Exhibit E

Case 2:18-cr-00422-DJH Document 1355-6 Filed 11/01/21 Page 1 of 87
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 3, 2021

Michael Lacey, ) 1:15 p.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 3 - P.M. SESSION

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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UNITED STATES DISTRICT COURT

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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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

THE COURT: Please be seated.

And we are back on the record with the jury present.

Mr. Jones, your opening.

MR. JONES: Thank you, Your Honor.

Her 14-year-old daughter had been missing for more

than six months. After months of posting missing person

flyers, as well as physically searching for her daughter, upon

the recommendation of a neighbor, the mother, Mrs. Pride, began

to search for her daughter online.

And in searching for her daughter online, she came

across an advertisement in the adult services section of the

website Backpage.com that showed an image of her daughter. It

was apparent by looking at the Backpage ad that her 14-year-old

daughter was offering sexual services in exchange for money.

Upon locating her daughter's ad on Backpage.com, the

mother immediately contacts the police who open an

investigation. But police aren't moving quickly enough for the

mother, so out of desperation, she contacts the number listed

in her daughter's Backpage ad and attempts to buy sex with her.

Upon contacting the number listed in her daughter's

Backpage ad, a woman, whose voice Ms. Pride didn't recognize,

answers the call, and asked her how many folks were going to be

having sex with the girl, and she needed payment in cash. The

mother responded that two folks were going to be having sex

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with the girl and she was willing to pay in cash.

At this point, the woman on the other end of the line

who, evidence will show, was the 14-year-old girl's pimp,

instructed the mother that she could meet her daughter at a

local bus station, keep her for approximately two hours for

$250.

Soon thereafter, the mother arrives at the bus

station, and she hides in between cars to ensure she isn't

being followed. When her daughter arrives, she jumps out from

in between the cars and approaches her. Upon realizing that it

is her mom, the 14-year-old girl drops down to her knees --

MR. BIENERT: Objection, Your Honor, Rule 401 and 403.

THE COURT: The objection is sustained.

MR. JONES: Ladies and gentlemen of the jury, what I

just shared with you is just one example, one of numerous

examples you will hear about by the close of this trial of

women and children being sold for sex on the website

Backpage.com, a website these six defendants ran with the

intent to promote and facilitate prostitution. And when the

United States refers to prostitution throughout the course of

this trial, we mean sexual services in exchange for money, a

crime in all 50 states.

And the evidence will show that Backpage.com didn't

just promote, and these defendants didn't just promote by

running Backpage.com, adult prostitution, but Backpage.com

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served as a platform where countless women and children were

sold for sex.

You're probably asking how? How could these

defendants create and run this website for nearly 14 years

knowing that they were facilitating this illegal conduct?

Well, they ran it through deception and concealing the truth.

You're also likely asking why? Why would these

defendants want to create and run this website, a website where

countless women and children were sold for sex? Greed.

Evidence will show that Backpage.com generated hundreds of

millions of dollars during its years of operation, which in

turn meant millions of dollars in many of these defendants'

pockets.

Now let's talk about what was Backpage.com.

Backpage.com was a classified advertising website where you

could offer various goods and services for sale. I'm sure some

of you have heard of the classified advertising website

Craigslist. Well, similar to Craigslist, for example, if you

have a sofa in your home, you wanted to offer it for sale, you

could take a photo of that sofa, place it on Backpage and offer

it for sale. But, ladies and gentlemen of the jury, evidence

will show that the vast majority of these folks visiting

Backpage.com weren't looking to buy themselves a sofa.

Backpage.com was the internet's leading hub, leading website

for prostitution. At its peak, it operated in more than 400

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cities here in the U.S.

Some of you have a good understanding of how the

website operated and how you could post ads on Backpage. I

want to show you some clips done by a recording from supervisor

Special Agent Brian Fichtner of the California Department of

Justice as part of his 2015 undercover investigation into

Backpage.

And as part of Agent Fichtner's undercover

investigation of Backpage, he posted two fake ads on the

website, one offering a sofa for sale, and the other ad

offering so-called escort services.

What you're looking at on your screen now is the --

Agent Fichtner typed in Backpage Sacramento. I mentioned that

Backpage operated in more than 400 cities here in the U.S.

Agent Fichtner was based out of Sacramento, California, which

is where his undercover investigation took place.

What you're looking at now is the homepage of

Backpage, local places, community, buy, sell, trade, where you

can buy, sell appliances, auto parts, and furniture. In the

middle you see rentals and real estate, where you can offer

various condos or apartments for sale. And then to the right

you see the adult services of the website, escorts, body rubs,

male escorts, and adult jobs.

What you're looking at now is various titles of ads in

the so-called Sacramento escort section of Backpage from

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March 2015. Let's look at a few of these ads a bit closer.

Young, sexy, still in town, enjoy some tytee time.

Best lips in the city. Exotic freak. Gone in an hour. $60

for a quick special.

$60, 100, $180 hot hottie special. Sweet sexy greeneyed beauty. Ask about my two girl shows. And, thirsty, come

drink my water. Fine too.

And this is the advertisement where we just looked at

some of the titles, exotic freak, gone in an hour. And you see

the images associated with that advertisement, as well as the

text.

As far as the text, you see ebony out and in calls.

Ladies and gentlemen of the jury, evidence will show that in

the prostitution industry, an out call is a -- it's when that

buyer of sex, he -- the prostitute goes to his location for --

to engage in sexual services for money, and an in call is where

the buyer of sex goes to the prostitute that provides the

hotel, motel room, or house to engage in sex for money.

Sweet, sexy green-eyed beauty, and images associated

with this ad in the so-called escort section of Backpage

Sacramento. Hey, I'm Jessica. I'm the hottie you will be

hooking up with tonight, and the images associated with

Jessica's ad.

And what you're looking at here is how you would write

an ad to be posted on Backpage.com. You see place for the

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title, descriptions we just looked at, you know, in calls and

out calls, descriptions of that. There is also a place for

age. And then there is also, shows you you can input your

e-mail address where, the evidence will show, a buyer looking

for sexual services for money can contact you via e-mail or

telephone. You see here it costs $10 in March of 2015 to post

a so-called escort ad in Backpage Sacramento's escort section.

The page you're looking at now you see the browse

menu, you can attach images to your ad. We looked at some of

these images in the escort section of Backpage Sacramento. And

at the bottom you see upgrade. Evidence will show that because

of the vast array of prostitution ads on Backpage, individuals

could pay extra to have their ads moved to the top. We looked

at some of the titles.

So you wanted to have your ad moved to the top every

so often to increase the visibility of your ad, the likelihood

of folks looking for sex for money could contact you, you could

pay for all the reposts.

Similar to this, you see sponsor ads. Sponsor ads

were also -- cost extra. You could pay for that upgrade where

your ad would be posted to the right of the page and

highlighted in yellow, again, increasing the visibility of the

ads.

Evidence will show that Backpage generated a large

amount of their revenue based on charging these individuals to

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post their prostitution ads, charging them for upgrades.

And what you're looking at now is the payment screen

where you could input your credit card information and post

your ad to be published on Backpage.com.

Ladies and gentlemen, these are some of the images

associated with the so-called Sacramento escort section of

Backpage.

Again, additional images. Additional images.

The image you're looking at now, no GFE, ladies and

gentlemen of the jury, evidence will show that, in the

prostitution industry, GFE is a sex-for-money code word that

means girlfriend experience. What girlfriend experience means,

evidence will show, that in addition to having sexual services

in exchange for money with a buyer, that prostitute, that the

buyer would also engage in emotional intimacy, French kissing

and the like. Evidence will show that these defendants became

aware that GFE was a sex-for-money code word, but continued to

allow ads with GFE to be posted on Backpage.com.

This image you're looking at now, no GFE, just means

this prostitute, this provider is only offering sex for money

with no girlfriend experience.

Additional image Backpage Sacramento. Here not even

attempting to hide what's being offered for sale.

What you're looking at here is the Sacramento

furniture for sale section. You see for Friday, March 6th, one

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ad for furniture, $150 sofa for sale. Ladies and gentlemen of

the jury, evidence will show that that one furniture ad was the

fake ad Agent Fichtner posted as part of his undercover

investigation of Backpage. One ad for furniture. You looked

at the vast amount of prostitution ads in the Sacramento escort

section of Backpage.

Now that you have an idea of how the website operated,

how it was laid out, and how you could post ads in the adult

services section of the website, as evidence will show, were

nothing less than prostitution ads, and these defendants,

knowing this, took steps to facilitate the prostitution crimes

being committed by folks who were posting these ads on

Backpage.

Speaking of defendants, let's talk about each one of

them briefly individually.

Defendant Michael Lacey, creator and cofounder of

Backpage, and at times owned a 45 percent interest in the

company.

Defendant Jim Larkin, also a creator and cofounder of

Backpage, and at times owned a 43 percent interest in the

company.

Defendant Jed Brunst, former chief financial officer

of Backpage, and at times owned a six percent interest in the

company.

Defendant Scott Spear, former executive vice president

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of Backpage, and at times owned a four percent interest in the

company.

And the final two defendants, defendant Andrew

Padilla, former operations manager at Backpage, and his

assistant, Joye Vaught, assistant operations manager at

Backpage.

Two individuals who aren't on trial, but you'll also

hear played significant roles in operating Backpage during this

14 years of existence, are former CEO and cofounder Carl

Ferrer, and sales and marketing director Dan Hyer.

You'll hear from both Ferrer and Hyer during this

trial. They were cooperating witnesses with the government.

Ferrer and Hyer will tell you that the vast majority of

advertisements in the adult section of Backpage.com were

nothing less than prostitution ads. And, knowing this, they

conspired, they agreed with these defendants to facilitate the

prostitution crimes being committed by folks who were posting

ads on the website. Why? Greed.

Evidence will show that Backpage generated hundreds of

millions of dollars during its years of operation, the vast

majority of which came from fees they were charging to post

their prostitution ads on the website, which meant tens of

millions of dollars to many of these defendants' pockets.

Now, let's talk about how Backpage was started and

grew to be the internet's leading forum for prostitution. In

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or around 1970, defendants Lacey and Larkin founded alternative

newspapers here in Phoenix, Arizona. And over the years, they

acquired additional alternative newspapers under the entities

New Times Media and Village Voice Media. Evidence will show

that the defendants Brunst and Spear were executives at these

entities.

In or around 1996, former CEO Carl Ferrer was hired by

Village Voice Media as a classified advertising director, and

in or around 1998, Dan Hyer was hired as an account executive.

In or around the year 2000, with the rise of the

internet, in particular the classified advertising website

Craigslist.com began to cut in on Village Voice Media's print

classified advertising business. So in order to respond to

this threat, defendants Lacey, Larkin, and Carl Ferrer created

Backpage.com in 2004.

In between 2004 and 2010 when Craigslist shut down its

adult services section, Craigslist was Backpage's biggest

competition when it came to prostitution ads. In fact,

evidence will show that these defendants engaged in a process

they called internally as content aggregation in the early

years in order to, evidence will show, grow the prostitution

ads on Backpage.

And what this content aggregation process entailed was

going on other prostitution websites, mainly the erotic

services section of Craigslist, taking prostitution ads off

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Craigslist and recreating those same prostitution ads on

Backpage in order to grow the content on the site in the early

years.

And you'll hear from former sales and marketing

director Dan Hyer. He will tell you that the goal in the early

years was to increase the content on the site, because if you

increase the content, you increase the customers to

Backpage.com.

An example of how the content aggregation process

worked. This is an e-mail exchange between Carl Ferrer, Dan

Hyer, and defendant Scott Spear, where they talk about

following the guidelines to secure content on Backpage.

Script. Hi. I saw your ad on the internet. Have you

ever tried posting it on Backpage.com? I can post your ad

today so that you can try out our site. It costs you nothing.

I do all the work here. Can I have your e-mail address,

please?

And, ladies and gentlemen, you'll hear from Dan Hyer

that in the early years these defendants didn't even contact

customers and get their permission before taking the

prostitution ads off Craigslist and recreating those same

prostitution ads on Backpage.

And this creating prostitution ads on Backpage with

the content aggregation process was successful in generating

revenue for the company. In fact, a couple months after they

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exchanged this e-mail, these defendants met to discuss

Backpage-related developments. And part of the agenda item for

that meeting included how the Dallas section of Backpage, where

Hyer was based, how it grew to more than $40,000 in revenue a

month. And next agenda item, creating adult content online, in

other words, creating prostitution ads on Backpage through the

content aggregation process.

This e-mail you're looking at now is an e-mail in

November of 2008 defendant Larkin sends to Carl Ferrer

congratulating Ferrer on Backpage having its best month ever in

terms of revenue. To which Carl Ferrer replies, Hyer has done

an awesome job with his marketing. Ladies and gentlemen, that

awesome job Hyer was doing was creating prostitution ads on

Backpage through the content aggregation process.

And you'll hear that in fall of 2010 when Craigslist

shut down its adult services section of its website, these

defendants didn't need to aggregate content in the U.S.

anymore, because evidence will show that overnight the folks

who were posting their prostitution ads on Craigslist, migrated

to posting those same prostitution ads on Backpage.

But that didn't end anything. Evidence will show that

even after Craigslist shut down its site, these defendants

engaged in content aggregation overseas in order to grow and

expand their criminal enterprises overseas, hiring individuals,

contractors overseas called content aggregators who would visit

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prostitution websites overseas, take prostitution ads off of

those websites --

MR. FEDER: Objection. Relevance.

MR. JONES: -- create the same ads on Backpage --

THE COURT: Your objection is overruled.

Go ahead.

MR. JONES: -- creating those same ads on Backpage in

order to grow and expand their criminal enterprises and their

businesses overseas.

But, ladies and gentlemen of the jury, evidence will

show that creating prostitution ads on Backpage through the

content aggregation process was just the tip of the iceberg in

deceptive strategies and schemes these defendants devised to

grow and expand their criminal enterprises.

Beginning in around 2007, and continuing until at

least 2010, these defendants engaged in business arrangements

with other prostitution websites which they called reciprocal

link agreements. One website you'll hear that the defendants

had a reciprocal link agreement with was the prostitution

review site The Erotic Review. Evidence will show that The

Erotic Review is the prostitution review site where buyers of

sex could rate their experiences with prostitutes, including

their sexual encounters with them.

Evidence will show that these defendants have a

reciprocal link agreement with Erotic Review, where if someone

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was on The Erotic Review looking at a prostitute's profile,

they could click on a link which would take them to that

prostitute's advertisement, take them to the prostitute's

prostitution ad on Backpage.com. And, similar to this, if an

individual was on Backpage looking at the adult services

section looking at a prostitution ad, they could click on a

link which would take them to that prostitute's profile on The

Erotic Review.

An example of how this worked. This document you're

looking at now is an example of a review on the prostitution

review site Erotic Review. Alica's profile, TER, The Erotic

Review, and the link is how do you know. And then you see the

ID number, the ad website, Backpage, female escorts, you see

general information. And you see the types of services Alica

offers: Sex, blow job, touch pussy, cum in mouth, lick pussy,

anal, full, no rush sex.

Ladies and gentlemen, evidence will show that the

individual on the Erotic Review looking at the profile for

Alica, they could click on that ad website link which would

take them to Alica's prostitution ad on Backpage.com. And,

ladies and gentlemen, these defendants were well aware of

Backpage's relationship with The Erotic Review, and were

even -- even generating Google analytics reports that showed

how successful the Erotic Review was in referring customers to

Backpage.

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What a Google analytics report is, if I'm Nike.com and

I'm trying to advertise in the New Times Air Jordans, I can

advertise on Facebook or Google, so if a person goes to

Facebook and they click on that Nike Jordan ad, it will take

them to Nike.com and they can purchase those shoes. Nike, in

turn, could generate a report that shows which websites it was

advertising the Nike Air Jordans on was referring the most

business to Nike.com.

Or similar to this, evidence will show that these

defendants generated Google analytics reports to show which

websites were referring the most business to Backpage. Ladies

and gentlemen of the jury, the number one source of referral

was the prostitution review site The Erotic Review.

In fact, this Google analytics report you're looking

at now, for the month of January 2009, evidence will show that

The Erotic Review was responsible for more than 500,000 visits

to Backpage. In other words, more than half a million folks

who were on The Erotic Review looking at profiles like Alica's,

clicked on that ad link to take them to that prostitution ad on

Backpage.com.

And, ladies and gentlemen of the jury, these

defendants were well aware that The Erotic Review was a

prostitution website. In fact, what you're looking at now is

an e-mail defendant Larkin sends defendant Spear and Carl

Ferrer in 2009 telling them about an article that discussed a

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recent prostitution bust here in Phoenix, Arizona, where 48

individuals had been arrested for solicitation of prostitution.

The article went on to note that many of the folks charged have

provided reviews of their encounters with prostitutes on the

website The Erotic Review, a website the article described as a

prostitution website.

Ladies and gentlemen of the jury, in addition to

creating prostitution ads on Backpage through the content

aggregation process, and intentionally soliciting prostitutionrelated business from prostitution review sites like The Erotic

Review, evidence will show that these defendants also have

relationships with individuals they call internally as super

posters, or super affiliates.

Evidence will show that a super poster or a super

affiliate were individuals who owned local prostitution

businesses, and in some cases, evidence will show, paid

hundreds of thousands of dollars in order to promote their

prostitution businesses in the adult services section of

Backpage.com. You'll hear about some of these super posters,

Dollar Bill, New York Platinum, and Sean Kim, throughout the

course of this trial.

This e-mail you're looking at here is sales and

marketing director responding to super poster Sean Kim's

complaint that another super poster was getting a higher

discount than him. Evidence will show that because these super

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posters were paying hundreds of thousands of dollars to post

ads on Backpage, they received a discount on their ad fees.

So this super poster is complaining that another super

poster is getting a higher discount than him. To which Dan

Hyer responds that we just cut you a check for $20,000, and if

someone is getting a bigger discount, please tell us who.

Ladies and gentlemen of the jury, Dan Hyer will tell

you that in order for super poster Sean Kim to be cut a check

for $20,000, he had to have posted at least $200,000 worth of

prostitution ads in the adult services section of Backpage.com.

So in addition to creating prostitution ads on

Backpage with the content aggregation process, the reciprocal

link agreements with websites like Erotic Review, the

intentionally promoting the prostitution businesses of super

posters like Sean Kim, evidence will show that these defendants

also devised deceptive strategies in an attempt to conceal the

fact that prostitution ads were rampant all over the website by

using both computer filters as well as human moderators.

And you'll hear the term moderators used frequently

throughout the course of this trial. And what a moderator was

was a former Backpage employee whose job was supposed to be

preventing illegal ads, preventing prostitution ads from being

posted on Backpage.com, but let's look at a few e-mails and

documents, internal documents that show that instead of

preventing these ads from being posted on Backpage.com, they

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were instructed by these defendants to conceal the fact that

prostitution ads were rampant on Backpage.

This document you're looking at here is an exchange

between defendants Spear and Carl Ferrer in 2007 discussing how

to instruct these moderators to moderate content on Backpage.

Edit ads for explicit sexual content. Do not include any

verbiage that has suck your or lick your. You may edit the ad

to read, I enjoy oral, but do not include the vulgar language.

He goes on to tell them to take out anything questionable.

Now, ladies and gentlemen of the jury, stripping out

or taking out suck your or lick your and then posting the

sanitized version of the advertisement on Backpage.com did

nothing to change the true nature of what was being offered.

It was still a prostitution ad.

This document you're looking at here is an exchange

between Carl Ferrer and staff in April of 2008 where Ferrer is

instructing staff that he's under pressure to clean up the

adult services section here in Phoenix, but he is unwilling to

delete any, what evidence would show, are prostitution ads,

because it would put Backpage in an uncompetitive position with

Craigslist -- this is before Craigslist shut down its adult

section in 2010 -- and also will result in considerable loss of

revenue.

So he instructs the moderators to ad these terms to

the filter where they will be stripped or removed instead of

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the version of advertisement posted on the website: Pop, cum,

oral, back door, full service and blow. Again, ladies and

gentlemen, stripping out these terms, posting the sanitized

version of the advertisement on Backpage.com did nothing to

change the true nature of what was being offered. Still a

prostitution ad.

Evidence will also show that on September 5th, 2010,

Carl Ferrer, defendant Andrew Padilla, as well as Hyer,

exchanged e-mails about needing to clean up the website because

of the many new users that are going to be checking out

Backpage.com.

Andrew Padilla responds that these words you're

looking at now were currently being filtered, in other words,

stripped from ads, and the sanitized version posted on the

website: Barely legal, holes, cum, pussy, fuck, cunt, blow.

Again, stripping these words out and posting the sanitized

version of the advertisement on Backpage.com, again, ladies and

gentlemen of the jury, did nothing to change the true nature of

what was being offered. It was still a prostitution

advertisement.

You want to know why Carl Ferrer was instructing them

that the website needed to be as clean as possible when many

new users checked out the site? Well, evidence will show, a

few days prior to him sending that e-mail, Craigslist had shut

down its adult services section, which I stated before meant

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overnight those who are posting their prostitution ads on

Craigslist migrated to posting those same prostitution ads on

Backpage, which represented a tremendous revenue growth for the

defendants. However, it also meant that all eyes from law

enforcement, the public, and crimes against children

organizations were going to be focused on these defendants.

And, ladies and gentlemen of the jury, that is exactly what

happened.

Less than two weeks after Ferrer sends that e-mail,

and Padilla talking about stripping out these terms, the

National Association of Attorneys General, an organization made

up of every state attorney general here in our nation, all 50

sent these defendants a letter signed by 21 states attorney

generals. They sent it to Samuel Fifer, who, evidence will

show, is the defendants' public relations representative,

telling these defendants pointblank that ads for prostitution,

including ads trafficking children, are rampant, are all over

Backpage. And in light of Craigslist's decision to shut down

its adult services section of its website, and because these

defendants cannot or will not adequately screen for these ads,

they should shut down the adult services section of the

website.

The AGs, attorneys generals, went on to tell them that

they understood that this will result in considerable loss of

revenue for these defendants, but they reiterate to them that

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no amount of revenue, no amount of revenue could justify the

scourge of illegal prostitution and the misery of the women and

children who will continue to be victimized by the ads posted

on Backpage.com.

And speaking of revenue, evidence will show that

during the time of this letter at the end of 2010, these

defendants were generating -- Backpage was generating

$30 million a year in revenue, the vast majority of which, more

than 94 percent, from fees they were charging customers to post

their prostitution ads on the website.

So while they were telling the AGs and others that

they were doing everything they could to prevent these ads from

being posted on the website, let's look at a few more of the

e-mails to show that, in fact, they were doing quite the

opposite.

This e-mail you're looking at here is from defendant

Andrew Padilla, the operations manager, that he and defendant

Joye Vaught send the moderation staff a couple weeks after this

AGs' letter urging them to shut down the website, threatening

to --

MS. BERTRAND: Objection. Misstates the document.

MR. JONES: -- fire --

THE COURT: The objection is sustained.

MR. JONES: -- threatening -- Padilla threatening to

fire any moderator who acknowledges that a customer is a

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prostitute. And defendant Vaught is also copied on this

e-mail. Leaving notes on our site that imply that we are aware

of prostitution or in any position to define it is enough to

lose your job. He goes on to tell them, if you don't agree

with what I'm saying, you need to find another job.

Evidence will also show a couple weeks after Padilla

sends this e-mail, he sends moderation staff another e-mail,

again, to which defendant Vaught, as well as Carl Ferrer and

Hyer, were copied on. In this e-mail he tells moderation

staff -- he includes a PowerPoint attachment, as well as an

Excel spreadsheet. And in this PowerPoint he lists 37 images

and instructs staff that if an image had approved next to it,

those images were all okay to be posted in the adult services

section of Backpage.com.

He then instructs staff if an image had a fail next to

it, don't fail the ad if it -- if somebody posted an ad with an

image that had fail next to it, simply strip out the image and

post the sanitized version of that ad on Backpage.com. And

then he tells them to only remove the entire ad if an image had

graphic sex act next to it. Let's look at a few of these

images.

Approved. Topless is okay.

Legs spread is okay but genitalia is covered by

clothing, so an ad -- an image included like this were okay to

be posted in the adult section of Backpage.com.

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Approve. Female frontal nudity with legs spread but

not extremely spread. Another image like this okayed to be

posted in the adult services section of Backpage.com.

Fail. Hand too far past waistband of panties. Now,

again, ladies and gentlemen of the jury, fail didn't mean if an

individual posted an ad with an image like this to fail the ad.

Fail meant strip out that image and post the sanitized version

of that advertisement on Backpage.com. Again, changing nothing

about the true nature of what was being offered. Still a

prostitution ad.

Approve. Mouth on own breast is okay. Another image

okay to be posted in the adult services section of Backpage.

Approve. Rear shots okay.

This rear shot, more graphic than the previous slide,

but the amount of nudity is still okay.

Approve. Transparent wet panties okay. Again,

another image, now this image okay to be posted in the adult

section of Backpage.com.

Fail. Exposed anus. Now, ladies and gentlemen of the

jury, again, if an individual posted an ad with an exposed anus

like this, evidence will show, that that ad wouldn't fail, it

wouldn't be prevented from being posted on Backpage, but these

defendants instructed moderation staff to strip out that image

and post the sanitized version of that ad on Backpage. Again

here, changing nothing about the true nature of what was being

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offered here.

Fail. Using toy in a sexual manner. Again, image

stripped out, sanitized version of the ad posted on

Backpage.com. And he tells them to only remove the entire ad

for graphic sex act.

But that's not it, ladies and gentlemen of the jury.

Padilla goes on in this e-mail to instruct staff. He tells

them that, images aside, it's the text, it's the words in the

ads that's killing us with the AGs, the attorney generals. A

couple weeks after the AGs had just sent them this letter

urging them to shut down the website because of the

trafficking, the prostitution taking place in there, so he

tells staff, try to ban or strip out these terms from ads

before posting the sanitized version of the advertisement on

the website.

Ladies and gentlemen, stripping out any of these

terms: Pegging, pussy, quicky, rape, rimming, did nothing to

change the true nature of what was being offered. It was still

a prostitution ad.

These defendants knew, they knew that the vast

majority of advertisements on Backpage.com were prostitution.

Sometimes it's all about the journey and the destination --

destination. Erectile dysfunction, GFE provider. I don't care

for reviews, but they insist on leaving them anyway. You can

find a few current reviews on The Erotic Review and the ID

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number associated with that advertisement.

I love men. I'm a GFE. Out call and in call, with

the exception of in call.

Stacked college co-ed with the best mouth ever, GFE,

and the prices associated with her time. Ladies and gentlemen,

these defendants knew that these were prostitution ads, but

they didn't shut down the website. They didn't try to prevent

these ads from being posted on the website. Why? Greed. They

were generating -- the vast majority of the revenue came from

fees they were charging customers to post these prostitution

ads on the website.

A couple months after Padilla sends out that e-mail,

the PowerPoint and the Excel document, these defendants,

evidence will show, that staff were told that the website

needed deep cleaning because the news media outlet CNN was

getting ready to run a broadcast about children being sold for

sex on Backpage.com.

That's right, ladies and gentlemen, it wasn't just

crimes against children organizations, the public, and law

enforcement, but news media outlet also put these defendants on

notice --

MR. BIENERT: Objection, Your Honor. Rule 401, 403.

THE COURT: The objection is overruled.

MR. JONES: -- put these defendants on notice, as one

letter told them pointblank, that Backpage was a hub for

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prostitution. But the thing is, these deep cleaning, these

stripping out words and images indicative of prostitution and

posting the sanitized version of the advertisement on the

website, it still didn't work to clean up the website.

One organization that you'll also hear about that put

these defendants on notice that they were promoting

prostitution, including prostitution of children by running

Backpage.com, was the National Center for Missing and Exploited

Children, or NCMEC. NCMEC is a nonprofit organization based in

Washington, D.C., whose mission is to find missing and

exploited children, reduce the sexual exploitation of

children --

MR. BIENERT: Objection, Your Honor.

MR. JONES: -- and prevent the victimization of

children.

THE COURT: The objection is overruled.

MR. JONES: Since 1996, NCMEC has served as a

clearinghouse, a central location where crimes against children

can be reported, where cyber tips can be reported.

And what a cyber tip is, is suppose you're on the

internet and you come across a website where you suspect a

child is exploited. You could submit that information to NCMEC

via the 800 number, it's often done online now, you know, where

you found this image, the date and location, NCMEC will

disseminate that information to law enforcement who will

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further conduct an investigation.

Well, ladies and gentlemen, the evidence will show

that more than 70 percent of all child sex trafficking cyber

tips reported to NCMEC involved Backpage.com, the website these

defendants ran. And because of it, NCMEC met with these

defendants to try to work with them to implement safety

measures to reduce or eradicate children from being sold for

sex on the website.

But while they were asserting to NCMEC and others that

they were doing all they could to prevent the illegal ads from

being posted on the website, evidence will show that these

defendants' main concern was making money. And, boy, evidence

will show the money began to roll in about this time. Evidence

will show that these defendants were often given revenue

reports, Larkin, Brunst, Spear, and others, showing how much

revenue Backpage is generating, also what sections of Backpage

was generating the most revenue. And, ladies and gentlemen of

the jury, the vast majority of revenue Backpage was generating,

more than 94 percent, came from fees they were charging

customers to post prostitution ads.

For example, this pie chart you're looking at here

shows Backpage revenue from October 2010 to December 2010, the

first three months post Craigslist shutting down their adult

services section. As you can see, Backpage generated

$8.5 million during this three-month period of time, the vast

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majority, more than 94 percent, came from fees they were

charging customers to post these prostitution ads on the

website.

So while they were asserting that they were doing all

they could to prevent these ads from being posted on the

website, the proof is in the pudding. They were devising these

deceptive strategies to conceal the fact that prostitution ads

were rampant on the website because of greed.

I mentioned just briefly that CNN was getting ready to

run a report about children being sold for sex on the website.

Well, evidence will show before CNN ran this broadcast, they

contacted the defendants through their representative,

defendants Lacey and Larkin specifically, and asked them if

they wanted to comment on this troubling issue.

And the evidence will show that these defendants,

through their PR representative, sent CNN a quote that Backpage

is steadfast in its opposition of its website being used for

criminal activity, and they also included a so-called safety

and security background, which included recent so-called safety

measures that they had implemented to ensure or attempt to

prevent illegal ads from being posted on the website, including

a new no nudity policy.

Well, ladies and gentlemen of the jury, evidence will

show after a week, after they responded to CNN with that quote

and that new no nudity policy, defendants sent staff an e-mail

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entitled, Stricter Guidelines for Nudity, this e-mail exchange

between Padilla, Ferrer, and also the manager of the moderation

staff. In it Padilla tells them that now breast must be

covered with clothing and thongs can't be below the butt crack.

He tells them that if images are posted like this, these are

terms of use violations on Backpage.

But he goes on and tells staff to don't remove ads if

an individual posts an ad with their breast uncovered and

thongs below the butt crack, but he tells them to strip out the

image and post the sanitized version of the advertisement on

Backpage.com. And he goes on at the end to tell them, nudity

violations will always be a part of this business. Deception.

Concealing the truth. And a week after they had just sent CNN

this so-called no nudity policy they had implemented.

Evidence will show a week after Padilla sends this

e-mail, CNN runs the broadcast entitled, Selling the Girl Next

Door, that talked about children as young as 13 being

trafficked on Backpage. You will hear evidence that these

defendants discussed that broadcast in person, as well as

e-mails, Lacey, Larkin, and others at Backpage.

You'll also hear that a week after CNN aired this

broadcast, these defendants, through their PR representative,

sent CNN a cease and desist letter demanding that they not

re-air the broadcast. They also told CNN that Backpage was

steadfast in its opposition of its website being used for

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criminal activity, including prostitution.

They also, in essence, challenged CNN to find any ad

on Backpage that could be an indicator of a child being sold

for sex. And, ladies and gentlemen of the jury, you will hear

from a senior vice president at CNN. He'll tell you that they

took Backpage and these defendants, they took these defendants

up on that challenge, and for one day pulled more than 12,000

ads that they indicated to these defendants could be indicators

of a child being sold for sex.

MR. BIENERT: Objection. Rule 401, Rule 403.

THE COURT: The objection is overruled.

MR. JONES: And they included the words like:

Schoolgirl, young, fresh, teenage, tight. CNN also told these

defendants, they gave them examples of recent arrests all

around the country of pimps and traffickers who had been

arrested and prosecuted for selling children for sex through

ads placed on Backpage.com.

CNN also told these defendants in this letter that

many of the ads on Backpage included the ID number in links to

the prostitution review site The Erotic Review, which was

another strong indicator that the ads were for prostitution.

But, of course, they didn't tell CNN that they had a reciprocal

link agreement with the prostitution review site The Erotic

Review. Deception. Concealing the truth.

What you'll also hear, ladies and gentlemen of the

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jury, that a week after CNN sent them that letter, they sent

moderation staff another e-mail. This exchange between

defendant Padilla, Vaught is also copied on this e-mail,

defendant Vaught, as well as the moderation team manager. And

they tell them that, effective immediately, any variation of

TER, The Erotic Review, is banned on Backpage. But, ladies and

gentlemen of the jury, they don't tell them that if an

individual posted an ad with Erotic Review, to fail or prevent

that ad from being posted on the website. They simply tell

them to strip out TER, Erotic Review, and post the sanitized

version of that on the website, changing nothing about the true

nature of what was being offered. It was still a prostitution

ad, a week after CNN had just told them about the ads with The

Erotic Review. Deception. Concealing the truth.

You'll also hear that these defendants apologize to

customers for having to remove images and text associated with

their ads.

This ad you're looking at here, evidence will show a

user that went by the name of Licks a Lot contacted Backpage's

staff in February 2011 complaining that she was tired of

spending her hard earned money posting ads on Backpage.com only

to have her text and her images removed from her ads.

Ladies and gentlemen of the jury, these defendants

didn't prevent Licks a Lot's ads from being posted on the

website, in fact, guaranteed low mileage, boys, nice, round,

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firm bottom, and the two images associated with this ad,

evidence will show that they apologized to Licks a Lot that her

images and texts had been deleted, allowed this ad to remain on

Backpage.com, and even gave Licks a Lot free upgrades, free

moves to the top in sponsor ads for all of her trouble.

I mentioned earlier that these defendants met with

National Center for Missing and Exploited Children who were

trying to work with them to implement measures to reduce or

prevent children from being trafficked on their site. Well,

the evidence will show that on March 1st, 2011, defendant

Lacey, Larkin, Spear, Carl Ferrer, and others at Backpage met

with the National Center for Missing and Exploited Children.

But before this meeting, evidence will show that at defendants

Larkin and Carl Ferrer's request, defendant Padilla pulled more

than 600 terms that were currently being filtered or stripped

from ads, a week before meeting with the National Center for

Missing and Exploited Children.

And you will hear that they met with NCMEC, and during

this meeting, NCMEC showed these defendants images of known

missing children, and then those same children posted in ads in

the adult services section of the Backpage.com.

NCMEC also showed these defendants images of known

missing children, and then profiles of these children on the

prostitution review site The Erotic Review, but, again, like

CNN, they didn't tell NCMEC they had had a reciprocal link

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agreement with The Erotic Review. Deception. Concealing the

truth.

You'll also hear that later that day these defendants

also met with Polaris Project, another anti-human trafficking

organization based in Washington, D.C., whose mission is to

prevent women and children from being sold for sex. And you'll

hear from a representative from Polaris during the course of

this trial. He'll tell you that during this meeting with

Larkin, Spear, Ferrer, and others at Backpage, that Polaris

spread out Backpage ads across the table and went ad for ad

giving these defendants instances, indicators of women and

children being sold for sex.

But approximately nine days after meeting with

National Center for Missing and Exploited Children and Polaris,

evidence will show that these defendants met to discuss

Backpage related developments. And a part of the agenda items

for the meeting included how they could be more flexible and

allow more coded terms. You'll also see about a week after

that meeting Padilla sends moderation staff, sends an e-mail to

defendant Vaught and moderation manager Monita Mohan entitled

Relaxed Image Standards. And he tells them that the first and

last image you're looking at, that these images were okay to be

posted in the adult services section of Backpage.com.

And the evidence will show for the second and third

image, staff were instructed to strip out the image and post

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the sanitized version of the advertisement on Backpage.com,

again, changing nothing about the true nature of what was being

offered.

Also, the day before Padilla sends this e-mail,

defendant Vaught also sends staff an e-mail entitled Adult

Moderation. And she tells staff that we're going to allow

users to post pictures with their hands near their crotch

again. And she goes on to tell them that we still want to

delete the pictures where they have their hands in their

panties. Again, ladies and gentlemen, a perfect example of how

these defendants are trying to do everything they could to keep

law enforcement, crimes against children, and others off their

backs, while not upsetting their customers, because that's

where the vast majority of the revenue Backpage was generating

were coming from, fees they were charging customers to post

these prostitution ads on the website.

And deleting pictures, deleting images, the individual

who posted with hands inside their panties, did nothing to

change the true nature of what was being offered. It was still

a prostitution advertisement. Defendant Vaught knew that, as

well as her other five coconspirators. In knowing this, they

intentionally facilitated the prostitution crime being

committed by folks who were posting these ads on the website.

And why? Greed.

Evidence will also show that because of the mounting

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pressure these defendants were receiving from the public and

these crimes against children organizations and others, they

hired individuals they called internet safety experts, in a socalled attempt to work with them to reduce or eliminate

prostitution ads, ads offering sex for money, from being posted

on their website, as well as the trafficking of children.

Ladies and gentlemen of the jury, evidence will show

that these defendants didn't even implement the safety measures

recommended to them by their own internet safety experts. For

example, this document you're looking at here was sent to

defendant Larkin, Spear, and others at Backpage from their

safety experts telling them that the phrase new in town was

often used by pimps who shuttle children to locations where

they don't know anyone and can't get help.

Evidence will also show that these defendants were

told that the phrase AMBER Alert, that's right, the national

child abduction phrase, to be on the lookout for this phrase

because it also could be an indicator of a child being sold for

sex. But, ladies and gentlemen of the jury, evidence will show

that even after being told this, these defendants continued to

allow ads with new in town to be posted on the website. And

the evidence will show that AMBER Alert was simply added to the

strip term from ad filter. So if a user or somebody posted an

ad that included AMBER Alert, the AMBER Alert would be stripped

from the ad, and the sanitized version of the advertisement

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posted on Backpage.com, changing nothing about the true nature

of what was being offered.

These defendants were also told by their internet

safety experts to determine if a user was using the same credit

card or the same phone number to post multiple ads in the adult

services section of Backpage, because this could also be an

indicator of a prostitution or human trafficking situation.

But even after being told this, they continued to allow users

to post multiple ads with the same credit card, as well as post

multiple ads using the same phone number.

You'll also hear that during this time these

defendants exchanged e-mails, defendant Larkin and others at

Backpage, including former CEO Carl Ferrer, about implementing

age verification. So before posting an ad in the adult

services section of Backpage, you have to input your -- verify

with your driver's license or some other type of identification

information. Ladies and gentlemen of the jury, evidence will

show that although age verification would have only cost

between 79 and 99 cents a query, these defendants determined

that it wasn't cost effective to implement.

Now, let's look at the revenue they were generating

during this time, July 2011 where they're exchanging e-mails

about implementing age verification. Backpage had generated

$40 million a year -- $40 million in just a nine-month period

of time, from October when Craigslist shut down to that next

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July, $40 million, 94 percent from fees they were charging

customers to post prostitution ads on their website, but they

didn't even want to pay 79 or 99 cents a query to implement age

verification. Greed.

You'll also hear that these defendants met with --

continued to meet with states attorney generals who put them on

notice that they were promoting prostitution by running

Backpage.com.

You'll hear that in one meeting with the Washington

State Attorney General's Office, you'll hear from a Washington

state representative, you'll hear from Professor Paula Selis.

Professor Selis will tell you that she asked a Backpage

representative during this meeting, she asked them pointblank,

you mean to tell me that the folks contacting individuals in

the adult services section of Backpage, the women that they're

contacting are offering to go out for coffee? To which she'll

tell you the Backpage representative told her, we can't deny

the undeniable.

That's right, ladies and gentlemen, these defendants

can't deny that they knew that the vast majority of the ads on

Backpage.com were nothing less than prostitution ads. And

knowing this, they intentionally facilitated the prostitution

crimes being committed by folks who were posting these ads on

the website because of greed.

You'll also hear during this time these defendants

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continued to brag about Backpage's contribution to the

prostitution industry. This document you're looking at here is

an excerpt from a draft editorial entitled Backpage Understood.

In it defendant Lacey states, eliminating our adult advertising

will in no way eliminate or even reduce the incidents of

prostitution in this country.

He goes on to say, for the very first time, the oldest

profession in the world has transparency, recordkeeping, and

safeguards.

Ladies and gentlemen, the evidence will show that

defendant Lacey sends this draft editorial to defendant Larkin,

who forwards it on to former CEO Carl Ferrer. And Larkin tells

Ferrer, he says, Carl Ferrer, I want you to think about any of

the information, any of the information Lacey just sent him

being made public. We need to stay away from the very idea of

editing the posts, as you know. Deception. Concealing the

truth.

You'll hear that Carl Ferrer removed Lacey's comments

about bragging about Backpage's contributions to the

prostitution industry before finalizing that document.

Evidence will also show that in August of 2011 the

National Association of Attorneys General, I told you they sent

them -- the defendants a letter signed by 21 AGs in September

2010. Well, in 2011 they sent these defendants another letter,

this time signed by every attorney general in the state -- in

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the United States, all 50, telling these defendants pointblank

that naked persons in provacative positions are featured in

nearly every ad on Backpage.

The AGs go on to tell these defendants that it doesn't

take forensic training to know that these are prostitution ads.

They also tell them that this hub for illegal services has

proven particularly enticing for those seeking to sexually

exploit minors. But even after this letter signed by every

attorney general in the state -- in the United States, they

still didn't shut down the website. Why? Greed. By the end

of 2011, evidence will show Backpage had generated nearly

$60 million, more than 94 percent from fees they were charging

customers to post prostitution ads on the website.

Evidence will also show that in January of 2012 Auburn

Theological Seminary, a faith-based organization based out of

New York City, who have met in person with defendant Larkin, as

well as defendant Lacey, to try to work with them to implement

safety measures to reduce or eliminate children and women from

being sold for sex on Backpage, but after still finding the

same ads on Backpage, they sent Lacey and Larkin a seven-page

letter specifically addressed to them telling them that a

cursory, a brief review of Backpage shows customers selling

sex.

They also went on to give these defendants examples of

children as young as 12 being sold for sex, and pimps and

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traffickers convicted through ads placed on Backpage.com.

A couple of months after this e-mail, evidence will

show, in April 2012, a mother contacted Backpage staff and told

them that a 17-year-old minor who had an ad posted in the

escort section of Backpage.com was trying to recruit her

15-year-old daughter into prostitution. And the evidence will

show these defendants, defendant Padilla, told staff that we

can't do anything -- don't do anything about this ad because

she didn't claim her own daughter is being depicted in the ad.

You'll also hear that that same month another mother

contacted Backpage staff and included a link to her daughter's

ad on the -- on the website called Backpagepics.com. And she

tells staff that the link included images of her daughter who

had been drugged and taken against her will, and urged Backpage

to shut down, take down those ads. To which the response for

her was that, we don't own Backpagepics.com so we can't do

anything about that.

Well, ladies and gentlemen of the jury, evidence will

show that this same mother contacted Backpage a few days later,

again, this time with her daughter's -- a link to her

daughter's ad on the website Backpage.com, a website these

defendants ran, urging them to take down the ads of her

daughter who had been drugged and taken against her will.

Nothing happened. The mother again the next day, and finally

the ads were taken down. The evidence will show that this

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e-mail exchange was ultimately forwarded from Carl Ferrer to

defendant Larkin, to which Larkin replied, CF, Carl Ferrer,

that's a good, solid response.

Now, ladies and gentlemen of the jury, you'll hear

from victims during the course of this trial. They'll tell you

how Backpage made it easy to sell them for sex. They'll also

tell you how everybody in the prostitution industry knew that

Backpage was a website to visit to connect with folks offering

sexual services in exchange for money.

They'll also tell you about how their pimps and

traffickers took photos of them and placed those photos in ads

and posted them on Backpage.com offering them for sex.

They'll also talk to you about some of the code words

used in the prostitution industry, as well as how important the

upgrades, the move-to-the-tops in the sponsor ads were, because

of the prevalence of prostitution ads on Backpage.

You see, evidence will show that this case isn't just

about these defendants generating tens of millions of dollars

off facilitating prostitution. The lives of countless women

and children have been forever changed by their running

Backpage.com for 14 years.

You'll hear -- you'll hear from that mother of that

14-year-old who had to attempt to buy sex with her daughter to

rescue her from being sold for sex.

MR. BIENERT: Objection, Your Honor, 401, 403.

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THE COURT: The objection is overruled.

MR. JONES: You'll hear from a father who had to

contact Backpage staff to urge them to take down ads of his

daughter. And you'll also hear, you'll hear that these

defendants likely submitted thousands of cyber tip reports to

NCMEC about a possible trafficking occurring on Backpage.

You'll hear that they were sometimes quick to respond to law

enforcement requests for information to further trafficking

investigations, and also that they prevailed in some court

hearings and proceedings in regards to Backpage.

But, ladies and gentlemen of the jury, evidence will

show the courts, if NCMEC, if the law enforcement, if they only

knew, if they only knew what we know now about how these

defendants were creating prostitution ads on Backpage and the

content aggregation process; how they were intentionally

soliciting prostitution-related business from prostitution

review sites like The Erotic Review; how they were

intentionally promoting the prostitution businesses of these

super posters like Sean Kim; how they were constantly changing;

how they were instructing staff to moderate these ads based on

the pressure they were receiving from the public; how they were

about to strip terms from ads, because if they only knew. Why?

Greed.

You'll hear from -- you'll hear from Destiny and

Naomi. Naomi here, Naomi who was sold for sex beginning at the

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age of 14, she'll tell you that her traffickers told her

pointblank that they were using prepaid cards to post ads of

her on Backpage, cards you could buy from CVS or Walgreens,

because they didn't -- they couldn't be tracked. They didn't

allow them to be tracked, or didn't link back to any bank

account information as identifying them as the ones posting her

on Backpage offering her for sex.

These NCMEC, their own internet safety experts urged

them to implement not allowing customers to pay -- to post with

these prepaid cards.

You'll also hear from Destiny who was trafficked at

the age of 15. Destiny will tell you that if you attempted to

post an ad on Backpage with an age under the age of 18, you

simply get an oops message and allowed to post that same ad by

indicating that you were 18 or older.

The defendants, they didn't stop allowing these

customers to pay with these prepaid cards, they didn't

implement age verification, something NCMEC and others had

urged them to do, they didn't shut down the website. Why?

Greed.

By the end of 2012, they had generated $80 million a

year, more than 94 percent from fees they were charging

customers to post these prostitution ads on the website.

That's why they didn't shut it down.

You will also hear evidence that beginning in 2013

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banks and credit card companies began to put these defendants

on notice that they -- what they understood their customers to

be using their cards to post for illegal services, in other

words, prostitution ads on Backpage. In fact, in August of

2013, Chase Bank, one of the largest financial institutions

here in the country, sent Backpage staff an e-mail telling

them -- telling them that beginning this month -- beginning

September 1st, 2013, Chase was no longer accepting transactions

from Backpage due to their involvement in human trafficking.

And you will hear, evidence will show that this e-mail

from Chase Bank was forwarded to defendant -- was sent to Carl

Ferrer and Dan Hyer, who forwarded and sent this Chase Bank

e-mail to defendants Larkin, Brunst, and Scott Spear. And

Ferrer told them that I think our problem may get larger on

Sunday -- Sunday, September 1st.

And you will hear their response of these banks and

credit card companies, stop processing Backpage associated

payments. These defendants devised deceptive strategies to

fool credit card companies into thinking their charges weren't

-- their customers' charges weren't related to Backpage by

creating seemingly unrelated entities.

A couple you'll hear about throughout the course of

this trial, Website Technologies, as well as Posting Solutions.

Ladies and gentlemen of the jury, evidence will show that

Website Technologies and Posting Solutions was simply

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Backpage.com disguised under a different name. Deception.

Concealing the truth. And it worked. Fooling credit card

companies into thinking their charges weren't associated with

Backpage, it worked.

By the end of 2013, evidence will show that Backpage

had generated nearly $113 million from that year alone, the

vast majority of which came from fees they were charging

customers to post these prostitution ads on the website, more

than 94 percent.

You'll also hear -- let's look at defendants'

individual incomes for 2013 from -- that they reported to

Medalist Holdings, which is a parent company for Backpage.

Defendant Lacey made nearly $39 million for 2013 alone;

defendant Larkin, nearly 38 million for 2013 alone; defendant

Brunst, more than $6 million; and defendant Spear, nearly 3

million for just 2013 alone.

Evidence will also show in 2014 these defendants

continued to be put on notice as one payment processing company

told them that they understood their customers to be using

their credit cards to post prostitution ads on their website on

Backpage.

You'll also hear that in April of 2014 U.S. Bank,

another large financial institution here in the U.S., sent

these defendants a letter addressed specifically to former CFO

Jed Brunst, telling them, please be advised that we have

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elected to close your account with us.

Evidence will also show the next day defendant Brunst

sends this letter -- attaches this letter by U.S. Bank in an

e-mail to Carl Ferrer, Scott Spear, and others, telling them

that May 1st we will be completely out of U.S. Bank. We'll

move all of our banking under Website Technologies at BMO.

Ladies and gentlemen of the jury, Website Technologies was

simply Backpage.com disguised as a different name. Deception.

Concealing the truth.

You'll also hear in 2014 that these defendants

continued to meet to discuss Backpage developments, how to grow

the site. And one of the agenda items for this meeting

included that Backpage was able to grow because Craigslist shut

down its adult erotic services section, and they were allowing

customers to post on Backpage without leaving any meaningful

identification. In other words, they could pay with these

prepaid cards.

You'll also hear that they continued to instruct staff

on how to moderate these ads. This e-mail you're looking at

here from defendant Vaught sent in April of 2014 where she

tells staff that if they come across an add in the adult

section of Backpage that included a link to a sex-for-money

website, to strip out the link and post a sanitized version of

the advertisement on Backpage.com. Again, changing nothing

about the true nature of what was being offered. It was still

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a prostitution ad. Oh, she tells them, don't bother removing

it from the current ad. Deception. Concealing the truth.

Also around this time the National Center for Missing

and Exploited Children served these defendants with a brief

criticizing their efforts to eradicate children from being sold

on the website. And, ladies and gentlemen of the jury, NCMEC

didn't know what we've discussed and what the evidence will

show in this case, but they were exactly right. They didn't

have all the internal documents and e-mails, the evidence to

show, but they were exactly right in 2014 when they told these

defendants pointblank that the unpleasant reality is that

Backpage publicizes carefully selected operational processes as

a subterfuge, as a means of deception and trickery to avoid

increased scrutiny, while providing traffickers with easy

access to an online venue to sell children for sex.

NCMEC didn't have all this stuff, but they knew then

what the evidence would show. Why? They still didn't shut

down the website even after this brief being served to them by

NCMEC. Why? Greed. By the end of 2014, Backpage had

generated nearly $135 million, the vast majority of which,

94 percent came from fees they were charging customers to post

prostitution ads on the website.

And let's look at some of these defendants' individual

income for 2014. Defendant Lacey for one year alone for the

parent company of Backpage made more than $50 million;

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defendant Larkin, nearly 50 million; defendant Brunst, more

than 10 million; and Spear, more than $4.3 million for this one

year alone.

You'll also hear that in 2014 defendants Lacey,

Larkin, Brunst, and Spear, they entered into a so-called letter

of intent to sell Backpage for $600 million. And I say socalled sale, because, ladies and gentlemen, it was a sham. It

was bogus. The sale, it wasn't a sale. Evidence will show, in

fact, after this so-called sale was complete in April 2015,

these four defendants maintained significant financial and

operational control over Backpage, including they're entitled

to payouts on any future loans, a 30 percent participation in

any future sale of Backpage above the purchase price.

They were also -- ladies and gentlemen of the jury,

evidence will show that this sham of a sale that I mentioned

was these defendants loaning former CEO Carl Ferrer, they

loaned him the $600 million to purchase Backpage. And in doing

so, Carl Ferrer couldn't sell Backpage without these

defendants' permission, but, ladies and gentlemen of the jury,

he couldn't even hire an accountant without these four

defendants' permission.

They also had to approve the annual budget and

business plan, and had full access to all of Backpage's books

and records, as well as full access to all of Backpage's bank

accounts even after this so-called sham of a sale was completed

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in April 2015.

You'll also hear that in April 2015 the financial

institution Mastercard, again, a large financial institution

here in the U.S., sent Backpage an e-mail, sent them a letter

telling them that beginning May 1st that Mastercard might stop

processing Backpage associated payments, in other words, they

might stop allowing customers that used that Mastercard to post

in the adult services section of Backpage.

In response, evidence will show that Carl Ferrer sent

former CFO and defendant Jed Brunst an e-mail telling him that

we should route all the Mastercard transactions through an

international bank so we can fool Mastercard into thinking that

the customers' charges weren't related to Backpage. To which

defendant Brunst replied, regarding MC, Mastercard, didn't we

go down the Mauritius path, the bank in East Africa, didn't we

go down that path once, and the banks have the same issue with

our content.

That's right, ladies and gentlemen, wasn't just the

international -- wasn't just the U.S. banks that had a problem

with their content, the international banks, evidence will

show, also didn't want to do business with Backpage out of

concerns that their customers were using their cards for

illegality.

Evidence will show that by the end of 2000 -- the

summer of 2015, Visa, Mastercard, and Amex had stopped

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processing Backpage associated payments. In other words, the

customers weren't allowed to pay to post prostitution ads using

their Visa, Amex, or Mastercard.

And you will hear that these defendants referred to

this time at Backpage as credit card Armageddon. And because

of credit card Armageddon, Visa, Mastercard, Amex pulling out,

evidence will show that these defendants stopped charging

customers to post their prostitution ads on Backpage, and now

only charged them for upgrades. We talked about the move to

the top, as well as the sponsor ads.

In order to pay for these upgrades, evidence will show

that, led by Carl Ferrer, as well as former CFO Jed Brunst,

they created these alternative payment methods where customers

could pay using bitcoin credits, as well as checks and money

orders.

This document you're looking at now is a Backpage

staff member, an e-mail a Backpage staff member sent a customer

complaining that she is unable to use her credit card to post

in the adult services section of Backpage. And the staff

member tells this customer, this e-mail sent to defendant

Vaught, if you would like to pay for upgrades, we can only

accept checks or money orders made out to Posting Solutions.

The staff goes on in this e-mail to state, please do

not make your payments out to Backpage, as we will no longer be

able to accept them. Deception. Concealing the truth. And it

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worked.

Evidence will show these defendants -- millions in

checks and money orders were sent and deposited into the bank

accounts. This image you're looking at now is at Backpage.

You see all the checks and money orders the customers had sent.

These checks and money orders, evidence will show, were

deposited into accounts in the name -- millions of dollars into

the name of Posting Solutions. Posting Solutions, again,

Backpage disguised as a different name.

Same thing with bitcoin. Evidence will show that

individuals who paid for the -- paid for their upgrades and

moved to the top of their prostitution ads that paid by

bitcoin, this was deposited into Website Technologies' account.

And the evidence will show this money that was deposited into

Posting Solutions and Website Technologies, evidence will show

this money was funneled to other bank accounts, including

Serious Properties, to further conceal the fact that Backpage

was involved in the transaction.

But guess what the evidence will show were the

authorized signers on the Serious Properties account, defendant

Brunst and Spear. And the evidence will show that once this

money reached Serious Property, it was funneled back out to

defendants as well as Backpage. And it worked.

By the end of 2015, let's look at the defendants'

individual income, even after Visa, Mastercard, and Amex had

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stopped processing Backpage associated payments, defendant

Lacey in 2015 still made nearly $26 million for this one year

alone; defendant Larkin, nearly 24 million; defendant Brunst,

3.8 million, nearly 4 million; and defendant Spear, 2.8 million

for 2015 alone.

Evidence will show that these defendants continued, in

2016, fooling credit card companies into thinking their charges

weren't associated with Backpage, and allowing customers to pay

with bitcoin, money orders, and checks. By the end of 2015 --

2016, Backpage had generated more than $128 million a year.

Evidence will show, ladies and gentlemen, the vast majority of

which, 94 percent came from fees they were charging customers

to post these for these upgrades, the move-to-the-tops for

their prostitution ads.

Now, let's look at defendant Lacey's and Larkin's

Backpage distributions for just this one year alone, between

January 2016 and January 2017, defendant Lacey, more than 30

million in Backpage distributions, and defendant Larkin, the

evidence will show, and his family, more than $28 million for

this one year alone.

You'll also hear evidence that in January 2017,

following a 17-month investigation, the U.S. Senate issued a

report on Backpage. And the day this report was issued, these

defendants stopped allowing customers to post ads in the adult

services section of Backpage. But that didn't change anything.

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They simply allowed customers to move from posting these

prostitution ads in the adult services section of the site to

posting these same prostitution ads in the personal section of

Backpage where they remain until the website was seized and

shut down by the United States in April 2018.

By the end of 2017, evidence will show that Backpage

had generated more than $135 million a year, the vast majority

of which came from fees they were charging to post and pay for

these prostitution ads even after the U.S. Senate's report in

January of 2017. And in 2018, the first few months of 2018

before the website was seized and shut down, more than 26 --

nearly $26 million.

Ladies and gentlemen of the jury, I'll end my opening

statement like I began when I told you about a mother,

Mrs. Pride, that you'll hear from, who had to attempt to buy

sex with her daughter in order to rescue her from being sold

for sex through ads through Backpage.

And I'll end by telling you about another mother that

you'll hear from throughout the course of this trial, Nacole

Svengard. Nacole will tell you that after her daughter's

trafficker had been arrested and convicted for selling her for

sex through ads placed on Backpage, Nacole went -- this mother

went on a mission to shut down Backpage. And this mission led

her to meet with the mayor and the attorney general --

MR. BIENERT: Objection, Your Honor. Relevance.

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MR. JONES: -- the National Center --

THE COURT: Counsel.

MR. BIENERT: Your Honor, it also calls for hearsay.

THE COURT: Well, it's not hearsay, but the 403

objection is sustained, and relevance.

MR. JONES: Nacole will also tell you that outside of

the chambers of the U.S. Senate, she crossed paths with

defendant Michael Lacey. And defendant Lacey told her,

pointblank, that if these yahoos would keep their fucking mouth

shut, we wouldn't have all these issues. Ladies and gentlemen

of the jury, thankfully, these mothers, NCMEC, Auburn

Theological Seminary, the U.S. Senate, these entities and

individuals, thankfully, they didn't keep their mouth shut, and

because of it, Backpage.com is shut down.

And the government submits that after all the evidence

is presented to you in this trial, that you find these

defendants, hold these defendants accountable for their

criminal conduct in running this website for nearly 14 years.

The government submits that you find each six of these

defendants guilty.

Thank you.

THE COURT: Okay. We're going to take a 15-minute

recess. If you need more time to make sure you all get a

restroom break, of course we'll wait, but as soon as you're

ready, we'll come back in.

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(Recess taken, 3:08 p.m. - 3:26 p.m.)

THE COURT: Okay. I understand someone wanted to talk

to me before we brought the jury back in.

MR. CAMBRIA: Afternoon, Your Honor.

Your Honor, at this time, I would move for a

declaration of a mistrial on several grounds.

First of all, the basic child theme throughout this

summation, number of things about children being trafficked, he

starts his -- his opening with a child situation, he ends it

with a child situation, continues to talk about children being

trafficked when there is no such charge.

The next thing is a 404(b)(3) violation. Each one of

those uncharged pictures or ads that he showed in his

presentation, what constituted wrongful act under 404(b)(3), of

which we should have had knowledge under subdivision 3 and

notice, and we were not given any of that.

The other thing that I base this on is he made a

comment at one time, these defendants can't deny, which has

been a fairly hot topic with the jury during selection.

The other thing that's troublesome is that when he

talked about the attorney generals' letter, he said, and all 50

attorney generals signed it. And that is an issue that I

thought the Court had discussed and was put to bed and would

not be mentioned, but to say all 50 signed it, we have a lot of

smart people on this jury. We have people with post-grad

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degrees and so on, and -- and someone there may very well think

that one of the signators was your husband. And I just think

that, you know -- and how does that get any better? You say,

oh, my husband didn't sign that. I mean, this just makes it

worse. I was surprised to hear that. And I think it's

unfortunate, but that, in connection with the other things,

especially the 404(b)(3) and the comment on silence and the

right to silence, is a problem.

MR. BIENERT: If I can add one more, that is what

jumps out at me the most, Your Honor has acknowledged several

times, this is a specific-intent crime.

Your Honor has even said several times, when we have

raised things about our concern that they're trying to make

this general, or they're trying to make this about, quote,

prostitution in general, you flat out said in various prior

hearings, no, this isn't about just prostitution in general,

it's about whether they can prove specific intent on the 50 ads

charged.

We can't un-ring this bell. What Mr. Jones did -- I

mean, literally the entire opening was saying, these people

were repeatedly told that they, in general, had prostitution on

their site. They were repeatedly told after the fact that they

had children who had been identified as already having been

peddled, or they had women who did prostitution and were

trafficked all after the fact.

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What's amazing to me, he didn't show them one ad, not

one, that he claimed any defendant had any knowledge of before

it went out, because they don't have that evidence. And so

what he has done here that has irreparably tainted this jury

and is a clear error, is he basically said this is a general

intent crime. You just need to find out that they know

generally, because all of these do-gooders are telling them

that you -- you're hurting children, you've got prostitution,

therefore, they knew enough. And they are now supposed to, in

advance, identify each and every potential criminal as opposed

to the legal escort ads.

Number one, that's impossible to do. Number two, it

absolutely violates the law that this is specific intent.

Number three, it violates what you have said repeatedly. This

isn't about just saying they're promoting prostitution. It's

about 50 specific ads and particular business enterprises. He

did none of that.

And I haven't -- other than, frankly, telling you --

telling the jurors what I'm telling you, Your Honor, which, of

course, is saying, become a lawyer and a judge all at once,

ladies and gentlemen of the jury, which we know they can't, I

have no way of addressing this.

So, unfortunately, after all this time and effort, I'm

standing here thinking, this is all totally egregious, because

these people have been told, convict our guys, didn't identify

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a single one of them for a single one of the 50 ads, not one.

It's outrageous.

And we have been screaming, as Your Honor has said in

denying some motions we made, this is obvious. We knew all

along that your position is this is protected, it can't be

general. No, they got -- they're going to get their day in

court to show the specific counts in this indictment. It's not

what he did.

So on all the -- for all the reasons Mr. Cambria said,

and especially he has now tainted the jury with the general

intent presentation, we move for mistrial.

THE COURT: Let me ask you something though before I

hear.

With respect to that issue, so this is not argument

so --

MR. BIENERT: You know, Your Honor, I get it, but you

can't cure this by saying, ladies and gentlemen, what the

lawyers say isn't argument, you're going to hear -- and the

reason is because he literally, and very persuasive -- I'll

compliment him on a nice presentation -- the problem was it was

just -- it was deceptive, to use his word, because that's not

how the law works. And what he did was he repeatedly -- I

counted -- I think I was up to 48 times that he said child

trafficking. And after you rejected my objections, I think

five times in a row, I said, all right, I'm not getting up

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again. But we talked about this being a problem. We've all

acknowledged, although he doesn't want to, this isn't a child

trafficking case.

So you can't un-ring this bell. You can't tell these

guys, forget about this persuasive piece that Mr. Jones just

told you about all the women and children who have been hurt

because of these guys, when they never identified a single one

that anybody knew about.

THE COURT: Okay.

MR. LINCENBERG: Your Honor, I'd like to add two

points. First, you know, the emotional highlight at the

beginning and the end where we're talking about a mother and

children and their -- their quest to protect their children,

they're listed as witnesses. They're not the subjects of any

of the 50 counts in the case.

And, you know, when the Court says, well, but --

THE COURT: Is it their daughters?

MR. LINCENBERG: No, they're not the subject of any

counts. My understanding is they're not the subjects of any of

the 50 counts.

And, you know, when the Court makes the comment to

Mr. Bienert that, well, it's opening statement, you know, I

mean, in a California state civil case they would call it a

nonsuit, you know, the -- an opening statement is not

irrelevant. It's very important. This is indelibly impressed

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in the minds of jurors, and it was blatant mis -- blatant cause

for a mistrial.

The last point I want to make, and I think it's

secondary to the earlier points, so I don't want to detract

from them, but it's still important and it was still improper,

was the references to CNN. You know, it's this effort to say

-- it's this effort to throw mud that because so and so accused

you, because the state attorney general wrote you a letter, or

this organization, or CNN. You know, if -- if CNN said

President Trump should be impeached, and they started listing,

well, because he uses prostitutes like Stormy Daniels, and he

engages in tax evasion and bribery, et cetera, and if President

Trump doesn't respond to that, is that admissible evidence in

an impeachment trial that he did not respond to something? And

it -- it really, in a context of a criminal trial where we're

sitting here, it's sort of a ruse to go over the line and --

and sort of comment on this idea that defendants are not

responding to accusations.

It's a clever way to plan this idea of not responding.

It's an -- and it's impermissible. I mean, are we now left in

a situation where somebody is going to come in from CNN and we

should start cross examining them on, let's say, dozens of

stories they've done where they've accused people of things

that were incorrect in the end. Sometimes they may be correct,

sometimes incorrect. It creates this whole sideshow that's

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improper.

THE COURT: Okay. I'm sorry. You're getting far off

from the point as it relates to the opening statement. I

understand what your concern is about cross-examination, but --

MR. LINCENBERG: So forget about the crossexamination, it's --

THE COURT: Yeah.

MR. LINCENBERG: My main point is the impropriety of

using that for the reasons I stated.

THE COURT: Okay. Thank you. I have a line, a line

behind you of people.

MS. BERTRAND: Good afternoon, Your Honor.

THE COURT: Good afternoon.

MS. BERTRAND: We also move for a mistrial and note

that no one wants to do this case twice, but we have a real

problem with the government's argument. And I'm going to call

it argument, it wasn't a statement.

The reference to sexual services for money as the

working definition that the government has now told us to use,

and has told these jurors to use, is flat wrong, and has not

only now raised an issue of a mistrial, but also renews our

concern about what the grand jury was instructed in this

matter.

If the government used that same definition of sexual

services for money, which, by the by, has no basis in law, then

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that grand jury was mis-instructed. They now have told us,

just like they told us, what, two hearings ago, that's their

definition -- three hearings ago -- and it's a real problem.

Because just because things are sexual or sexy or titillating

does not constitute prostitution. Here's some examples.

I was stupid enough to incur over a hundred thousand

dollars in law school debt only to learn in this case I could

have been getting paid to have my feet rubbed. There is maid

services here in the valley that have scantily dressed or

undressed women come clean your house. Again, weird, but not

sex, not intercourse, not someone's something going into

someone's something else. That's sex, and that's prostitution.

If this government has used this outrageously

overbroad definition for prostitution, they misguided the grand

jury, they've misguided this petit jury, and we have a

mistrial.

THE COURT: I am not equating sexual services with

foot rubs. I'm not seeing your --

MS. BERTRAND: It's actually --

THE COURT: -- connection.

MS. BERTRAND: Yeah, it's actually part of the adult

services sections where women -- and there is all kinds of sex

work. There is --

THE COURT: So that's adult services.

MS. BERTRAND: Uh-huh, in a very sexual, stimulating

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way. I'll give the example of the women who come clean house

scantily clad or naked, that's not advertised with Merry Maids,

it's advertised in the adult sections and it's sexual. It

might be, for some people, very exciting.

THE COURT: Okay.

MS. BERTRAND: But it is not prostitution. And for

them to continue to use this sexual services for money

definition is misconduct and it is the basis for a mistrial.

At the least, it is a basis to review the grand jury

instructions that this government gave the grand jury.

THE COURT: Okay. Thank you.

MR. FEDER: Let's talk about a few more 404(b) issues.

I objected to the one, it was overruled. They brought

up the inter -- the international aspect of Backpage, which, of

course, has absolutely nothing to do with this case, because

some of the -- the -- even prostitution is legal, for instance,

in Holland, but they brought it up anyhow, for reasons unknown.

I don't know if they've got any evidence that they plan to

present, but it's obviously 404(b), and it's improper, and it's

another basis for a mistrial.

Similarly, they brought up the Senate Subcommittee.

Are we going to get into the Senate Subcommittee, the PSI

report? They've listed nothing that I know of from the PSI

report, but they brought it up anyhow right at the end.

Kind of a little bit going back to the fact that they

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didn't mention one of the 50 ads. They also didn't mention one

of those 50 ads having any money associated with it to justify

the money laundering charges. Why, because it doesn't fit into

the narrative that they wanted to push to this jury, which is

just to talk about general intent prostitution, and mostly

child prostitution, and child -- you know, child facilitation,

unfortunate, and a lot of stuff that's not in the evidence, a

lot of stuff that shouldn't -- that, obviously, shouldn't be a

part of this case, has never been noticed in this case, and all

to inflame this jury on issues that this Court has written and

talked about is improper.

THE COURT: Is there anybody else?

MR. CAMBRIA: Sorry, but one more thing. They never

noticed this so-called statement on the part of my client

either even though we requested them.

THE COURT: Okay. From the government.

MR. JONES: Your Honor, I don't quite know how to

respond to this.

The Court has instructed the jury, as it pertains to

opening statements, you know, they objected. You know, they

were given the government's PowerPoint a couple days before the

opening. We listed the exhibits that we were going to

reference. We did all we could to do that. They -- they stood

here for nearly an hour before the opening objecting before I

even had given it, and then now they're objecting again, Your

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Honor, about some of the same things that the Court has already

ruled on.

You know, the child sex trafficking, the Court

instructed the defendants that they wanted to -- if they felt

the government was getting out of line, they wanted to object,

they could, and -- and they did, and Your Honor sustained and

overruled some of those objections.

You know, Bruce's point that we brought up the Senate

PSI report, first of all, that's listed on our exhibit list.

Second of all, I merely mentioned that the CSI issued their

report. I didn't go into any of the details of the report. I

just said they issued their report in January 2017, and the --

and they stopped accepting ads in adult and they moved to

personals.

You know, Mr. Cambria's statement about none of the

ads are referenced in the indictment, several of the ads in my

PowerPoint are charged counts. And, again, Mr. Cambria had my

PowerPoint two -- two days ago, Your Honor. And so if he had,

you know, an issue with the ads or what they were, he could

have -- could have -- should have brought that up with myself

or the Court before post opening statements.

And, you know, I don't -- you know, even with the

notice letters, the two AG letters, Your Honor, these are

things that have already been litigated, you know, and the

Court have ruled that they were admissible to show notice, you

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know.

And, again, these defendants -- and it looks like

they're -- will attempt to do this the entire trial, Your

Honor -- but relitigate issues that we spent the last three

years litigating. And we are at trial now and the government

is allowed to give its opening statement, just like Mr. Bienert

and all these other five defendants are able to give their

opening statements, you know.

And so we feel like -- is there a specific thing out

of everything you just heard, Your Honor, you'd like the

government to address, because there is so much?

THE COURT: Yes.

MR. JONES: Okay.

THE COURT: So one is their -- what they're defining

as 404(b), and why that's not 404(b) that required notice.

MR. JONES: We charged conspiracy from 2004 to 2018,

and everything before that -- I mean, everything that

encompasses that, Your Honor, is not 404(b). You know, they've

been aware of that, of what we charged since April 2018. We

charged conspiracy that began in 2004 and in or around

April 2018.

THE COURT: So it's your position that it's intrinsic

evidence and not 404(b)?

MR. JONES: Correct. Correct, Your Honor. It's

closely related to the offense, correct. It's a part of the

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conspiracy, Your Honor.

THE COURT: The second thing is -- well, first, with

respect to the comments about children trafficking, I've

already ruled on that. And the government didn't cross the

line on that issue, in my mind, because they didn't go into any

of the details. It was merely the fact that this happened.

The next thing I want a response from you about is the

comment about the attorney generals, because their concern is

-- well, I'm sure they have concerns about the content of the

letter -- but their concern is that you've now associated that

somehow with my husband.

MR. JONES: Your Honor, we'll show both of those

letters, the 2010 and the 2011 AG letter. They'll come in as

part of our trial through witnesses. And so the jury will know

who the Arizona Attorney General was during the time those

letters were sent, so it will address that concern. Each

attorney general that signed that letter, they'll be shown

that.

THE COURT: Let's see, and then the next one is their

argument that you have now commented on the defendants' right

to remain silent when you said these defendants can't deny.

MR. JONES: That was a reference to they can't deny

the undeniable. We'll have a witness to come in who has

firsthand knowledge of that, and that's what a Backpage

representative told her, and that was my reference to that.

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And she'll testify at trial, Your Honor.

THE COURT: And refresh my memory on who that was.

MR. JONES: Professor Paula Selis.

THE COURT: And with respect to your definition of

prostitution, which, honestly, I don't recall you saying that

this is the legal definition, that you phrased it in a general

sense, but -- so I'd have to look back at that -- but what is

your response to their argument that you have -- well, they

actually accused you of misconduct by doing that.

MR. JONES: Again, I mean, the judge will instruct the

jury on -- on the law in this case, Your Honor. And, you know,

my reference to, you know, prostitution is sex for money, I

don't see how that in any way -- I didn't mention any type --

that it was a legal definition. It was just part of my opening

statements. And if they want to rebut that, they could do so,

you know, during trial, but that is certainly not misconduct on

the government's part for -- for making that statement.

THE COURT: Okay. And then the last thing is from

Mr. Cambria who says that you never provided notice of the

statement his client made.

MR. RAPP: I'm happy to respond to that.

Well, first of all, there will be a lot of

statements --

THE COURT: I can't hear you.

MR. RAPP: Just as a general proposition, there will

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be a lot of statements from these defendants that will come

from witnesses that they don't necessarily have notice of, and

I don't know what our obligation is. But we do have an

obligation if they gave a statement in response to

interrogation, but that's not the case here.

They did get the report from the 302 from -- that is

an interview of Nacole Svengard where she relates to running

into Mr. Lacey at the Senate Subcommittee and making that --

him making that statement to her.

THE COURT: So that statement is in the 302?

MR. RAPP: The statement is in the 302, yes. And I'll

tell you what we'll do, we'll be happy to send that to

Mr. Cambria this weekend so he can have that, if he hasn't

looked at it in discovery.

THE COURT: Okay.

MR. CAMBRIA: May I?

THE COURT: Yes.

MR. CAMBRIA: As to the last issue, they're obligated

to give us notice when we ask for it, we did and they didn't.

As to the 404(b), he never answered --

THE COURT: Wait. He just said he gave it to you in

the 302.

MR. CAMBRIA: No. He said it's in the 302, but no

indication that it was something they planned to use. That's

what we asked.

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The other situation, the 404(b) --

THE COURT: Okay. What rule says that they have to do

that?

MR. CAMBRIA: It's 16, Your Honor.

MS. BERNSTEIN: It's Rule 16(b)(1), Your Honor.

THE COURT: Go ahead.

MR. CAMBRIA: Yes. On the 404(b), his response is

that's part of the conspiracy. It doesn't matter what it's

part of. Subdivision 3 requires advance notice so that we can

deal with it. And there was no such advance notice. And the

way he presented it to everyone was in like: Each one of these

is a violation too. So that's exactly what 404(b) is all

about. So now he's showed all those pictures to them,

basically telling them that these are all -- you know, more

violations, and that's a classic violation of 404(b), classic

violation. And he didn't give us notice.

If we didn't give him notice, I'm sure we'd be hearing

about it. He did not give us notice. And his response is, oh,

it's part of the charge. Still, we're required to get notice.

MS. BERNSTEIN: And, Your Honor, I've just been

feeling left out, so I'd like to pile on, if I can.

THE COURT: Okay.

MS. BERNSTEIN: The first thing I would add to the

record is that I believe Mr. Jones's response to the -- to the

burden shifting in his opening statement by saying that we will

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not be able to deny that we intentionally facilitated

prostitution, that was never a comment that was made to

Ms. Selis. The comment that was made to Ms. Selis was by a

representative of Backpage who said, we can't deny the

undeniable. I don't even know if that's true, but that's what

the allegation has been.

We did extensive pretrial litigation with Your Honor

when the government filed this motion to admit every statement

under the sun by every person under the sun who ever heard from

any of these people sitting here. And we told Your Honor at

that point that this was not contemplated by the rules of

evidence, that it was prejudicial, that it was -- violated 401,

violated 403. And Your Honor's ruling on that motion was to

say that you would not pretrial admit any of that, you would

wait until trial until it came out.

Mr. Jones manipulated the statement that he is going

to elicit from Ms. Selis, or that someone is going to elicit

from Ms. Selis. She did not say -- no one ever said to her

that our clients intentionally facilitated prostitution and

they cannot deny that. It is extreme dangerous burden

shifting.

THE COURT: Okay.

MS. BERNSTEIN: My second point -- if I can put this

up on the Elmo. I'm curious. This was one of Mr. Jones's

slides, adult versus non-adult. And I want to know if

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everything in the adult section, if he contends and believes

that to be prostitution, because I don't even think that's the

government's contention.

And, finally, while Your Honor was running through

things with Mr. Jones, his entire 200-minute presentation was

inverting the standard here, was making this a general intent

crime in direct and stark contrast to your rulings when you've

denied every motion we have brought on the topic. So I don't

know what the government's response is to that either, but I

did want to bring that back up.

Thank you.

THE COURT: Well, okay. Ms. Bertrand is standing

behind you.

MS. BERTRAND: The government's response to us saying

they continue to mis-define what is prostitution under any

jurisdiction, not to mention the independent jurisdictions in

which each of these ads was placed, was to say just give the

jury an instruction. So they -- that, to me, is a concession

that they misstated the law, they misrepresented it to this

petit jury. And based on the government's statements in this

case over the summer, where, when challenged on this issue

before, said prostitution is sex for money, without defining

sex, without defining services, and that is a fundamental

misrepresentation of the law. They can't take it back.

THE COURT: Except that this is a general opening

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statement. If he had said this in closing arguments, this is

the definition of prostitution, and this is how we proved that

there was sexual services and for money, that would be an

issue, but to incorporate into a relatively short statement for

all of the evidence that they expect based on what they showed,

I don't see how it's a misrepresentation.

MS. BERTRAND: It's a flat out misrepresentation of

what the law is. And, more importantly, it is consistent with

what the defense says likely was told to the grand jury as an

instruction for what is prostitution. The government

ferociously defended that request to either show us -- show us

what you told the grand jury this is.

THE COURT: Okay. So, counsel, how long do you think

your opening is?

MR. BIENERT: I really don't time them out, but I've

got to think it's an hour-and-a-half.

THE COURT: All right. So we're going to recess.

What?

MR. BIENERT: Well, we're in a Hobson's choice here,

Your Honor, because obviously we feel strongly about this, but

as bad as it is now, if these jurors go home and percolate,

Saturday, Sunday, Monday, Tuesday, for five days after this

grossly inappropriate opening that basically mischaracterized

the law --

THE COURT: Well, so I can -- we can start now if you

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want, I just didn't think you would want to be interrupted.

MR. BIENERT: I'll be honest, I don't know the

standard. I mean, the truth is, this should be a mistrial and

we should get that.

THE COURT: Well, these are serious allegations, so

there is a couple things I want to look at before I rule on it.

MR. BIENERT: Okay. But may I do this, I was -- can I

have five minutes to confer with everyone about whether, with

our mistrial in place, I don't want to have this be some

waiver --

THE COURT: No, no.

MR. BIENERT: -- do I go ahead and just spend the last

hour, so at least I've gotten something out, to try to talk

about this or not.

THE COURT: Sure. Take five minutes.

MR. BIENERT: And I do want to just say this, because

when you were questioning Mr. Jones, you, as always, very

organized, but you never asked him at all about what, in my

mind, is the biggest problem, mainly what he repeatedly said,

which is that the reason our clients had knowledge and notice

and are guilty is because of people anecdotally telling them

these things are happening. And he never ever, not once, said,

and here's a specific count where we're going to show you that

one or some combination or all of these defendants knew it was

an illegal prostitution ad before it was published.

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And, you know, obviously, we've had our disagreements

on the law with Your Honor, but the one area where we go home

-- and we got our heads down because we think -- we think she's

got the law wrong, she's seeing it different than us -- but the

one area we've always said to each other, but she recognizes

that they have to prove the 50 counts. You've said that at

least twice in transcripts that we have.

And what he just -- he didn't do any of that. And so,

to me, in the many problems here, the single biggest issue is

he told this jury, you can and should find them guilty because,

in general, bad things happen to some people who are on

Backpage. But he never said, and I'm going to show you that

they had specific knowledge and intent of this ad right here,

it's count 22 in the indictment, and they purposefully let it

be published so they could help this prostitute's business

venture. That's what you have said the case should be.

And, frankly, while we've been skeptical, because

every word that has come out of Mr. Rapp's mouth, Mr. Jones's

mouth, and the reason we've been so fighting over it -- and in

fairness to you, you don't hear all the evidence or see it like

we do -- what we're seeing over and over again is these guys

aren't planning on proving individual counts. They're just

going to go in and say, the Senate said this is bad, a church

group said this is bad, a bunch of AGs said this is bad.

You know what's interesting, Your Honor, one of the

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greatest tells of all, which -- at least for me -- when he

talked about the 50 attorney generals -- attorneys general, he

literally used the word, they urged Backpage to stop.

Attorneys general don't urge, they -- they enforce the law.

The reason they urged is every single law enforcement person

with authority to charge, or every judge who has ever seen this

case until now right here in this court, has recognized that

you can't convict these guys just because you hear anecdotally

that bad things are happening.

THE COURT: Okay.

MR. BIENERT: And that's what he told them, he's

saying you can. And the jury has heard it. They can't un-ring

that. And it's just fundamentally wrong.

The indictment is wrong. It's just an invalid

indictment. We shouldn't even be here. But more -- well, I'm

not going to say more importantly -- equally importantly, what

he just said is just grossly wrong under the law. And he never

even addressed it and you didn't ask about it.

So I'm confused by what you're saying the standard is,

because, in my mind, what he is trying to do here is

inconsistent with what even you've said the standard is on

multiple times. And I would be curious to see how he tells us

he's demonstrated that this isn't a general intent crime.

THE COURT: Does he have to demonstrate that in

opening statements?

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MR. BIENERT: Absolutely, that's the legal standard.

As it is, you know, Your Honor, we're sitting here

with our hands tied behind our back because you haven't given a

First Amendment instruction. That's your call, we think it's

clear error, but we already have that.

But now in addition to that, we've got a bunch of

people told, you know, if a bunch of people who are anti --

I'll call it adult sex or any kind of sex -- tell you stop, and

you don't, you get hauled into court.

You know, it's funny, I thought Mr. Lincenberg's thing

about Trump was such a great analogy, because, the truth is,

since he's such a lightning rod, if the standard for whether

Mr. Trump could or couldn't be prosecuted was based on what CNN

or the paper or people are saying he did that's illegal, the

guy would have been prosecuted ten times over, but it's not the

standard. But that's what they're making the standard here.

In other words, this whole case -- they're bringing in CNN.

How many trials do -- I have been doing this 35 years --

THE COURT: Okay. Can I hear Mr. Jones respond --

MR. BIENERT: Sure.

THE COURT: -- to that.

MR. JONES: One thing Mr. Bienert failed to mention,

Your Honor, the first 40 or 45 minutes of my opening statement

talked about how these defendants were engaging in content

aggregation by creating prostitution ads on Backpage, how they

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have -- how they're intentionally facilitating prostitution by

business arrangements with prostitution review sites like The

Erotic Review.

The government also talked extensively about the super

posters, how defendants were intentionally promoting the

prostitution businesses of super posters as well. I mean, he

mentions none of that when he talks about this general intent,

Your Honor. You know, that -- those are instances of these

defendants specifically intending to promote prostitution

through running Backpage. And that was the first 40 or

45 minutes of my opening statement.

Moderation as well. We went through that, so --

MR. BIENERT: And I'll just say, Your Honor, that

violates your, this isn't about general prostitution, ruling.

THE COURT: Yeah.

MR. BIENERT: That's exactly what he just described.

It's got to -- it's got to be he's going to prove that my

client specifically intended to help prostitute Sally Smith and

the Smith Prostitution business, and he knew that she was

advertising and he said, all right, I'm going to help you out.

That's what he has to do. He hasn't even tried to do that and

he's polluted the jury against us.

THE COURT: Okay. So take a few minutes, because I

need to know if you want to do your opening or not.

MR. EISENBERG: Your Honor, excuse me, I haven't had a

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chance to speak. I don't mean to be hiding.

I join my colleagues in the motion to dismiss the

indictment, but I will add one thing that I don't think we've

really considered, and that is whether the government has

waived its right to go forward by not expressing the connection

between what it seeks to prove in all of the counts that have

been charged in this case, because, as we have said, there is

no connection between what Mr. Jones has said and any of those

counts, so therefore they have waived their right to go

forward.

THE COURT: Well, what do you mean by they've waived

the right to go forward?

MR. EISENBERG: They have an obligation in their

opening statement to relate the government's evidence to the

charges. And those -- there are some 52 substantive charges

here. That's not just an idle comment.

I don't have the legal research on it, but my

understanding of what an opening statement is designed to do is

to link the charges through the evidence that the government

seeks to present to the jury.

THE COURT: Okay. But what do you mean by they waive

the right?

MR. EISENBERG: Well, if they haven't done it in their

opening, then they can't go forward, therefore, the case --

THE COURT: Ever?

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MR. EISENBERG: Yes, Your Honor.

THE COURT: Or it's cause for a mistrial?

MR. EISENBERG: I'm sorry, mistrial.

THE COURT: Okay. Thank you.

MR. BIENERT: Your Honor, I think what we think should

happen is we would ask that we get an expedited transcript. We

would want to review the transcript and file a written motion.

THE COURT: So we -- your request is that you not

start your opening?

MR. BIENERT: Correct.

THE COURT: Okay. Also, in addition to the

transcript, I want from the government the information about

this statement about, we can't deny the undeniable, whatever

you disclosed to the defense, I guess you can provide it.

You can provide it.

And I want that tonight so. As well as since I'm

getting information, the 302 from the -- the woman, the mother

that heard the statement from Mr. Lacey, and if you can tell me

when it was disclosed to them.

MR. CAMBRIA: Could I comment on that, Judge?

Remember we have somewhere around 11 million documents that

were disclosed to us. And to say that they discharged their

duty under Rule 16 by now saying, oh, it was one of those 11

million documents, I don't think cuts it.

THE COURT: Okay.

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MR. CAMBRIA: The other thing is I think what

Mr. Eisenberg was talking about is that there are cases that

say that if a prima facie case was not made out in the opening,

the charge could be dismissed. And they, at no time, talked

about the 50 ads that you said in your decision are the ones

that they have to show specific knowledge of, and that they

then furthered a business enterprise with.

THE COURT: Okay. So the two things I asked for was

the statement from the professor and the statement from the

mother, and then I'll order the transcript, an expedited

transcript.

And we're coming back on Wednesday, right, because

Monday is a holiday, Tuesday is a holiday, Wednesday. So if

you're going to --

Let me ask you this, because I don't know, from your

perspective, when you electronically file something, can you do

that on a holiday?

MR. STONE: Yes.

THE COURT: Okay. So if you're going to file

something, I need it on Monday so I can -- I mean, I'll start

looking at the issues. I know what the issues are. The

government knows what the issues are.

MR. BIENERT: And, obviously, because -- I will say

this. I assume -- I mean, we've been pretty good here, we've

got pretty lengthy statements. I'm assuming that because we're

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doing it quickly, I don't think we have to necessarily restate

every single thing we've said. I assume Your Honor will have

the transcript and incorporate a lot of that. It will allow us

to do a shorter --

THE COURT: Yes.

MR. BIENERT: -- brief, to get kind of the down and

dirty to you.

THE COURT: Yes. I'll have the transcript. I assume

you'll have the transcript.

MR. BIENERT: Yes, Your Honor.

THE COURT: Okay. I'm just going to have Elaine tell

the jury that we're recessing.

And, Elaine, they have the calendar that says we're

coming back on Tuesday, so make sure they know.

COURTROOM DEPUTY: They asked me about getting a copy.

Can I just print them a new copy or --

(An off-the-record discussion was held between the

Court and the courtroom deputy.)

THE COURT: We're at recess. Because my office is

upstairs, I'm doing some work with Elaine here, so feel free to

get up.

(Proceedings concluded at 4:10 p.m.)

* * *

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86

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 4th day of September,

2021.

/s/ Christine M. Coaly_______

Christine M. Coaly, RMR, CRR

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