of being in 17 different handheld

papers, it's in one place for all of them.

Now, as I said, things started really getting big when

Craigslist shut down. And you'll hear a lot about Craigslist

shutting down. Bottom line is they weren't doing anything

illegal either, but there was a lot of pressure. Don't get me

wrong, there were a lot of people saying, Craigslist, there is

a lot of stuff on your site that we don't like. You should

shut down your adult section. And you'll hear that after

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several years, they did.

Now, as an aside, much of Craigslist's adult section

just went over to its personals, but a lot of adult stuff came

over to Backpage. But, again, these were adult ads that were

within the legal services, on their face, not illegal. And

we'll talk more about that.

But, significantly, again, on the so-called greed

factor, my client, Mr. Larkin, he didn't want to keep doing

this. You will learn that from about 2011 on he was trying to

sell the companies, the newspapers and the Backpages. He

wanted to spend more time with the family over here. And so

from 2011 on, all of these companies were constantly on the

sale block.

Now, of course, selling newspapers, selling a big

company, it's not like me selling a car, so it takes a while.

And what you're going to learn is there was a lot of different

meetings with legitimate investors and buyers who knew full

well what these companies were over sales the whole time. And

what ultimately happened was in 2012, the newspaper part --

which, frankly, was easier to sell because it didn't have all

the reputational risk, which I'll talk about -- sold.

And then in 2015, after several almosts with

established companies, who always at the end said, you know,

there is so many people saying we don't like this, we're going

to back out, they relented and they agreed to sell it to

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Mr. Ferrer, who had always wanted it. He created it. He

started it. He ran it. And they finally said, all right,

we'll work a deal with you to buy it.

So in 2012, Mr. Larkin, Mr. Lacey, and the other two

owners sold it. Carl Ferrer's baby even more. But -- so

another big deception is this idea that somehow these guys kept

involved running things after 2015, they didn't. But what you

will learn is this was what's called a seller-financed sale.

Sales price for this company was over $500 million. Mr. Ferrer

didn't have $500 million in his pocket. So they did what

companies often do, they sold it with him having to pay them

back over time.

So what you'll learn is, like any bank or lender, they

did stay on top of financial stuff: We want to know what's

happening with the money. We want to know that you're making

your payments to us. But they didn't have anything to do with

running it. And you won't see anything that shows to the

contrary. That's a deception when he told you that, that they

kept running it after, they didn't.

And what you'll also learn is that the structure of

this was the same structure they used when they sold the

newspapers in 2012 to a company out of Denver. In other words,

this is a legitimate, valid, proper structure.

The other thing you'll learn is even Backpage got

loans -- I mean, Backpage, sorry, sorry. Strike that. VVM had

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a $130 million loan from the Bank of Montreal to pay for all

this stuff, which they paid back every dime. But, again, the

bankers there were getting information from VVM all the time to

make sure that their $130 million would be repaid. That's very

different than running a company.

What you're going to see here about the way the

company originated, what Mr. Larkin's MO was for 40 years, is

that it's real simple, it's this simple line: Legal is

allowed, not legal isn't. And he followed it consistently.

But he continued every year, they kept beefing up more, and

more, and more the number of people who would screen the ads to

try to make sure that anyone who could be victimized, if the ad

looked like it was illegal or a victim, they would refer it to

law enforcement.

Backpage had over 100 employees, 100 employees who

came in every day and just screened ads. And you'll see there

is all kinds of training, Mr. Jones showed you some of it,

training these people for what to look at to make sure that the

ads -- no ads were going out that were illegal. And if ads had

things in them that were indicia of trafficking, we alert law

enforcement. And then there were groups that collect the

information and alert law enforcement, they would alert them as

well.

And, once again, more law enforcement accolades. This

is great. You guys go above and beyond when handling subpoenas

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and assisting law enforcement. It's truly appreciated.

Columbus Police, 2012.

Good afternoon. Thanks for a quick response. The

subpoena was in response to an investigation that was initiated

due to a tip sent to NCMEC by your site and about possible

child prostitution. The tip was received by NCMEC on

January 22nd, 2014. NCMEC generated tip number -- blah, blah,

blah. The female pictured in the ad was determined to be a

17-year-old runaway. She has been recovered and returned to

her family. A case is underway for human trafficking and

suspects have been identified. Tallahassee Police Department.

That 17-year-old runaway was saved by Backpage, because they

looked at these ads, and when they saw things that looked like

they could be trafficking, they reported it.

Thank you very much for your assistance. I'm with the

Toronto Police Department. We deal with numerous hospitals,

banks, cell phone companies, et cetera. You guys have been by

far the best and easiest to deal with. Your law enforcement

guide was a tremendous assistance. Thanks again. Toronto

Police Department, 2013.

Thank you for your help. From Hennepin County

Sheriff. Your response has been outstanding compared to most

other companies.

And, finally, Philadelphia. In essence, I want to

pass along the good news that we've indicted someone

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trafficking minors. The help you provided in a grand jury was

instrumental. Again, Backpage is helping solve the problem by

having a hundred people look at these things and turn them

over.

If you had any question, there is e-mails, and I want

you to look out for these, there are e-mails that are really

windows into the mind of someone. I'm going to tell you right

now, the government will never show you, never, an e-mail that

shows a criminal intent by my client James Larkin. Won't

happen. They're going to put a lot of things up that they're

going to distort, and we'll be able to explain every one and

show that they're taking it out of context, if they even have

them.

But here's a window into my client, and Backpage, and

Mr. Lacey, and all of these guys. E-mail from staff from -- to

all the staff at Backpage and the papers from Jim Larkin and

Scott Spear, another one of the defendants. Because we believe

in the First Amendment right to free speech, we have agreed to

run an advertisement in next week's papers from the Rebecca

Project attacking Backpage.com.

Think about that. My client and Mr. Spear, who is

sitting at the end of this table, said, we believe so much in

the First Amendment, that we're going to run an ad by somebody

who is trying to say Backpage is awful and get rid of it. In

other words, we're going to run an ad saying what these guys

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are saying because the First Amendment matters. That's why

they did all this. You can't cut back on the First Amendment

or else anyone can be sitting in a room like this. There is

your window into my client. That's 2010.

Now, let's talk specifics, legal or not, adult ads,

legal versus illegal. What people need to understand is a lot

of adult activity is legal. I mean, whether some people think

that's a good thing, some people think it's bad, some people

just don't care. Voluntarily adult activities are quite broad:

Pornography, stripping, sex shows. You can get a naked maid

here in Phoenix, you'll learn. You can call up somebody to

come clean your house buck naked. Who knows what goes on when

they're there, but, boy, it's legal to advertise.

So what you need to keep your eye on the prize on,

that these guys don't want you to, with the wave of a hand --

actually, it was his left hand -- Mr. Jones did a lot of this,

because all of this was prostitution, all of this was

prostitution. No, add the word escort. That's what he's

saying is prostitution, but he's wrong. Prostitution has

specific meanings. It's a state-by-state statute. At the end

of this case, the Court will tell you the specific meanings,

but basically they're precise.

For example, in Arizona, prostitution involves someone

agreeing, in exchange for money or compensation, to engage in

sexual conduct with another person. And they define sexual

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conduct.

Sexual conduct means sexual contact, sexual

intercourse, oral sexual contact, or sadomasochistic abuse.

And, again, we warned all you all in advance, unfortunately,

we're going to have to talk granular about sex acts in here, so

we're all adults, but it's important distinctions.

The bottom line is there is a line that makes

something illegal, and the line is, generally, and this -- we

just talked about Arizona, but it's going to be intercourse,

and, of course, because lawyer types and politicians don't want

to leave anything to chance, they want to define it, they

define it. Arizona says, sexual intercourse means penetration

into the penis, vulva, or anus by any part of the body or an

object.

Okay. So can't do intercourse, that would be

prostitution if you do it for money. They also say oral sexual

conduct, oral conduct with the penis, vulva, or anus. Okay.

No, I'll just call it, oral sex. And then the other one,

sexual conduct, the fondling or manipulation of any part of the

genitals, anus, or female breast. So how about, don't touch

the private parts. All right. Don't touch the other person's

privates. There it is. You're not going to see a single ad

that advertises any of that.

If an ad said $50 for intercourse, oral sex,

manipulating your privates, that's an illegal ad, but you're

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not going to see that. When the ad doesn't say that, it's not

illegal. And, you know what, you'll probably hear some

examples later, I'm going to spare it to you now, but you can

let your mind wander. And you can realize there is a heck of a

lot of things people can do for money that are sexual that

don't do this.

And I'll just give at least one example. Come out and

strip naked in front of you and dance around, even touch you in

certain places, just stay away from these. That's what these

ads are. They're varying degrees of escort ads, they are not

this. You won't see it. Backpage screened, think of these

numbers, hundreds of millions of ads, hundreds of millions, and

you will see few, if any, ads that actually have this.

One of the biggest issues in this case is what you

don't see, because what you don't see is a reminder of just

what a good job they're doing. You're going to see children

being saved, traffickers being stopped, and you're not going to

see ads like this, because they did their jobs, and every one

of these six people took it seriously. These ads were not

prostitution.

By the way, in another thing that -- incredible that

they wouldn't really let you know this --

Let me go back here. I might have jumped ahead. I'm

somehow way ahead. I'm sorry. I'm going to come back to

these. I think in my excitement I'm pressing buttons without

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realizing it, so let's go back. We'll talk about these in a

minute.

City of Scottsdale escort application. Not only is

escort services legal, but pretty well all big cities in the

country actually have departments of escort services, places

where people sign up people who do escorts, which is the kind

of stuff I talked about that doesn't involve the banned items,

and they get a license and they can go out and, guess what they

do, they pay money to the city. The city gets taxed -- gets

money from them and uses it to pay for expenses. Escort is

legal, it just is. And things that fall short of this

prostitution are legal, they are not illegal ads.

All right. Let's talk about a couple of examples so

we can put this in perspective. These are a couple of the

counts in the indictment. The government didn't even bother

showing them to you. But here's one, this is a lady, I'll just

call her Brianna L. Says she's 26. She's certainly an adult.

And she basically says she's the hottest in town. This will

show you what their ads look like. She puts this up herself.

Somebody at Backpage looks at it, it does not -- you'll be able

to see these later -- but nowhere in here does it say anything

about intercourse, oral sex, touch privates.

I love what I do. Pleasing you is my mission. Says

she's ready. No explicit language. She literally says in it,

this ad is not in any form an ad for solicitation of

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prostitution, and then it gives her information to call her.

And, by the way, everything that she is depicting, frankly, in

all of these -- let me keep going.

Now this, these pictures here, you will learn, are

pictures that the moderators at Backpage removed. They took

them down from the ad. So when the ad went out, it showed

these, but it did not show the other pictures of the lady in a

little bit more provacative poses.

Now, very important point, these other ads' pictures

are legal too. They're not obscene. They're not showing

intercourse, oral sex, or touching privates, but Backpage tried

to put some standards in. They chose to say, you know, we

don't want graphic sex, and we don't want things that get too

graphic, so they would bounce them, because they moderate.

But what you'll also see is this box up to the left,

this is all the kinds of information that Backpage would get

for administrative data. And you'll see that it includes how

much the ad was paid, so this was $7. And you'll see typically

these ads cost 7 to 10 bucks, ish.

You'll see there is an invoice. You'll see

significantly over to the top right, you'll see there is an

e-mail address, Alexis Fox 23 @ G mail. You'll go to this page

which gives additional information that Backpage keeps.

Significantly, at the bottom left, it shows the IP address

where this came from. And, at the bottom right, it shows the

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credit card reference.

And then it also shows the people who actually -- it

gives these numbers -- it says approved and it gives a code,

467360, who actually reviewed this. And if you go back and if

you look at these pictures that were removed, it's kind of hard

to see, but in the top left on that white box, at the bottom --

at the bottom it says, deleted by BP 45, another one says

deleted by system, deleted by system. In other words, BP 45 is

a number that corresponds to an actual Backpage employee. So

you can actually see who deleted this and looked at it and said

it was okay or not okay. They're looking at these things.

But, significantly, this blue page is all information

that Backpage keeps so they can help police catch bad guys. If

there was a concern that someone was acting illegally, they've

got a credit card number, they've got the IP address where it

came from, they've got the e-mail address that was used for it,

and sometimes they get a phone number, but not always. All of

that, by design, is for Backpage to be able to help law

enforcement if they see anything that looks involuntary or like

trafficking or underage or if the police need anything.

Totally legal. Zero illegal about that.

And, by the way, you will never hear that my client or

any of these defendants knew anything about this ad, this lady

Brianna, who goes by Alexis. What you'll know is the ad

follows the standards that they insisted be followed and that's

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it. They don't know anything about it.

So if Brianna turns out to go above and beyond the

legal services that are encompassed in this ad, we don't know.

The government won't know unless Brianna or someone who had sex

with -- who had intercourse, oral sex, or no touch privates

with her, comes forward and says they did it. But the ad

itself, which of course is Backpage's only window into this, is

a legal ad. All of them are.

Similarly, the next one, one of the counts, Jordan is

her first name -- and she goes by a different name on here, I

don't remember what it is but -- sexy, erotic playmate. The

girl you need to see. She says she's 20 years old. She is of

age, certainly looks it. No allegation she's not. She's got

clothes on. Frankly, she doesn't have to for it to be a legal

ad, but she does. Slippery when wet. These are stripper

terms. More pictures.

I do not offer specials and I'm sexy. I'll make your

dreams come true. Call me. Exotic suite. Someone could call

that number and go to that very hotel where she is, and she

could do everything she's doing there and more with no clothes

on and it's legal. And they can pay her for it, as long as

she's not doing intercourse, oral sex, or touching her own or

their privates, or letting them touch her or her touch them.

And this ad doesn't say that. It's a legal ad.

Again, you're not seeing illegal ads because Backpage

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monitored for them. The only thing advertised was legal escort

services. And, once again, here's all the information, e-mail

address, IP address of where the internet stuff comes to, where

it comes from, credit card. And she paid $12 for her ad. This

is legal. And you're going to see this over and over again by

the ads that are shown.

Once again, ad posting rules. I already went over

them with you, but telling people: Act legally.

Now, couple things, you heard a lot about this socalled moderation, which the government talked a lot about, and

other counsel will talk about that. I'm not going to talk

about it much, but, again, in this 2008, 2009, '10, '11, '12,

things are changing. This is all new. And the website had

gotten way bigger than anybody expected.

With advice of lawyers and experts and consultants,

they were continually adding more things on. And you will hear

that they changed. Again, there were over a hundred people

they got looking at these things. And what you'll see is my

client, in the limited involvement he had in things, was let's

do whatever it takes to do it right. Here's another window

into my client.

2009, Carl Ferrer sends to Scott Spear, his boss.

Mr. Spear is in between my client and the Backpage folks,

because my client is not part of Backpage, he's just part of

the parent company. Ferrer says, hey, we want to do adult

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content abuse abatement. We want to start doing more things to

try to catch people who abuse the website. And he lays out a

plan. We want to remove sex act pics, more coded terms, et

cetera.

So this goes to Mr. Spear, who writes to my client,

Carl's plan, this is well thought out. And what does

Mr. Larkin say back, I agree. We should implement this

immediately, thoughtfully, and deliberately.

What you're going to see over, and over, and over

again is Mr. Larkin, as the head of the parent company running

19 companies, as suggestions were made, as advice was given to

make things better, to screen things better, he said, sure, and

they threw a lot of money at this and a lot of people. Not the

actions of somebody who is trying to act illegally.

Now, so far what I've told you about is as though it's

just these guys' views, but they didn't just operate in a

vacuum. My client and the others were getting constant

feedback as to what was legal and what wasn't that went into

his brain and his decision making to ensure that he always was

comfortable that they were staying on the legal side of the law

and continuing to do protected First Amendment activities.

So there is going to be various influences on him in

that, some indirect, some direct. In terms of indirect, I

mean, just taking kind of things out there, as I told you, they

had a loan from the Bank of Montreal for 130 million. One

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thing about this business, and this kind of makes your job a

lot easier, the proof is in the pudding, the ads -- you'll see

the ads -- and the only thing that the Backpage folks provided

to any advertiser are the ads, right. They're not out there

with the escorts. They're not out there with somebody wanting

to do business. They're not listening in. They say, here's

space. For 7 to 12 bucks you can get space for a sofa or for

your ad if it's legal. So their only window is the ad itself.

Well, that window is visible to everyone. In other

words, if you're the Bank of Montreal and you're debating

whether to do business with Backpage, you can see what it does.

It's right there. And they did. And all of these companies,

like the Bank of Montreal, dealt with them like a legitimate

company, lent them $130 million, had regular meetings about

where are you? Are you going to pay it? Where is -- how is it

going? We need to get paid. And they paid every dime. They

had a lot of exchanges like that with big reputable companies

that, again, confirmed to Mr. Larkin and the others, yeah, this

is all legal. No one is treating this like it's not.

They had various potential sales. I'll talk to you

about them more in the evidence, but there were multiple

meetings from 2011 to 2015 with big companies, big players,

hedge funds, who were like, hey, this is a profitable company,

we think we want to buy it. And they would get to the brass

tacks, but there was a lot of negative press, and they would

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say, you know, we're going to take a pass. We don't want to

deal with the reputational issues, because people will say

we're an adult business.

How about seeing what other companies were doing?

This isn't in a vacuum. The whole time these defendants are

doing what they're doing at Backpage, they're familiar with

Craigslist and Google and Twitter and Facebook -- I don't even

know what the other one is, that shows what a dinosaur I am --

but social media out there, and this stuff, these adult ads,

revealing ads, escort ads, they're everywhere. Again,

continually confirming, this is a legitimate business. It's

legal speech of other people.

But then, not only did they have indirect, they had

direct input to corroborate their view that they're acting

legally under the First Amendment and they can continue to

allow legal speech.

Department of Justice. There is Lady Justice in the

halls of the Department of Justice headquarters in Washington,

D.C. Mr. Larkin on the right, Mr. Lacey in the middle, and

Mr. Ferrer, who was the CEO and person running Backpage, they

went and they met with the Department of Justice. They

literally sat down with them in 2011 and said, here's what

we're doing. Here are the things we're trying to add in to

better catch bad guys. Tell us if we're doing anything wrong.

Tell us what we can do to do better. They never told them they

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were doing anything wrong.

They certainly never told them they were acting

illegally. In fact, afterwards one of the DOJ attorneys wrote

the lawyer -- they're there with lawyers, this isn't just going

out on your own, there are lawyers involved in all of this --

wrote them, Your presentation was very professional and I

learned a lot. Thanks a lot. Again, confirming that this is

consistent with their abiding belief, this is legal speech and

we are not going to be the guys who stop people from legal

speech.

Once again, they're at the FBI, they're meeting with

DOJ. More attaboys. Thank you very much. The information you

provided was helpful. Unfortunately, Clearwire does not feel

the same as your company when it comes to the safety of people.

Clearwire is a company that the St. Louis County Police

Department was trying to get information from. Unlike

Backpage, they didn't give it.

I'm very happy and always have been with the level of

cooperation I get when dealing with Backpage. Please leave the

ad up and any future ad they may post, as our investigation is

ongoing. Again, thank you for your quick response and your

company's help with attempting to locate a very dangerous

subject. That's 2013.

2014. I have never received records back this quick.

Thank you for your fast response. I do know -- I do not know

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how you can improve on that portion of your service.

FBI, 2014. That was the most expedient response ever

from a provider, ten minutes. Thank you. Simply incredible.

The individual depicted in the advertisement was successfully

recovered and identified as a juvenile. Thank you again for

the hard work.

Next one, security investigations. Thank you. This

is above and beyond what we expected and incredibly helpful.

Homeland Security.

Backpage continually showed we're going to let

anything that's legal, we're not going to let things that are

illegal. We're going to do everything we can to help catch the

bad guys. We're about voluntary, consensual, legal adult acts.

They don't stand for trafficking. It's just a deception. This

whole trafficking thing is just to inflame you on something

that just doesn't exist.

Lawyers, you'll hear Mr. Ferrer -- and I'll talk about

him in a minute -- their witness is going to tell them how he

told them, we had lawyers the whole time telling us that our

moderation practices were legal, that we were protected by the

First Amendment.

MR. JONES: Objection.

THE COURT: The objection is overruled.

MR. JONES: A continuing objection, Your Honor. This

issue -- just a continuing objection, Your Honor. This issue

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has been litigated.

THE COURT: The objection --

MR. BIENERT: No, it hasn't, Your Honor. That's a

false statement.

THE COURT: Mr. Bienert, the objection is overruled.

MR. BIENERT: Okay. You will hear that their chief

witness said, yeah, we had lawyers telling us the whole time

this is protected activity, and the way we moderate or look at

ads and what we do with them is legal. Again, that's what

happened. My client is like, look, I'm not going to give up

anybody's First Amendment rights, but I want to do it legally.

But there is more.

These guys didn't just rely on the word of lawyers,

they went to court. They went to court to make sure that

courts agreed that they were acting legally. Every single year

from 2011 through 2016 my client and the others at Backpage had

at least one court look at an actual case involving Backpage,

and the kind of pictures that the government is showing you

here, and say this is protected activity, this is legal, and

throw the case out.

2011, a case called M.A. versus Village Voice Media.

I need the glasses for this one. The mother of a young girl,

who turned out to have been a teenager and was trafficked, sued

Village Voice Media, the parent company. By the way, if you

look up here and you see at the caption, M.A., a minor, versus

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Village Voice Media, look under where it says M.A., a minor, by

and through her natural mother and next friend, P.K. You know

who that is? That's the lady they showed you in the very first

slide of his presentation. Pride. I think her last name was

-- Kubiiki Pride. This is her lawsuit.

She went to court and said, I am taking a position

that Backpage is responsible for what happened to my daughter.

And they alleged that Backpage posted many advertisements which

included explicit nude photographs advertising services as an

escort for sex and got paid money for doing it.

They allege, defendants knew that there were explicit

sexual photographs posted on the site, that the postings were

for advertisements for prostitution, that minors were included

in them, and that their internet service was being used to do

this. They literally said -- they literally allege, defendant

aided and abetted, Backpage aided and abetted the pimps who

were trafficking this young girl in the crime of facilitating

prostitution, exploitation of children, and child pornography.

They went on to say as their evidence, well, Backpage had been

told in the past about this kind of thing.

The Court rejected the argument. The Court threw the

case out. The Court said this is a two count civil action

where M.A. seeks to hold defendants, Village Voice Media,

liable for the victimization by this woman who trafficked her.

The Court ruled, plaintiff artfully and eloquently

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attempts to phrase her allegations to avoid the reach of a law

called Section 230 -- which gives immunity to website hosts

like Backpage, an extension of the First Amendment -- and says,

the allegations, however, don't distinguish the complained of

actions from any other website that posted such content.

Congress has decided to make websites immune from this. It is

for Congress to change the policy that gives rise to such

immunity. It is hereby ordered that the case is dismissed.

What the court said is this is legal under the First

Amendment and Section 230. If Congress wants to change the

laws, they need to. But they haven't. The plight of this

mother is horrific, but Backpage wasn't knowledgeable of it,

didn't know anything about the little girl. Backpage saw an ad

-- and you'll see the ad, if they present it to you -- and

you'll see that it's not an ad that shows a little girl. It's

an ad that shows a mature adult woman who claims she's over 18.

Again, what was my client told by a court, this is

protected activity. You are still within the First Amendment.

And the court specifically said, the creation by Backpage of an

adult category does not impose liability for Backpage on

Backpage for ads in that category.

Neither notice or profit make Backpage liable for the

content and consequences of the ads posted by McFarland.

McFarland was the trafficker, the person who, of course,

without Backpage knowing, was behind the ads and victimizing

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this young girl. That was in 2011.

The very next year, 2012, another case, Backpage

versus McKenna. This one was in the Western District Federal

Court in Seattle. And, basically, Washington State put

together a law, basically, trying to regulate commercial ads

like the ones on Backpage, saying that it, basically, wanted to

stop abuse of minors.

They alleged, through their law enforcement

declarations, that moderators would be aware that someone

looked young and they didn't remove the ad. The Court said,

when an online service provider publishes advertisements that

can employ coded language, a reasonable person could believe

that facts exist that do not, in fact, exist. An advertisement

for escort services may be just that. In other words, the fact

that an ad is sexy, the fact that it has some coded words --

and what's the one they talked to you about, GFE, girlfriend

experience is what they told you. What did they tell you?

That means somebody who is willing to kiss, that's what they

told you.

First of all, we'll see what the evidence is as to

whether any of these defendants even knew what the government

claims GFE is. But let's assume they did, you know, we can go

back to the old kissing booth at the county fair, the reality

is kissing is not illegal. Someone can go out and kiss

someone, crazily enough, for money, legal activity. This court

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flat out said it.

The next one, the third-party publication of offers to

engage in illegal transactions does not fall within the

well-defined and narrowing limited classes of speech that fall

outside of the First Amendment protection. In other words,

these ads by third parties are First Amendment protected. And

what did the court do? The court threw out the case under the

First Amendment. Dismissed the case. I'm sorry, declared that

the law that they were trying to impose was illegal, and then

they granted Backpage's request, saying, this is protected

activity. You can't do what you're trying to do.

2014, the next year. Here's another case. Backpage

versus Robert Cooper. This one is in Nashville, Tennessee.

This was a lawsuit to, basically, have another law saying we're

going to regulate ads if we think they could involve children.

The courts, basically, said this law is preempted, both by this

statute Section 230, and it also likely violates the First

Amendment. It's protected activity.

Once again, that is what these defendants are being

told in real time. And what the court here said was, this law

could impose liability for advertisements, notices,

announcements, and online postings that don't involve minors at

all, or appears suggestive without actually involving a paidfor-sex act.

For instance, a description on a Backpage.com posting

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for escort services with someone who is, quote, barely legal,

unquote, could fall under the sweep of the statute even though

the person who posted it could be 25 years old. The statute

might also apply to someone who is 25 on a paid dating website

that is coy and playful, but has no connection to prostitution,

much less child prostitution.

And, by the way, I mean, what the court is saying here

is you can't tell from these ads what age somebody really is.

And if somebody looks like a mature adult and the ad is

otherwise legal, it's protected.

The next case, next year, 2014, Backpage versus

Hoffman. This case in New Jersey -- and, by the way, this case

and a couple of the others, I want to stress, and we'll show

you this during trial, the judges didn't make these rulings in

a vacuum. They were actually sent, as part of the cases,

Backpage pictures, Backpage ads. You're going to see the ads

look like the ads in this case. So when the judges said, this

is protected activity, this is not illegal, they're looking at

ads like the ones we're looking at. Again, telling my client

and all of the defendants this remains, indeed -- I'm going to

pull it up on my little legal category -- it's lawful speech.

This case, again, was thrown out under the First Amendment,

saying this is protected activity.

There is another case in Boston, the Jane Doe case.

This case, like the others, this one alleged that Backpage

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defendants knew that a significant percentage of the

advertisements of escorts were prostitution and involved

minors. And the court said -- by the way, this court, I would

submit you'll see, really, in one line, captures what the case

is about. In this litigation, two important public policies

collide head-on, the suppression of child sex trafficking and

the promotion of a free and open internet. That is what this

is about.

And what you'll see the court ruled is, don't

misunderstand, the plight of a child who is trafficked is

awful, but whether one agrees with its stated policy or not,

Congress has made the determination that the balance between

suppression of trafficking and freedom of expression, the old

First Amendment, tips in favor of the latter, in other words,

the First Amendment.

Putting aside any judgment, these are legal practices

and it stays that way unless Congress changes it. And the

court, the second amended -- the dismissal of the second

amended complaint is allowed. The court said this is not a

valid lawsuit. Once again, telling these guys they acted

legally.

This cases -- sometimes cases go up to the next level

on appeal. This case went up on appeal. Here's the First

Circuit looking at the same case. So it goes district court,

appellate courts, the circuit courts, which cover several

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states, and then right above them is the supreme court.

In this one, once again, the court said, the

appellants' core argument is that Backpage has tailored its

website to make sex trafficking easier, but Congress did not

sound an uncertain trumpet when it enacted this act that

involved Section 230, and it chose to give broad protection to

internet publishers.

Goes on to say, if the evils that the appellants have

identified are deemed to outweigh the First Amendment values

that drive this law, the remedy is through legislation not

litigation. Once again, confirming that these ads, when they

are legal and on their face look like adult consensual conduct,

they are legal. Once again, telling my client he's acting

properly.

And then, finally, the last case I'm going to talk

about here because it covers so much ground that we'll hear

here, is a case called Dart. This is an appellate case out of

Chicago. The appellate court basically was looking at an

effort by the sheriff in Chicago, a guy named Dart, to lean on

credit card companies to not let Backpage's customers use

credit cards, to basically strangle them out so that they could

not get business.

The court highlighted, Backpage sought an injunction

saying, hey, this sheriff is not allowed to pressure credit

card companies to quit doing business with us. And the court

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agreed. While the sheriff has a First Amendment right to

express his views about Backpage, a public official who tries

to shut down an avenue of expression of ideas and opinions

through actual or threatened imposition of government power or

sanction is violating the First Amendment.

The court went on to say, this sheriff is using the

power of his office to threaten legal sanctions against credit

card companies for facilitating speech and he's violating the

First Amendment. The First Amendment forbids a public official

to attempt to suppress protected speech. And this court was

looking at Backpage ads just like the one in this case.

The Court even went so far as to say, even entities

that know of the content aren't liable for what a third person

puts on a classified ad site. Does a newspaper that carries an

advertisement for escort services or massage parlors aid and

abet the crime of prostitution if it turns out that some or

even many advertisers made money from that? The answer is No.

Basically, it then ruled in favor of Backpage. Here's

an interesting quote, and this is from the court here, nor is

the sheriff on solid ground in suggesting that everything in

the adult section of Backpage's website is criminal, violent,

or exploitive. Fetishism, phone sex, performances by

striptease artists, vulgar is not violent.

One ad in the category of domination and fetish is for

the services of a professional dominatrix, a woman who was paid

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to whip or otherwise humiliate a customer in order to arouse

him sexually. And then he sites a website about talking about

what a dominatrix does. I make a living as a professional

dominatrix. I make a living by hitting, humiliating, dressing

up, verbally attacking, and otherwise fulfilling men's weird

fantasies about being dominated. It's not obvious, the court

says, that such conduct endangers women or children or violates

any laws, including laws against prostitution. Sound familiar?

What you're going to see here is that the evidence is

going to show that these ads are legal. And no matter how much

the government says, they're all prostitution ads, just look at

them, they're not. And the message continually being conveyed

to the defendants by courts who looked at the ads, who said,

no, these are legal. This kind of stuff is legal. You don't

have to do it, you don't have to like it, but you can't stop

people from allowing others to post it when it's legal.

I'm going to talk about a couple of -- I want to

address some of the things that they said a defense is, and

then I'm pretty well going to be wrapped up.

So I probably have fifteen minutes, Your Honor, just

so you know.

THE COURT: Okay. Thank you.

MR. BIENERT: I assume I should keep going?

THE COURT: Yeah.

MR. BIENERT: Okay. This is kind of in the -- talk

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about deception, this is dirty pool, I will submit, you will

see from the evidence. You may recognize this slide, because

this is one of the slides that Mr. Jones showed you. New in

town -- and, again, my client's mugshot isn't next to these

documents. You will learn, he didn't even write this document.

This is a long document by a consultant who, basically, they

paid a lot of money to come in and say, hey, help us catch bad

guys and do the right things. And he gave them a big list of

stuff that they should think about.

And the guy says, new in town is often used by pimps

who shuttle children to locations where they do not know anyone

and cannot get help. When this phrase is used, moderators

should be told to be on heightened alert that the images may

belong to someone under 18.

So, first of all, they suggested that this somehow

shows an intent to break the law by my client. I assume that's

why they put his picture there, even though it wasn't there.

That's not what this says.

It just says, if you see this, pay careful attention.

It doesn't say that this is illegal. It says just be looking,

and if this looks like someone under 18, take appropriate

actions. And, again, we know they were constantly taking

appropriate actions.

More kudos. Detroit, Flint FBI. Thanks for the quick

reply. Your information resulted in the successful recovery of

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UNITED STATES DISTRICT COURT

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a juvenile.

Bureau Kings, human trafficking, special victim unit,

county district attorney, Kings County. Thank you. You are

the best. Have a great day.

Portland Police Department. Information obtained

through Backpage subpoenas resulted in the successful rescue of

a female and the PPD is working to catch others. Thanks.

FBI IC unit, 2015. Words cannot describe how

appreciative and impressed I am by your group. Thank you so

much. Have a fabulous weekend.

So on and so on. Savannah, Georgia, FBI, another

thank you, they saved some children.

And, finally, ICE 2016, they had a human trafficking

organization.

Not acting illegally, but acting responsibly while

still staying true to their firmly held belief that the First

Amendment matters.

The FBI even gave a special recognition for the help

that Backpage, run by Carl Ferrer, was giving. The FBI is

proud to recognize Carl Ferrer, Backpage -- he was vice

president in 2011, he became president at the beginning of

2013. Thank you for your outstanding cooperation and

assistance in connection with an investigation of great

importance. The FBI's ability to carry out its investigative

responsibilities has been greatly enhanced through your help

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UNITED STATES DISTRICT COURT

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and we are very proud of your valuable contributions. Acting

to help catch bad guys while not shutting down an avenue of

legal expression for people that like to express things that

some don't like.

Now, here is deception. You may remember this. This

was shown to you by Mr. Jones. He put this up and he made a

big deal of it. He said, here's an e-mail or -- in Backpage,

and it literally says, don't include verbiage that says suck

your -- private part -- or lick your -- private part -- but you

can edit it to say I enjoy oral. And he made a big production

saying, that doesn't change anything. It's still oral sex.

And you know what, if this were next to something that said $50

for that, I agree with him. And that's certainly what he

suggested to you.

But what the evidence will show is, oops, look at the

top left. It says, Backpage.com personals criteria.

I just blew it up for you.

This is about the personals section where this is

people saying they want to meet other people: Women seeking

men, men seeking women, women seeking women, men seeking men,

all combinations. This is not about sex for money. This is

about just people who want to meet others, some of whom

indicate they'll do sex. That's Tinder. That's many websites.

It is absolutely 100 percent legal for people in

personal ads to tell people what type of sex they would do,

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because it doesn't involve money. Yet you will see that,

contrary to Mr. Jones who tried to make you think that this was

about the money adult ads, this is specifically in the

personals area. And if you have any question about that,

here's all the different categories at Backpage. And there we

have it, on the left is what this applies to. Dating: Women

on women, women on men, men on women. It does not even apply

to the adult category on its face. That's deception. Just not

true.

These pictures -- I'll go through them quickly -- the

bottom line is, he went through a bunch of these with you.

These are all legal. Guys, I think everybody here can see

you'll learn that this stuff is a lot tamer than what you can

see walking out of here and going to various newsstands,

stores, getting on the internet. There is nothing illegal

about these ads.

But Backpage chose to try to set a standard where they

didn't want graphic sex, so they trained their people and just

said, hey, we're not going to let graphic sex on here, even

though they could. As long as it's not linked with money for

graphic sex, it's legal. Strippers can show themselves naked.

Personal ads can show themselves naked.

And here's what's also interesting. If we zoom in on

the one on the left, it says, I am me @ -- it's kind of blurry,

we'll see it better later -- sexy -- I forget her name -- @

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Yahoo. In other words, this ad is giving her Yahoo address

where people can be in touch with her and get more: Sexy ads,

information about her. The point is, all of these websites

allow ads like this. What Backpage is doing was, frankly, in

the adult world, mainstream, except they were cutting back on

some of the graphic stuff. Totally legal.

They sent you a letter from states attorneys general.

The bottom line on this is it's neither here nor there.

Sometimes a key word is big. When he said this to you, he

said, the state attorneys general were urging Backpage to shut

down its adult section, because some -- and, by the way, he

said -- you notice it's not everybody on there. It said 21

state attorneys general. Because some of them don't like

Backpage, frankly, some law enforcement do, and you'll hear

about that. But the point is, state attorneys general don't

urge you to stop something when it's illegal. They tell you,

this is illegal and we're going to indict you or charge you.

Urging is requesting. It doesn't change the fact that this is

legal activity.

These I'm putting up because these actually are ads in

the indictment. These are the only ones that they showed you

from the indictment. Adult woman -- I'm not going to spend a

lot of time on it. You'll see it later. This is a legal ad.

Nothing illegal here. There is no offer of sex -- of

prohibited sex act for money. It's an escort ad. I will spend

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my time with you. I'm sexy. I -- I don't even know if it says

I'll -- I get paid X dollars an hour, but it could say that.

Totally legal. She could do naked dancing. She could do

everything short of intercourse, oral sex, and touching the

other person's privates or vice versa.

Same thing here. This is another ad, perfectly legal.

It has that GFE term in it. There's just -- as the case law

said to you, these terms mean nothing. It doesn't make

Backpage any less protected. It's a legal ad.

Same thing here. They showed you this one. It's

another legal ad. This one is interesting because it has the

out call and in call. There is nothing illegal about that.

That's an escort or a stripper term as well. Out call means,

I'll go to you; in call means, you come to me. That's it.

It's just referencing where they're willing to go do their

services, whether it's a stripper, a sensual massage, an

escort, someone who will do everything up until prostitution.

That's what this is advertising.

Remember what the court said in Dart, the Seventh

Circuit case, if there is anything about this ad that could be

legal conduct, then the ad is legal, because the law, the First

Amendment says, we need a space for people to put their legal

stuff. There is all kinds of legal stuff from this. There is

nothing illegal expressed.

Now, these are the other two they sent you. Now,

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these they told you are underage. You can look at the ads.

There is nothing here that indicates underage. They're legal

ads. There is nothing illegal about the ads on their face.

That is a mature female.

Same with this one. That's a mature female. And if

it turns out that they were underage, if Backpage finds that

out, they immediately help law enforcement.

Carl Ferrer. Carl Ferrer is a guy who the government

talks about is going to be a key witness. And he is a key

witness because he ran the whole shebang. Carl Ferrer was a

guy who handled the -- he was the head guy. He was the CEO and

president of Backpage, not of the 19 companies, but of

Backpage. He designed it. He ran it. He would report to

Mr. Spear above him, and my client above that, but give them

general information. And they would tell him, let's talk about

important rules. He was given all the legal advice and experts

and told to follow the rules.

And, frankly, as far as the Backpage folks -- or, I

should say, the VVM folks are concerned, he did. Now, we'll

see what he has to say from the stand. It will be interesting.

But, one thing is, he was the president and CEO of Backpage.

He's the guy who ran it. Nobody else.

Here's a signature to it. He ran Backpage from

Dallas, Texas. He wasn't even in the same state as my client

and several of the defendants during the relevant time. He's

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just another of those 19 places all over the country that my

client checks out and tries to stay on top of in a loose

fashion, and says, do it right.

As I told you, my client and the others sold Backpage

to him in April of 2015. And when they did, they resigned --

you'll see this is my client's resignation -- from any and all

companies that had anything to do with Backpage even as a

parent company. And here's his resignation. Now, you'll

notice, he doesn't resign from Backpage, my client, because he

wasn't an officer. He wasn't involved in Backpage. He's just

a guy who runs a bunch of companies, Backpage is one of them,

and Carl Ferrer runs it.

Get to my notes here.

I realize I got things a little out of order. I just

wanted to show you, this is a declaration of Carl Ferrer. And

there are many of these. He filed lots of declarations in a

lot of these lawsuits. And what you'll see is he writes,

Backpage prohibits illegal content, and, basically, we do all

we can to keep it legal. And you will see that he swore that,

under penalty of perjury: I declare under penalty of perjury

of the laws of the United States that the foregoing is true and

correct. He did that time, and time, and time again. So it

will be interesting to see what he has to say.

But I'll say this, if he says anything different than

what he told these people for, up until 2015, he's a perjurer.

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And he's basically going to be admitting to you that, yeah, the

oath, the same oath he's going to take here means nothing, and

he will lie whenever it's convenient. And he had a lot of

reasons, as you will see, that going over and working with the

government as of April of 2018 might be in his interest.

Number one, you'll see that he is doing this to try to

make sure he doesn't risk the same risks that these guys on

trial have from a criminal perspective.

Number two, you will see that his deal with the

government lets him keep his two houses, his two Mercedes, his

speedboat. They took these guys' assets.

You'll see that in making that deal with the

government, he also got to -- Backpage took money, because

there was so much litigation, and they put it in a lawyer's

trust account for the clients to be able to defend themselves.

You'll see, they cut a deal with him where they said, oh,

Mr. Ferrer, you come work with us, you keep your money, your

lawyers get to keep it. They took the money for our clients.

You'll see that he got all these benefits right away

by just coming over and saying, okay, I'll help you out. But

what he really avoided was even bigger than that. See, my

client and these guys, they're First Amendment believers. They

believe this stuff to their core. You'll learn that my client

got put in jail, with Mr. Lacey, simply for writing articles

against public officials who didn't like what they had to say.

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They've been jailed -- not in this case -- for their belief in

the First Amendment. And they had to get themselves out, and

then they later got it overturned and sued and won. But that's

a believer.

Carl Ferrer is a mercenary. He's not a First

Amendment guy. He's an advertising guy, just about money. And

you'll see this was a decision for him that, even independent

of the things that the government gave him, that these guys, if

you stand up against them, you have to deal with, it gets even

sweeter. All this litigation, the continual having to fight

with people who do want to pressure you to shut down, whether

it's legal or not, he wiped that clean. But you want to hear

about something big being wiped clean, remember, he bought

Backpage.

He owed 300, not thousand, $300 million to these guys

for Backpage. How much of this $300 million do you think he's

paid since he made the decision to go from this table to this

table? (Makes raspberry sound) zero. You're going to hear

that Mr. Ferrer, by saying, okay, guys, I'll tell you, yeah,

yeah, yeah, we knew it was all prostitution, wipe's the slate

clean. Keeps his stuff. Gets out of debt. Is out of

litigation. So, look, stay tuned. You will get to see him.

You'll get to judge for yourself.

But here's what you won't see -- just like they didn't

show it to you -- you will not see anything from Mr. Ferrer,

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objective evidence, that shows that these defendants, in

particular my client, did anything wrong except say follow the

rules. Stay on the line of legal speech. You'll judge him,

and I'll submit to you, at the end of the case, you're going to

go, this ain't a guy that I'm putting any stock in.

Money laundering, they talked about that. All I'm

going to say about that is, because we'll hear a lot about it

at trial, two things. One, money laundering only applies if

the underlying activity that produced the money was knowingly

illegal. So these guys aren't guilty of anything. And because

they're not guilty of the crimes charged on the so-called

prostitution, then there is no issue that any of the money they

did was laundered, because money laundering only applies to

illegal money that you know is illegal. And we'll talk about

that more.

But, secondly, you were told, oh, they're doing

nefarious things with credit card companies. Remember that?

Well, remember the Dart case? You will learn that the

government, just like Sheriff Dart who was told by the Seventh

Circuit Court of Appeals, you can't do this. You can't lean on

credit card companies to stop working with these guys.

There was something called operation choke hold, where

the government did exactly that. They went to banks and credit

card companies, and a whole host of businesses that the

government didn't like, all legal, but one of which was adult

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businesses, and they said, do not let these guys run credit.

That's what's behind that. Nothing sinister on these guys'

part. They're running a legal business. But the government,

when they had no ability to say it was illegal, certain

government types went and leaned on credit card companies.

More of that to come.

I finish here. This case, because this sums it up,

and I showed you this already, but I just feel like it's such

a -- a concise statement of where we will be at the end of

this. As the court in Boston said, these are important

policies that are colliding head-on. First Amendment, free

speech, which my clients, to the core, believe in and have

lived in their whole life, versus, of course, trying to

suppress child trafficking.

And what this court found, and what the First Circuit

above it found, is right now, for the entire time this was

going on, the law tilted and said, nope, First Amendment

trumps. A legal, on its face, ad, even if it turns out to

involve criminality, is protected and it's legal. If we, as

citizens, want to change that through our representatives in

Congress, okay, and we all have a right to have an opinion on

that, but it doesn't give the right to change the rules and

bring us in a courtroom like this.

We've kind of come full circle here, because we're

talking about the constitution. This whole case is about the

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First Amendment. And we are sitting in, frankly, a beautiful,

albeit a little hot, monument to the constitution, this

courthouse.

Her Honor told you several times, she will say it

again, I will repeat it, our constitution, the bedrock of our

country, is that these guys are all innocent. And unless and

until these guys prove beyond a reasonable doubt that these

guys are guilty of knowingly and intentionally violating these

prostitution laws with these prostitutes and their so-called

businesses, even if you don't like what they're doing, or if

you like what they're doing, you must acquit.

At the end of the day, in this case about the First

Amendment that is governed by a whole host of other amendments,

it's going to be a no-brainer. This activity was legal. We

are here because these prosecutors don't like the activity, but

it doesn't make it illegal. Backpage has been shut down since

April of 2018. The only thing left is to address the innocence

of my client and these other five people.

You all didn't just fall off the cherry truck, you

were picked after three days. You're a good representative of

the community. Please look out for anything that ties any of

these defendants to any of these ads, you won't see it. And at

the end of it all, I'm totally confident that you're going to

agree, first of all, that they are affirmatively innocent.

They've done nothing wrong except maintain our First Amendment

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that we don't want to let slide at all, because then these guys

can take cases anywhere they want.

And, finally, even if you have doubt, they need to

prove it, they can't prove it, they won't prove it, and you

need to find them all not guilty.

Thanks a lot for your time.

THE COURT: Okay. We'll take our midmorning recess,

so you can take your break and we'll come get you in about

20 minutes.

(Recess taken, 11:09 a.m. - 11:32 a.m.)

THE COURT: All right. Thank you. Please be seated.

And we are back on the record with the jury present.

Mr. Feder.

MR. FEDER: Thank you.

Good morning. My name is Bruce Feder. It's my

privilege to represent Scott Spear, that young man down at the

end of the table. It's also my privilege to be a part of this

group to represent all of these folks in the defense of their

First Amendment rights, the Sixth Amendment right to a fair

trial, federal statutes that protect -- or was supposed to

protect what the people at Backpage did, and something called

the rule of law, because what has happened in this court, the

reason why we are here, is that those rights, those laws, are

in grave danger.

Listening to Mr. Jones talk to you the other day

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reminded me of the old proverb that, don't pay attention to the

thunder. What is important is the rain, because the rain

waters the trees and the flowers. Waving your arms, using

misrepresentations and half truths, that's thunder. What's

important here is the law and the facts, and that's what the

rain is. The law and the facts are the rain that this case

needs to be decided upon.

As you can tell from looking at me, I've been a lawyer

for over 40 years. I've done civil cases and criminal cases.

One thing that I've learned is that criminal cases are in a

different category. As you all probably know, there are

commercial cases where one business sues another business;

personal injury cases where red car hits green car, somebody

gets hurt and the injured party sues the person that recklessly

or negligently harmed them; divorce cases where, unfortunately,

couples break apart and decide who is going to have the custody

of their children. Those cases have, of course, a much lower

burden of proof. The criminal case in importance is up here,

and the civil cases are down here.

I'm going to try not to repeat what Mr. Bienert said

because it's a really good summary, I think, of what this case

is about and what it should not be about. But let's talk about

greed for a little bit, because Mr. Jones said it quite a few

times, probably in hopes that it would give you some kind of

impetus to not listen to the law and the facts. Last I looked,

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capitalism still exists in this country. It's still legal for

a business to try to make money. And the more successful the

business, the more money it makes. There is nothing wrong with

that as long as the business is legal.

As has been discussed with you, the business that

Backpage was engaged in, just as New Times was engaged in, was

a legal business. And making money is fine. There is nothing

absolutely wrong with it. And nothing these people can say can

change that unless you allow them to.

As a legal business, as you -- as you heard, they had

a thousand employees. They paid for their supplies. They paid

for rents. They renovated an old Phoenix elementary school at

12th Street and Jefferson where New Times began and where

Backpage began. They did all kinds of things that a normal

legal business does and spent the money to do it. They spent

millions to assure that they had consultants and lawyers to

instruct them on what they could do and what they could not do.

That was important to them, because none of these

folks over here are lawyers. And some of these issues, some of

these laws, the First Amendment, Section 230, they're

complicated laws. And they needed people to instruct them on

what they needed to do and what not to do. People who are

intending not to follow the law don't spend a bunch of money on

lawyers, in general.

They also all paid their taxes and were very careful

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to do that because of the controversy of their business, to

assure that the people in front of me wouldn't try to say that

they didn't pay their taxes. People that commit criminal acts

frequently do not pay their taxes, because it will show to the

government what they've done and what they haven't done, how

much money they've made, how much money they have not made. A

regular, successful, legal business.

Scott Spear grew up in Phoenix. He went to college.

And when he came back, he was searching around, like a lot of

us when we get out of high school and college, for what he

should do with his life. Initially, with a couple of his

friends, they opened up a series of record stores in Phoenix.

Some of you may not even remember what a record store was, but

they actually had vinyl disks that you played on a player that

had music on it.

After that, the stores were sold, he went into the

real estate business with the father of a friend of his and

sold real estate, until at some point he started thinking about

going to graduate school. But during his record store era, he

had met Jim Larkin who was just starting New Times. And

Mr. Larkin offered Scott a job at New Times. And Scott had

been reading New Times, like a lot of us who grew up in Phoenix

had, and he was really impressed by that. Because they were an

uncompromising weekly newspaper, not beholden to the powers in

Phoenix that sort of control things, and that they were not

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afraid to put things in their newspapers that some of the

traditional newspapers, like the Arizona Republic, would not

do.

Strippers were okay because they are protected by the

First Amendment. Controversial issues that maybe the Republic

would not publish because it would offend the powers that be,

not in New Times. So it was a place that Scott Spear wanted to

go work at because it fit in with what he wanted to do with his

life, his philosophy, and that was to defend First Amendment

and to work for a new, vibrant, growing business.

Because he didn't have any particular skills other

than a college degree in liberal arts, Scott became kind of the

jack of all trades at Backpage. He started doing a lot of

different things, some of which he had some experience in, like

real estate, buying real estate, you know, renting office

space, marketing, was involved in beginning a race that used to

be called the New Times 10K, was a running race where people

run through the streets of Phoenix.

New Times also had something called the Best of New

Times, which was a special section of New Times every year that

they would rate restaurants and entertainment venues, et

cetera, or clothing stores, et cetera, et cetera, so he did a

lot of different things. And as New Times grew, as they grew

into 17 cities, Mr. Spear did all of this stuff for all of

those cities, flying around quite a bit, traveling, handling

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their leasing agreements and some of their marketing issues, et

cetera.

Then in 2004, as you've heard, Backpage began. And

Mr. Spear was assigned to try to supervise its inception and

what it was going to do, with the help, generally speaking,

from 2004 throughout the time that he was responsible for

supervising, with the help of lawyers on every issue. Because

he is not a lawyer, he didn't understand a lot of this -- a lot

of the issues involved in running a classified internet service

provider. Very few people at that time did, because the

internet, again, as you older folks might know, it hasn't been

around that long. And so the internet service providers were

kind of feeling their way on what to do and how to do it, what

they could do, what they could not do.

Mr. Spear, being the kind of person that he is, he

researched. So he looked at Craigslist, which was the, sort

of, premiere classified internet service provider. He looked

at the big boys, Google, et cetera, to see what they were

doing, to try to assure that this business was doing what all

the other folks were doing.

Their intention, as you saw from the blackboard, was

to have a general internet site that had a lot of different ads

and a lot of different subject matters, part of which was the

adult, part of which was the personals, part of which was

furniture, part of which was everything. That was their

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intention was to be a general classified internet service

provider. And Mr. Spear attempted, to the best of his ability,

with the help of others, to supervise Mr. Ferrer, who was the

person that was brought in to run Backpage, who knew about

classifieds, and they became, as you've heard, successful.

You will hear from people that Mr. Spear has certain

characteristics, law abiding, honest, conservative. And the

40 years or so that I've been in the law practice, one thing I

can tell you for sure, when you get in trouble, about the only

good thing about it is you really learn if you have any

friends, because you're non friends, your acquaintances, they

all disappear. Mr. Spear has people that are going to testify

to his good character.

Mr. Bienert referred a little bit to the moderation

issue. Content moderation is the organized practice of

screening user-generated content posted to internet sites,

social media, and other online outlets in order to determine

the appropriateness of the content for a given site locality

and jurisdiction.

In essence, under the law, technically, an internet

service provider could have no moderation. They could just

have the ads come in, and put them in and not pay any attention

to them. And whatever the user who created that ad and sent it

in said, it's on the site. But most internet service providers

like Backpage decided that they had certain standards that they

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wanted to impose on their users, and they did.

Starting in 2004 it was pretty moderate. And as the

years went by, as they became a little bit more successful, and

then even more successful still, they imposed more and more

standards, with one goal, and one goal, primarily, only, and

that is to not put anything illegal or allow anything illegal

on their site. But they also decided at some point that they

didn't want to be just legal or illegal, they wanted to have

not a free-for-all on there. And, again, they used something

called the Playboy standard, as opposed to the Hustler Magazine

standpoint.

There used to be a magazine, maybe it's still around,

called Playboy, and then there was a magazine called Penthouse,

and then there was a magazine called Hustler. Playboy was,

let's call it, tame, although they had nude printouts in it.

And a lot of people were against Playboy. They thought it was

distasteful, and some people even thought it was illegal.

Same thing with the next step up, which was Penthouse,

which was a little bit more risqué, a little bit more things

that a lot more people thought were distasteful. And then we

got to Hustler Magazine, which was very risqué and had a lot of

controversy. And there were a lot of people that thought they

were doing something illegal, let's stop them. But the First

Amendment protected all of them just like it protects the

internet sites.

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You were shown a lot of ads. Mr. Bienert referred you

to the fact that every ad you saw put up by the government was

a legal ad. Let me show you the risk that we run in this case.

Think that's an illegal ad anybody? These people do.

$20 to get high and put it in the hole. Seems like a sex organ

reference suggesting that you can go and get high and have sex

for 20 bucks, unless it's a billiards parlor saying that you go

and pay them $20 and you get two beers and play all the pool

that you want.

The danger of not having a clear standard of it's got

to be sex for money in the ad versus something that is

suggestive is what undermines our First Amendment. A slippery

slope. Once we go past an illegal ad, sex for money, to

anything other than that, kiss it good-bye.

And maybe some people agree with that. Maybe some

people don't think we ought to have a First Amendment. But

unless and until the people of this country change the

constitution and get rid of the First Amendment, that's what

the law is, and, in our humble opinion, that's what the law

needs to be. Because as those cases that Mr. Bienert showed

you, those federal district courts and those federal courts of

appeals all over this country said, when it -- the comparison

when it is First Amendment versus something that people don't

like, the First Amendment prevails.

I don't know if any of you watch TV, because a lot of

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you may just be looking at the internet these days and get your

news from there, but there is an ad that's been very prevalent

in Phoenix by, I think it's called the Tempe Gun Store. They

have one in Tempe and one in Mesa. And it shows people are

buying guns, and then at the end it's got like a symbol of two

machine guns shooting. And machine guns, of course, are

illegal. Is that an illegal ad showing machine guns shooting

that they sell illegal guns? No.

And, I'm sorry, this ad, we want to put some photos on

it, so kind of people that are scantily dressed to spice it up

a little bit, once you go down the road of the slippery slope,

you have nothing at the end except morality police telling you

what to think, what to see, what to read, what to do.

During the progression of Backpage, they had human

moderators. At some point Mr. Ferrer and some other -- their

IT people came up with the idea of having an auto stripout,

which means that the ads were automatically run through a

computer, initially to see if they were going to outright

delete the ad if it had sex for money, or send it for a better

review by the human moderators. And then to assert their taste

standards, there were a number of words, abbreviations, et

cetera, that were given to all the moderators that was inputted

into the auto filter to either omit automatically, or to -- at

least to send it to a human moderator to look at it to see if

it passed muster under the Backpage rule of no illegality, and

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Playboy versus Hustler Magazine standard.

That happened over a number of years. And the list of

words, abbreviations, et cetera, became longer and longer,

because ads -- police would tell them about phrases that they

didn't know the meaning of, or attorneys general would tell

them about the words that they didn't want in there. They

would add them to this list in order to comply with what they

were being asked to do, short of closing their site.

In 2012, instead of moderating ads, the same list of

words, abbreviations, symbols all of the moderators were

told -- because Mr. Spear was no longer supervising Mr. Ferrer,

but Backpage hired a lawyer, a former partner at a large law

firm's Seattle office, who was then, I believe, general counsel

for Craigslist. She came in and took over the moderation, took

over -- well, by that time the aggregation was already gone --

took over moderation and basically what ads could be in

Backpage or not. And she imposed a rule that was followed that

the ad is either okay or not okay. No in-betweens. So it's

either -- it's either we delete the ad outright because it has

words that we don't want in it, symbols that we don't want in

it, abbreviations that we don't want in it, or its allowed as

is.

Curiously, that was the same year that Mr. Larkin,

Mr. Lacey, Mr. Spear, Mr. Brunst, that New Times was sold to

its editors. At that point in time, Mr. Spear's role, if you

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will, at Backpage was quite minimum -- quite minimal. He was

no longer involved in supervising Mr. Ferrer. He was no longer

involved in things that he, realistically, had to learn on the

fly. He was continuing to do things like the real estate and

things that he knew about, but his role there became a lot

smaller. And, of course, smaller still when, several years

later, Backpage was sold to Mr. Ferrer.

These are some of the words that you will see used.

Content, of course, is what the material is on the Web.

Editing and stripout is taking out words, taking out phrases.

The word list is what I was just talking about where they had a

list of words, abbreviations that they didn't want on their

site, so they got rid of them. And then, of course, delete

meant delete, the ad is gone. If some -- if somebody paid

money for that ad, they weren't given their money back because

they had violated the terms of use that Backpage implemented.

This is just one page of about a nine-page terms of

use that Backpage had that any advertiser, when they went to

their website, had to scroll through these terms of use, and at

the end of it, essentially, put their signature on it saying, I

will follow these terms of use.

The part that Mr. Bienert showed you is down at the

bottom, the posting rules. But there is also another paragraph

under terms of use, which says, it's forbidden, you agree to

refrain, stop, don't do it, while using our site, transmitting

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any information, data, text files, software, chats,

communication, or other materials that is unlawful, false,

misleading, harmful, threatening, abusive, invasive of

another's privacy, harassing, defamatory, and on, and on,

because not only did they want to have a legal site, they

wanted to have a site that was as inoffensive as it could be,

given the circumstances and subject matter that they were

allowing on their site under the First Amendment.

And then, of course, the posting rules, similar. If

somebody put an illegal ad on there and it was deleted and they

paid their $7 or $10, well, you don't get your $7 back, because

you violated their terms of use.

Mr. Jones talked about aggregation. Aggregation is

terrible, according to the government. If I am Jeff Bezos and

I own the Washington Post, and we look at the New York Times

and we see a big advertiser there, we, of course, want that

advertiser to come advertise in the Washington Post, so we

aggregate. One of our people calls up that advertiser, or in

the internet age, e-mails them and says, hey, why don't you

come advertise with us. And Mr. Jones' point was, well, they

were out aggregating escort ads, which equal prostitution ads,

and, therefore, they were trolling for prostitution ads knowing

that they were prostitutes.

First of all, they were legal ads, but the thing that

he didn't tell you, which is just incredible, where do you

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think Backpage got most of their ads, that they aggregated most

of their ads from? It's called Google. It's called

Craigslist. They had legal advice that aggregating is legal,

appropriate, as long as they're not violating some other sites

who say you can't take our ads, you can't contact our

advertisers. But they went to Google and got Google ads for

escorts, among other things. They looked for advertisers in

all other categories not just adult.

And then what do you think happened to those ads when

they -- when a -- when an advertiser would say, yeah, I'll put

a free ad on Backpage? Even though the ad came from Google or

Craigslist, it had to go through Backpage's moderation process,

meaning we're not going to trust Google and Craigslist not to

have an ad that either is illegal or offends our standards, so

it's going to go through our process first.

Here's one of the slides that Mr. Jones showed you

with Mr. Spear's picture on it. Of course, that picture wasn't

on that phrase, because that phrase was in a 10 or 15-page

proposal created by Mr. Ferrer and sent to Mr. Spear for his

review and approval. And it's really awful what it does.

Mr. Spear was trying to review and approve standardized ways of

people working for Backpage approaching advertisers to see if

they could aggregate their ad. Because he wanted to make sure

that it wasn't going to be haphazard, that one salesman was

going to say one thing, and another salesman another. So this

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was the way that they were allowed to approach somebody by

e-mail.

Hi, I saw your ad on the internet. The ugly part

about this is, number one, putting somebody's picture by this

when they didn't write this is just not right. It's

misrepresentative. Second, it's trying to make something look

bad when it's really good. This prosecution is about high

becoming low, green becoming red. They reverse everything and

try to make something that is appropriate to be inappropriate,

to misrepresent the facts and not follow the law. The thunder

that you're going to hear a lot about.

Similarly, you're going to hear something about some

affiliate programs. Generally speaking, affiliate programs

are, if you send us an ad, we're going to give you a

commission, or we're going to give you a break on the price if

you send us a lot of business. It's a novel concept, right?

As long as your ads are legal, there is absolutely nothing

wrong with that, number one. Businesses all over this country

and all over the world do it, because it's a way of rewarding

people that send you business.

I think they're called social influencers. Have any

of you ever heard of a social influencer? They're all over the

internet now. And they basically tell people how to cook, how

to dress, how to do whatever, and then they give a pitch for

some product. And if one of their readers buys that product,

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guess what they get, the social influencer gets some money for

sending -- for referring that person to that business. Trying

to make illegal what is legal.

You're going to hear a lot about something called TER,

The Erotic Review. The Erotic Review was another website --

still in business, as I understand it, not prosecuted -- that

had, in part, on their site, if you could get behind what's

called a firewall, meaning you had to be a VIP member, you

could see reviews of escorts and prostitutes. And TER wanted

to have a link in some of the escort ads in Backpage. So it

would be, hi, I'm Nicole, blah, blah, blah, TER number X, Y, Z.

You're going to hear the government talk about how

Backpage knew all about TER, they knew what it was, yada, yada,

yada. They not only have incredibly unreasonable and illegal

expectations of Backpage for their own site, but they're saying

they had to go out and look at every advertiser, every link,

every person that wants to be on there, they had to go out and

investigate them. It's kind of like telling the IRS that

before you send a refund to a taxpayer, you've got to go out

and investigate them, send out a team, every one of them.

Unreasonable, not appropriate, not required.

When Backpage was told about TER and what they were

about, even though they had a lot of legal business, they had,

potentially, some illegal business behind their firewall, they

took it down. They took off any reference to TER in 2012, 2011

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when they were told about it. Even though they probably didn't

have to, they wanted to be cooperative with law enforcement,

with the attorneys general, with NCMEC. They did pretty much,

or most of everything that they asked them to do that was

reasonable except closing them down. This is really about

Backpage telling a governmental agency like NCMEC that they

weren't going to do what they told them to do. They weren't

going to close a legitimate business.

Mr. Bienert put a lot of case law up on the board,

federal district courts around the country, federal courts of

appeal around the country. When a business sues a business

saying you shouldn't be able to do that, you got to stop it,

they go to court and they try to get something called an

injunction, which means a court orders them to stop doing what

they're doing.

Most of those cases were injunctions brought by

Backpage against people that were doing things they thought

were inappropriate, and they won. They won over and over

again. The federal government didn't intervene in any of those

where they could have if they thought that what Backpage was

doing was inappropriate or illegal, but they didn't. And if

the federal government thought that they were doing something

illegal, then why not start, since this is an experimental

prosecution against a First Amendment provider, why not start,

like most other people in this country do, with some kind of

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civil action to enjoin?

MR. JONES: Objection, Your Honor.

THE COURT: What's your objection?

MR. JONES: Inappropriate argument.

THE COURT: It's argumentative.

This is opening, Mr. Feder.

MR. FEDER: Okay. When you have the law and the facts

on your side, you go to civil court, when you don't, you take

people's money so that they can't defend themselves and you

bring a criminal charge. These people are not guilty. They

were not guilty before this case was brought, and they're still

not guilty, and they will be not guilty throughout these

proceedings and at the end. At the end I'm going to ask you to

bring the only appropriate verdict, and that is not guilty.

Thank you very much.

THE COURT: Okay. Before we begin the next opening

statement, we'll take our lunch break. So please remember the

admonition. And let's get started at 1:15.

(Lunch recess taken, 12:09 p.m.)

* * *

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C E R T I F I C A T E

I, CHRISTINE M. COALY, 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.

DATED at Phoenix, Arizona, this 11th day of

September, 2021.

/s/ Christine M. Coaly_______

Christine M. Coaly, RMR, CRR

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