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United States District Court

2:18-cr-00422-DJH, September 12, 2023 (Ferrer excerpt)

 UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

_______________ 

United States of America, )

 )

 Plaintiff, )

vs. )

 ) 2:18-cr-00422-DJH 

Michael Lacey, et al., )

 ) 

 Defendants. )

 ) September 12, 2023 

 ) 

__________________________________ )

BEFORE: THE HONORABLE DIANE J. HUMETEWA, JUDGE

REPORTER'S EXCERPTED TRANSCRIPT OF PROCEEDINGS

(Testimony of CARL FERRER) 

Official Court Reporter: 

Elaine Cropper, RDR, CRR, CCP

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

401 West Washington Street, SPC 35 

Phoenix, Arizona 85003-2151 

elaine_cropper@azd.uscourts.gov 

Proceedings Reported by Stenographic Court Reporter

Transcript Prepared by Computer-Aided Transcription

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Case 2:18-cr-00422-DJH Document 1786 Filed 09/13/23 Page 1 of 99
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United States District Court

2:18-cr-00422-DJH, September 12, 2023 (Ferrer excerpt)

I N D E X

TESTIMONY

WITNESS Direct Cross Redirect Recross 

Government's Witnesses 

CARL FERRER 5

E X H I B I T S

Number Ident Rec'd 

1056 Email from Ferrer to Spear, “Backpage 86 87

work plan”, 11/21/2005 

1056a Attachment, “Backpage Work Plan”, 88 89

1057 Emails form Spear and Ferrer, “adult 91 92

changes”, 05/08/2006, 

2030 Demonstrative Exhibit Illustrating 27 28

Backpage Aggregation Process, 

2031 Demonstrative Exhibit Illustrating 33 34

Backpage Reciprocal Link Program 

Process, 

RECESSES

 Page Line 

(Recess at 2:30; resumed at 2:51.) 37 16

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United States District Court

2:18-cr-00422-DJH, September 12, 2023 (Ferrer excerpt)

A P P E A R A N C E S 

For the Government: 

 KEVIN M. RAPP, ESQ.

PETER S. KOZINETS, ESQ.

ANDREW C. STONE, ESQ.

MARGARET WU PERLMETER, ESQ.

 U.S. Attorney's Office

 40 N, Central Ave., Ste. 1800 

 Phoenix, AZ 85004-4408 

 kevin.rapp@usdoj.gov 

peter.kozinets@usdoj.gov 

andrew.stone@usdoj.gov 

margaret.perlmeter@usdoj.gov 

AUSTIN M. BERRY, ESQ.

U.S. Department of Justice 

Child Exploitation and Obscenity Section 

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

Washington, D.C. 20005 

austin.berry2@usdoj.gov 

For the Defendant Michael Lacey: 

 PAUL J. CAMBRIA, JR., ESQ.

 Lipsitz Green Scime Cambria, L.L.P.

 42 Delaware Ave., Ste. 120

 Buffdalo, NY 14202

 pcambria@lglaw.com

 

For the Defendant Scott Spear: 

 BRUCE S. FEDER, ESQ.

 Feder Law Office, P.A.

 2390 E. Camelback Road, Ste. 160

 Phoenix, AZ 85016

 bf@federlawpa.com

 ERIC W. KESSLER, ESQ.

 Kessler Law Office

 6720 N. Scottsdale Rd., Ste. 210 

 Scottsdale, AZ 85253 

eric.kesslerlaw@gmail.com 

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2:18-cr-00422-DJH, September 12, 2023 (Ferrer excerpt)

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

For the Defendant John Brunst: 

 GOPI K. PANCHAPAKESAN, ESQ.

 Bird Marella Boxer Wolpert Nessim Drooks 

Lincenberg & Rhow, P.C.

 1875 Century Park E. Ste. 2300

 Los Angeles, CA 90067

 gpanchapakesan@birdmarella.com

For the Defendant Andrew Padilla: 

 DAVID S. EISENBERG, ESQ.

 David Eisenberg, P.C.

 3550 N. Central Ave., Ste. 1155

 Phoenix, AZ 85012

david@deisenbergplc.com 

For the Defendant Joye Vaught: 

 JOY MALBY BERTRAND, ESQ.

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

 P.O. Box 2734

 Scottsdale, AZ 85252-2734

 joy@joybertrandlaw.com 

 

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United States District Court

CARL FERRER - Direct

P R O C E E D I N G 

(The following excerpt was separately transcribed.)

MR. RAPP: The United States calls Carl Ferrer.

THE COURT: Sir, please come forward here and be

sworn.

COURTROOM DEPUTY: Please raise your right hand.

(CARL FERRER, a witness herein, was duly sworn or

affirmed.)

COURTROOM DEPUTY: If you could please state and

spell your last name for the record.

THE WITNESS: I do. And Ferrer -- oh, first and last

name?

COURTROOM DEPUTY: Spell the last name.

THE WITNESS: Ferrer. F-E-R-R-E-R.

COURTROOM DEPUTY: Please proceed to the witness

stand. There's water there and please use the microphone.

THE WITNESS: Thank you.

MR. RAPP: Thank you, Your Honor.

DIRECT EXAMINATION

BY MR. RAPP: 

Q. Sir, could you state your full name and spell your last

name for the record, please.

A. Carl Allen Ferrer. My last name is F-E-R-R-E-R.

Q. Sir, what was your employment from 2004 to 2018?

A. From 2004 through 2018, I was the project manager at 01:34:38

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CARL FERRER - Direct

Backpage.com.

Q. When was the website Backpage.com created?

A. We started building the site in 2003 and in 2004 we

launched in Phoenix, Arizona.

Q. What type of website was Backpage.com?

A. Backpage.com was a clone of Craigslist.

Q. What type of -- when you say it was a clone of Craigslist,

what did the website offer?

A. So it had want ads, we called them classified ads, for a

variety of sections and categories but the category that -- the

section that seemed to do the best was Adult.

Q. All right. And did you charge to post ads on

Backpage.com?

A. We did. We always charged -- almost always charged for

ads in the Adult section.

Q. Were there categories within the Adult section on

Backpage.com?

A. There were. Those categories are Female Escorts, Male

Escorts, Transsexual Escorts, Body Rubs, Adult Jobs, Phone and

Web.

Q. During your employment from Backpage.com from 2004 to

2018, did you come to learn which category within the Adult

section generated the most revenue?

A. The vast majority of revenue is generated in Female

Escorts. 01:36:42

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CARL FERRER - Direct

Q. Was Backpage.com, did it have a site or a market here in

Phoenix, Arizona?

A. Yes. It was our first market.

Q. How many markets was Backpage.com, how many markets did it

exist in by the time -- by 2018?

A. It was in hundreds of markets.

Q. In the Female Escort section of Backpage.com, can you

describe the ads from about 2004 to 2009?

A. I'm sorry. In 2004 through 2009?

Q. Yes. Can you describe the nature of the ads that were

posted in the Female Escort section between that time period?

A. They are prostitution ads.

Q. When you say they were prostitution ads, sir, what do you

base that on?

A. A number of factors. They were numerous sex act pics,

there were numerous sex act terms. We had a relationship with

The Erotic Review and many of the ads had review IDs going to a

prostitution review site.

Q. All right. Let me just stop you there just so we

understand what The Erotic Review is. We'll ask you some more

questions about this later. Can you describe for the jury what

The Erotic Review was?

A. The Erotic Review is a Yelp for prostitution. Much in the

same way that clients in a restaurant will post reviews, Johns

who frequent prostitutes will post reviews in The Erotic Review 01:38:51

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CARL FERRER - Direct

and it was the largest review site certainly in the U.S. if not

the world.

Q. Who was the user of the Female Escort category on

Backpage.com? Who would -- who did you come to learn would

actually view the postings?

A. Johns, those people who frequented prostitutes.

Q. Sir, do you know an individual by the name of Michael

Lacey?

A. I do.

Q. How is it that you know Michael Lacey?

A. He was one of the company's owners.

Q. When you say "the company," what company are we referring

to?

A. It was New Times. It later changed its name to Village

Voice Media.

Q. And what, if any, was Mr. Lacey's role at the New Times/

Village Voice Media?

A. Well, he was one of the owners and early on, he was --

well, I understood he was involved in the editorial side of the

company and his other partner, Jim Larkin, ran more of the

sales and marketing.

Q. From 2004 to 2018 did you interact with Mr. Lacey?

A. Yes, I did.

Q. Did you exchange emails with him?

A. Yes. 01:40:26

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CARL FERRER - Direct

Q. Did you have meetings with him?

A. Yes.

Q. Did you attend meetings outside of Backpage with him?

A. Yes.

Q. Do you know where Mr. Lacey resides, not his address but

city he resides in?

A. Phoenix, Arizona.

Q. And how do you know that, sir?

A. I saw all the owners sort of lived in Paradise Valley or

somewhere near there.

Q. Is that based on from 2004 to 2018 your interaction with

some of these individuals?

A. Yes.

Q. Is Mr. Lacey seated in the courtroom today?

A. Yes, he is.

Q. Could you please point to him and identify an article of

clothing he's wearing?

A. Yeah. He's directly behind you. He has a gray suit,

white shirt.

Q. Is he wearing a tie?

A. Yes. Cowboy tie.

Q. Is that sometimes known as a Bolo tie?

A. Bolo tie, yes.

Q. Is he wearing glasses?

A. Yes, black glasses. 01:41:39

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CARL FERRER - Direct

MR. RAPP: May the record reflect an identification

of the defendant Michael Lacey?

THE COURT: It may so reflect.

BY MR. RAPP: 

Q. Sir, do you know an individual by the name of Scott Spear?

A. Yes, I do.

Q. How, sir, do you know Scott Spear?

A. Scott Spear was my supervisor for many years.

Q. Did you interact with Mr. Spear?

A. Mr. Spear and I, we worked on Backpage together very

closely and I -- we were joined at the hip.

Q. All right. Is that to suggest that you met with him on a

daily or weekly basis?

A. Often three times a day.

Q. Did you exchange emails with him?

A. Yes, I did.

Q. And what was his role at Backpage.com?

A. He was my immediate supervisor so Scott set the budgets,

worked on strategy, helped expand it into other markets and

signed off of contracts with vendors.

Q. All right. Is Mr. Spear seated in the courtroom today?

A. Yes.

Q. Could you please point to him and describe an article of

clothing he's wearing?

MR. FEDER: We'll stipulate that this is Mr. Spear. 01:43:20

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CARL FERRER - Direct

THE COURT: I'm sorry. Mr. Feder, did you say

something?

MR. FEDER: We'll stipulate that this is Mr. Spear.

BY MR. RAPP: 

Q. Is Mr. Spear wearing a mask?

A. Yes, he is.

MR. RAPP: May the record reflect an identification

of Mr. Spear?

THE COURT: It may so reflect.

BY MR. RAPP: 

Q. Do you know an individual by the name of John Jed Brunst?

A. Yes, I do.

Q. How do you know him?

A. Well, I knew him as Jed and Jed was the CFO of the

company.

Q. All right. And when you say he was the CFO of the

company, are we talking about Backpage.com?

A. He was the CFO of the entire company but he approved and

helped with the budget for Backpage.com.

Q. How do you know that?

A. Because we had numerous budget meetings and budget

preparations with Jed present along with Jim Larkin.

Q. All right. Let me just back up to Mr. Spear just so the

record is clear here. Did you come to learn at some point that

Mr. Spear had some type of an ownership interest in 01:44:24

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CARL FERRER - Direct

Backpage.com?

A. Yes.

Q. And similarly with Mr. Brunst, did he have an ownership

interest that you knew of in Backpage.com?

A. Yes, I knew he was also an owner.

Q. Is Mr. Brunst seated in the courtroom today?

A. Yes, he is.

Q. Could you please identify him and describe an article of

clothing he's wearing?

A. He's in the far corner over there with a blue suit, blue

striped tie, light blue shirt.

Q. Is he wearing glasses, can you tell?

A. Yes. He's also wearing glasses.

MR. RAPP: May the record reflect an identification

of defendant Jed Brunst?

THE COURT: It may.

BY MR. RAPP: 

Q. Do you know an individual by the name of Andrew Padilla?

A. Yes, I do.

Q. How is it that you know him?

A. Andrew Padilla was the supervisor of the Moderation

Department.

Q. All right. Do you know approximately -- and this is at

Backpage.com?

A. Yes. 01:45:34

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CARL FERRER - Direct

Q. Do you know approximately when he started with the

company?

A. I believe sometime 2006, 2007 he started. I would say at

least 2006.

Q. And when you say he was an operations manager of

moderation, what did that involve?

A. Well, he started with the company as a moderator and then

he stood out as the manager, so he was able to hire additional

moderators and give them direction and supervision.

Q. And who did he answer to?

A. Well, he answered to me.

Q. And during the time period that he worked at Backpage.com

did you exchange emails with him?

A. Yes, we did, frequently. 

Q. Did you have meetings with him?

A. Yes.

Q. Is he seated in the courtroom today?

A. Yes, he's in the front row, light blue shirt, dark suit,

also wearing glasses.

MR. RAPP: May the record reflect the identification

of the defendant Andrew Padilla?

THE COURT: It may.

BY MR. RAPP: 

Q. Do you know an individual by the name of Joye Vaught?

A. Yes, I do. 01:46:53

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CARL FERRER - Direct

Q. How is it that you know Ms. Vaught?

A. Joye Vaught started with the company as a moderator and

then was promoted to a supervisor and reported directly to

Andrew Padilla.

Q. All right. Did you have in-person meetings with

Ms. Vaught?

A. Not very often. I mean, some, yes.

Q. All right. Did you exchange emails with her?

A. Some, yes.

Q. All right. Is she seated in the courtroom today?

A. Yes, she is.

Q. Can you please point to her and identify an article of

clothing she's wearing?

A. She's on the second row, blonde hair, also wearing glasses

and a dark jacket.

Q. Can you describe her shirt?

THE WITNESS: Your Honor, may I did stand?

THE COURT: You may.

THE WITNESS: A black and white striped shirt.

MR. RAPP: All right. May the record reflect an

identification of defendant Joye Vaught?

THE COURT: It may.

BY MR. RAPP: 

Q. I want to ask you about another individual. Do you know

an individual named Dan Hyer? 01:48:07

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CARL FERRER - Direct

A. Yes.

Q. And how is it that you know Mr. Hyer?

A. Dan Hyer worked for Backpage.com as a sales and marketing

director.

Q. How long have you known him?

A. I've known Dan Hyer since I hired him when I was managing

a print publication department, the Inside Sales Department. I

hired Dan Hyer then and later we promoted him to help market

Backpage.com.

Q. And do you know an individual by the name of Jim Larkin?

A. Yes, I do.

Q. Did you know him during the time period that you worked

for Backpage.com?

A. Yes. We worked closely together.

Q. All right. And in what capacity did Mr. Larkin work in

Backpage.com?

A. Mr. Larkin was the CEO of the company. He was Scott

Spear's direct supervisor, but I often would work with both

Spear and Larkin on numerous activities around Backpage.com.

Q. All right. Now, I believe that you have testified that

your title at the inception of Backpage.com was that of a

project manager. Is that correct?

A. Yes. It started as a project manager, yes.

Q. All right. Did that title and your role change from 2004

to 2018? 01:49:48

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CARL FERRER - Direct

A. The role didn't change. The titles did change.

Q. All right. Can you tell the jury what titles you held

with Backpage.com?

A. I started as a project manager and then became sales and

marketing of Backpage and then went to VP of Backpage,

president of Backpage, and then CEO of Backpage.

Q. All right. And when you say your role, despite the change

in titles, didn't change, what basically was your role from

2004 to 2018?

A. My role for 2004 to 2018 was to run the site and to hit

budget and the budgets came down from Scott Spear, Jim Larkin,

Jed Brunst.

Q. All right. Where was Backpage based? Where was it

officed?

A. So it started in Phoenix, Arizona, and then later we added

a Marketing Division in Dallas.

Q. When you say it was based in Phoenix, Arizona, where in

the Phoenix metropolitan area was Backpage based?

A. It was located at 1201 Jefferson.

Q. All right. And, sir, did you report there? Is that where

you worked out of?

A. Yes. Yes.

Q. And the individuals that you have identified in court,

where did they work?

A. They worked in the -- well, they worked at the same 01:51:39

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CARL FERRER - Direct

location.

Q. All right. Did there come a time where that location

changed?

A. Yes.

Q. When did that happen?

A. Around 2012 we vacated the -- that location on Jefferson

Street. Phoenix employees started to work from home and more

of Backpage's operational control was in Dallas, Texas.

Q. All right. And did, for example, Mr. Lacey move to

Dallas?

A. No.

Q. Did Mr. Spear move to Dallas?

A. No.

Q. Did Mr. Brunst move to Dallas?

A. No, they did not.

Q. Did those three individuals stay here to operate

Backpage.com?

A. They did stay here. I would have to come meet them here

often.

Q. All right. Did you relocate to Dallas?

A. Yes.

Q. How about Mr. Padilla, did he remain here?

A. Mr. Padilla, he relocated to Dallas along with Joye

Vaught.

Q. All right. Now, as a website, did you have things known 01:53:01

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CARL FERRER - Direct

as servers?

A. Yes.

Q. And can you explain to the jury what a server is?

A. A server is a computer storing data. So we had numerous

computers because Backpage had a lot of data.

Q. Can you explain -- when you say it had a lot of data, what

do you mean by that?

A. It had the text of the ads and the images along with the

software to run the site.

Q. And I believe a few moments ago in your testimony you said

that Backpage had a presence in other cities other than

Phoenix?

A. Yes.

Q. And would there be ads posted in each one of those markets

or cities?

A. I'm not sure I understand the question.

Q. Would people post ads in a given city?

A. Yes, they would go online to post ads in a given city.

Q. All right. And approximately at Backpage, between 2004

and 2018, can you estimate how many postings there were on any

given day in certain city?

A. Well, tens of thousands of postings in some markets but

certainly thousands of postings per day.

Q. All right. And is it those postings that would be

somewhere retained or would find themselves to these servers 01:54:48

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CARL FERRER - Direct

that you just described?

A. Yes.

Q. And the post -- I believe your testimony was the postings

made up of images and texts?

A. That's right, the texts of the ads and the images of the

ads, later video.

Q. And where were the servers that maintained those -- that

data as you say, where were those servers located?

A. So we had multiple server locations but the vast majority

of time they were in Tucson, Arizona at a data center called

Login. That's also where our backups were stored.

Q. And were those -- did you have servers anywhere else?

A. We did. We also had servers at a Phoenix location called

PNAP, and we had servers in Dallas, Texas, holding data. And,

finally we had servers in Amsterdam, the Netherlands.

Q. Okay. Now, I believe your testimony was that in the

female escort category, people would pay to post an ad or at

least that was one of the few categories where you would

actually pay to post an ad. Is that fair?

A. Yes.

MS. BERTRAND: Objection. Leading.

THE COURT: Overruled.

BY MR. RAPP: 

Q. So when somebody would post an ad and pay for it, how

would Backpage get paid? Can you explain that to the jury? 01:56:45

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A. Yes. The process is someone is online. They put in their

ad text, their images, some personally identifiable information

like an email address. They hit "submit" and then a credit

card form would pop up onto the screen. There they can enter

their credit card number, their address, their name, CVV, which

is like a security code.

Q. That little three-digit code on the back of your credit

card?

A. Yes. Then they hit "submit" and if the credit card works,

then the ad will be stored on Backpage's server.

Q. All right. And then how is it that them using the credit

card, how is it that ultimately the charge on the credit card

ends up back at Backpage.com?

A. Yes. So now that the transaction has been captured by

what we call a credit card processor, they will gather the

money and then periodically send it to -- to Backpage.com's

bank accounts, so it's usually once every two weeks or once a

month.

Q. Okay. So can you explain the difference to the jury

between a merchant bank and a treasury bank?

A. So when you secure credit card processing for any commerce

site, we call that merchant banking, trying to find a processor

who will use a bank in order for you to take MasterCard and

VISA.

Q. All right. Let me stop you there for the merchant 01:58:50

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banking. For a website like Backpage.com, is the merchant

banking, is that an important part of the business model?

A. Without merchant banking, you're dead. I mean, just about

everyone wants to pay with a credit card. It's very difficult

to conduct e-commerce without a merchant bank account.

Q. And did you just say e-commerce?

A. Yes.

Q. And e-commerce, what does that mean?

A. It means buying stuff online.

Q. All right. And then what is the import of treasury

banking for Backpage.com? What's treasury banking?

A. A treasury bank is where you make your payroll, pay your

bills. It's also the bank where the merchant bank will deposit

the funds that they have collected from Backpage users. They

will deposit it into a treasury bank.

Q. All right. Can you tell the jury what treasury banks, if

any, Backpage had at its very start and going forward?

A. I recall -- well, for treasury banks, I know that they had

BMO, the company had --

Q. Is there a BMO branch that was used by Backpage here in

the Phoenix area?

A. Yes. I believe they also had U.S. Bank. They certainly

had U.S. Bank for a merchant bank but I'm not sure if it was a

treasury bank, too.

Q. All right. But for the merchant bank, the processing part 02:00:40

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of it?

A. We initially used U.S. Bank.

Q. And was there a particular company that processed the

Backpage transactions?

A. I became more deeply involved in the transactions when we

used Litle. It's like little but only with one T, so

L-I-T-L-E.

Q. And just so the jury understands, what was Litle?

A. Litle a credit card processor who would help us secure

credit card processing.

Q. My last question on this banking part, when you would post

an ad in the Female Escort section of Backpage.com, how much

would it cost to support an ad?

A. Generally $5, sometimes less. Smaller markets, $1, $3.

Q. Did that change over time?

A. It did. As Backpage became more of a monopoly in the

prostitution category, prices went up.

Q. Just to be clear, did you have other categories on

Backpage.com?

A. We did.

Q. For example, if you wanted to sell a couch, did you have a

category?

A. We had the category Furniture for Sale.

Q. If I wanted to post an ad in the furnishings or the

furniture category, how much would that cost? 02:02:31

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A. It was free. With the rare exception that somebody might

choose to buy a print ad in the newspaper, but that doesn't

happen much; and they could buy a sponsor ad, but it was always

little or no revenue coming from those categories.

Q. All right. Let's go back to the creation of Backpage.com.

Whose idea was it to create Backpage.com?

A. I believe it was both Jim Larkin and myself, but I

definitely had a pretty strong lead in it. Jim Larkin had sent

me to San Francisco. And I ended up finding out in San

Francisco just how strong Craigslist was. I then had meetings

with Larkin where we made the determination that I should take

that project on.

Q. And just to be clear here, Mr. Larkin and Mr. Lacey, I

believe you testified they were involved in a newspaper here in

the Phoenix area called "The New Times"?

A. Can.

Q. Can you tell the jury what "The New Times" is?

A. The "Phoenix New Times" is an alternative weekly. It has

long-form journalism, had a substantial classified section in

the back of the book with a lot of adult massage ads.

Q. All right. Is that the only newspaper that Mr. Lacey and

Mr. Larkin owned?

A. No. There's -- there were at least ten more.

Q. And were they very similar to what you've just described,

"New Times"? 02:04:33

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A. Yes.

Q. And were they in other cities?

A. Yes. In fact, those would be the cities that we would

later launch in Backpage.

Q. Is there a reason why you launched Backpage in the cities

where Mr. Lacey and Mr. Larkin had a -- I think what you called

an alternative newspaper? Is there a reason why that was done,

if you know?

A. When we launched in these cities because we wanted to stop

the hemorrhaging of revenue, the loss of revenue from the

Internet and sites like Craigslist.

Q. All right. And then going back to 2004, which you've

testified was the year that Backpage was created, do you

know -- in your capacity as a classified salesperson in that

area, do you know how the alternatives were doing in terms of

generating revenue?

MR. FEDER: Hearsay. 

THE COURT: Yes, he can answer if he knows. He can

answer "Yes" or "No."

THE WITNESS: Yes. I'm very familiar with it.

BY MR. RAPP: 

Q. Why are you familiar with it?

A. Well, I was -- I was -- I moved to Phoenix to be on the

corporate staff so I was aware that revenue generated by

Backpage. And I understood how much the papers relied on the 02:06:04

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profitability of the classified sections and it was getting

more and more difficult as sites like Craigslist became

stronger. So less of the papers -- the rest of the papers were

getting smaller. They were losing page count.

Q. All right. And so when you say these were alternative

newspapers, are these newspapers that I would go -- somebody

would deliver to my house and then I would pay them on a

monthly basis or I would go to a machine and put in money,

these things we used to use called coins, and get the

newspaper? How would they -- how would "The New Times," for

example, make money?

A. Entirely from advertising. The papers are distributed

free. They are on racks at grocery stores, restaurants, and

racks around the city.

Q. And so for them to make money, am I to understand your

testimony to be that they relied upon advertisements solely?

A. Yes. Well, I should correct that testimony. There was

some event marketing going on that they would make money from,

some sponsorships of events, but the vast majority of the money

really depended on the number of pages in the newspaper and how

many ads were sold.

Q. So can you tell the jury what was the reason that

Backpage.com was started?

A. It was started to directly compete with Craigslist that

was eroding into the revenue of our newspapers. 02:08:00

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Q. All right. And when you started Backpage.com, did you

implement any strategies that would allow Backpage.com to be

competitive with Craigslist?

A. Yes.

Q. All right. What was one of the strategies that you and

others implemented to try to compete with Craigslist?

A. Well, the first strategy is we need to generate revenue

ourself, so we're going to charge for adult ads and go free

everywhere else. And in some markets Craig was charging for

employment ads. So we thought, well, we'll be free but we'll

always charge for categories like Female Escorts.

Q. All right. And did you find at the very inception of

Backpage that you were making any money from the Female Escort

category?

A. Yes. It was the only money, virtually.

Q. All right. In addition to charging, did you implement any

other strategy that would allow you to grow the website?

A. We did. We started a process called content aggregation

which was internal code for stealing ads from Craigslist.

Q. All right. And so what types of ads did you steal from

Craigslist?

A. We tried to take some job ads, rental ads. But the ones

that really worked, the ones that stayed on the site, were the

ads that Craigslist had under their Erotic Services category.

Q. And when you say "steal the ads," can you just sort of -- 02:10:14

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in some detail explain how you went about actually stealing an

ad?

A. We had staff hired to go to Craigslist, find an ad in

Phoenix, for example, and then take the ad from Craigslist and

just repost it on Backpage, take the images on Craigslist and

then just repost it on Backpage. So we had to do this because

we had little or no content to start, so getting content online

was the first step.

Q. All right. But by stealing the ad, how would that wind up

generating revenue for you?

A. Users or customers of those ads might respond to those ads

and then those users would then, in turn, or I should say

people would notice our ads on Backpage and maybe they will

start paying us.

MR. RAPP: Madam Clerk, could I have the podium

please.

BY MR. RAPP: 

Q. So on your screen there, sir, is what's been marked as

United States 2030. Do you see that there?

A. Yes, I do.

Q. And have you seen this demonstrative exhibit in

preparation for your testimony?

A. I have.

Q. And what does it basically demonstrate?

A. This -- this slide as it is right now shows that users 02:12:02

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posting on Craigslist.

Q. Let me just stop you for a minute. Does this slide

demonstrate this process of aggregation?

A. Yes.

MR. RAPP: I would move to admit for demonstrative

purposes only United States 2030.

THE COURT: It may be admitted.

(Exhibit Number 2030 was admitted into evidence.)

BY MR. RAPP: 

Q. All right. And so you were about to explain -- before I

cut you off --

MR. RAPP: Could that be published to the jury,

please?

THE COURT: I'm sorry. Mr. Rapp, what was that

exhibit number?

MR. RAPP: 2030.

THE COURT: Yes. You may publish.

BY MR. RAPP: 

Q. And now we're talking about aggregation so can you explain

to the jury what they are seeing in this first slide?

THE COURT: Let me just make sure all of the jurors,

your monitors are working and you can see the slide? 

Okay. Thank you.

MR. RAPP: That is somewhat important.

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BY MR. RAPP: 

Q. So in this first slide, what does that show?

A. It shows a consumer posting an ad on Craigslist. That's

step one.

Q. And then going to step two, what does that show?

A. It shows a Backpage employee copying the ad content, which

is the text of the ad and the images, and posting it on

Backpage.

Q. And then step three, what does that show?

A. If we're able to find the email address of the user, we're

going to post the ad in their email address and then we're

going to send them another email with an ad repost offer.

Q. All right. And then showing you step four, what does that

demonstrate?

A. If the user clicks a link in the email message that we've

sent them, we've now captured them as a user because now they

will be able to edit their ad through that link.

Q. All right. Once you did this, was at some point the

expectation that they would be a paying client or customer of

Backpage?

A. Yes.

Q. And did you implement this strategy in just Phoenix or

only one city?

A. No. We implemented it in every major metro market in the

U.S. 02:15:08

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Q. All right. And who was basically in charge of this

strategy within Backpage?

A. Well, of course me but Andrew Padilla supervised some of

our marketing activities in Phoenix and then Dan Hyer took it

over in Dallas and did it in an even larger scale.

Q. All right. Who directed you on the strategy, if anyone

did?

A. So this strategy is something that we had management

meetings with Scott Spear. Because we needed to hire staff, we

would have to get approval from Jed Brunst and put these kind

of things in the budget. So we had a major marketing budget.

We spent more on marketing than we did moderation.

Q. All right. Did aggregation, the stealing of ads from

Craigslist -- was Craigslist the only classified website that

you stole ads from?

A. No. There were others. We often would go through The

Erotic Review to find leaks.

Q. Okay. Let's come back to that. Did aggregation remain as

a strategy from 2004 to 2018?

A. Let me think about that. From 2004 to 2018 we didn't need

to add content as much once Craigslist dropped the Adult

section, so we were sort of becoming the monopoly. So I would

say that around 2010 it wasn't necessary.

Q. All right. Did you come to learn that some people were

stealing ads from Backpage? 02:17:23

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A. Yes. And we weren't happy about it but, you know, we had

started our own business by stealing ads from Craigslist.

Q. All right. So at the outset of your testimony, and just a

few seconds ago, you referenced The Erotic Review. How -- if

it did, how did The Erotic Review -- well, strike that.

Was The Erotic Review also a strategy that was

implemented by Backpage to grow the site?

A. It was. It was the secret sauce.

Q. All right. When you say "secret sauce," what do you mean

by that?

A. You could steal content from Craigslist and put it on a

website; but if no one responds to those ads, you're not going

to turn them into paying customers. So by having a

relationship with The Erotic Review, we could make those ads

that we stole from Craigslist, we could make their phone

numbers ring.

Q. All right. And who were you with -- this relationship

with The Erotic Review, who were you trying to attract to

Backpage.com as users or customers?

A. We wanted those that would respond to prostitutes, the

Johns.

Q. Okay. And did you just come to learn about the existence

of The Erotic Review upon the creation of Backpage?

A. No. I was familiar with The Erotic Review. They had run

ads in our Adult sections of our papers. 02:19:17

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Q. All right. When you say it was a prostitution review

site, if you went to The Erotic Review, what would you expect

to see on that site?

A. The price of the services and a description of the sexual

services along with a description of the escort or, as they

called it on The Erotic Review, the provider.

Q. So did there come a point where you developed a

relationship, a business relationship, with The Erotic Review?

A. Yes.

Q. And can you tell the jury how that relationship worked?

A. The relationship worked in that The Erotic Review didn't

have pictures on their site so they had a URL called an ad URL

which is an ad website.

Q. All right. Wait a minute.

A. The Web address.

Q. Hang on. What's a URL in layman's terms, plain English?

A. It's uniform resource locator, I believe, but it's really

just a word for a long Web address that will take you to the

specific page.

Q. All right. And so you were telling the jury how this

relationship was established?

A. Essentially we're going to exchange links. The Erotic

Review is going to put a link for Backpage that's going to

point exactly to a Backpage ad and female escorts so that Johns

on The Erotic Review, when they click that link, will arrive on 02:21:22

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Backpage. 

And Backpage will do the exact same thing with the

ads that are on Backpage. We will add a link to The Erotic

Review for that particular prostitute that when you click, you

will go directly to the review on The Erotic Review. So in a

way, Backpage could have prostitution reviews by just having

links.

Q. All right. And similar to aggregation, in preparation for

your testimony today, have you reviewed an exhibit that

demonstrates visually this relationship between Backpage and

The Erotic Review?

A. I have.

Q. And I'm showing you United States 2031 for demonstrative

purposes only and so -- and I would request permission -- so is

this 2031, is this the demonstrative exhibit that you reviewed

that demonstrates how visually this relationship worked?

A. Yes, it does.

MR. RAPP: Move to publish United States 2031.

THE COURT: It may be published.

You're not moving for admission?

MR. RAPP: I'm moving for --

THE COURT: It may be admitted for demonstrative

purposes, yes.

MR. RAPP: Thank you.

(Exhibit Number 2031 was admitted into evidence.) 02:23:01

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BY MR. RAPP: 

Q. All right. Can you explain to the jury what this first

page demonstrates or shows?

A. So this -- so on this page, you'll see that The Erotic

Review has a link that on The Erotic Review prostitution review

page for a particular prostitutes they have a link to an ad

that's on Craigslist.

Q. All right. And then looking at the next page, what does

this show?

A. This shows the step where Backpage steals the ad from

Craigslist or aggregates it. We have a little vacuum here.

That's, essentially, what we would do on Craigslist, just a

team of people taking the ads from Craigslist.

Q. All right. And then let's look at the next slide of 2031.

Page three, what does this show?

A. So in this slide, we are now sending that ad that we took,

we're sending the Web address to The Erotic Review and we want

them to put the Backpage web address on the prostitute's review

page.

Q. All right. Then let's look at the next slide. Does this

slide demonstrate the link being placed on Backpage?

A. It does. What it shows is that the user, the John that's

on The Erotic Review, will click that link and then they will

arrive on Backpage.com and that's what we call in the business

a referral. 02:25:10

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Q. All right. And so in business is referral or what is

known as referral traffic, is that important in any respect to

the development of a website?

A. It's really -- it's used by Google to identify what kind

of website you are based on who is linking to you.

Q. All right. And did it become important within Backpage to

track this -- the referrals or referral traffic to Backpage?

A. Extremely important. We identified the traffic coming

from The Erotic Review. We generated reports and shared those

reports with my superiors.

Q. And your superiors being?

A. Scott Spear, Jim Larkin, Jed Brunst.

Q. A few more questions about The Erotic Review. Is there

any point in time where money changed hands between The Erotic

Review and Backpage for this relationship?

A. Yes.

Q. Tell us about that.

A. This program was so successful and our budgets to increase

revenue were very aggressive. We knew if we could double down

with a relationship with The Erotic Review that we would hit

our budgets in terms of revenue and ad count and page views.

So we offered the CEO of The Erotic Review $4,000 a

month and did a banner ad exchange program with them with the

hopes that he would send us a lot more referrals.

Q. All right. And when you say "banner ad exchange," can you 02:27:17

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just explain that for the jury?

A. A banner ads are, like, pictures, graphic ads, not text,

and we had a banner ad on The Erotic Review; and in exchange,

we gave The Erotic Review a sponsor ad on our page. So

essentially we reciprocated the banner ads but we still paid

them $4,000 a month.

Q. All right. Let me see if I can ask some questions that

explain this. Are you saying that if you went during this time

period -- can you give the jury, just so they have an

orientation, what is the time period that you started this

relationship with The Erotic Review?

A. Early on. We knew The Erotic Review was important as

early as 2006. We wanted to keep the referral traffic growing

so we certainly -- in this time frame is 2007, 2008, 2009.

Q. All right. And so if you went on -- during that time

frame, if you went on The Erotic Review, is it your testimony

that you would see an ad for Backpage on The Erotic Review?

A. You would. You would see it on the home page of The

Erotic Review and you would see it on the individual reviews.

It would say "Sponsored By" and then a Backpage logo and then

Find Escorts Here.

Q. All right. So it would say Backpage.com, Find Escorts

Here?

A. Yes.

Q. And the hope was by seeing that ad, people looking at The 02:29:20

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Erotic Review would go to Backpage.com?

A. That's what happened.

Q. All right.

THE COURT: Mr. Rapp I'm going to suggest that we

take our afternoon break at this time.

MR. RAPP: Certainly.

THE COURT: Why don't we stand in a 20-minute recess. 

And I'll just remind the jurors of an admonishment.

When you're at recess, again, do not come to any conclusions,

do not discuss the case amongst yourselves or anyone else.

Just simply try to enjoy your break and don't go far and we'll

resume in 20 minutes.

Please all rise for the jury.

(Jury departs at 2:30.)

THE COURT: All right. Thank you.

(Recess at 2:30; resumed at 2:51.)

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

THE COURT: All right. Please be seated.

Let's bring in the jury.

(Jury enters at 2:53.) 

THE COURT: All right. Please be seated.

Mr. Rapp, you may continue.

MR. RAPP: Thank you, Your Honor.

BY MR. RAPP: 

Q. Mr. Ferrer, when we left, when we left for break we were 02:54:17

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talking about ads that Backpage had put on The Erotic Review.

Do you remember that?

A. Yes. Links. Links to ads. Sorry.

Q. Links to ads?

A. Yes. Oh. No, I'm sorry. The banner ads.

Q. I was talking more about the banner ads. In the same

respect, did you have advertisements for The Erotic Review on

Backpage?

A. Yes, we did.

Q. Just to distinguish that from the link -- I'm talking

about an ad that says something to the effect of we're The

Erotic Review. Here's what we are. That type an ad?

A. Yes. We had that.

Q. And did you coordinate having those ads on Backpage.com

for The Erotic Review, did you coordinate that with some point

of contact at The Erotic Review?

A. Yes, I did. Mr. David Elms.

Q. And was David Elms the person that you coordinated this

relationship with at The Erotic Review?

A. Yes. He was the CEO of The Erotic Review.

Q. And as this relationship started with The Erotic Review,

did you have occasion to actually go on The Erotic Review and

look at reviews of prostitutes?

A. Yes.

Q. And what was the purpose of you doing that? 02:55:56

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A. I wanted to understand the market and I was tasked with

growing the Female Escorts category and they used The Erotic

Review, very valuable.

Q. Did you ever see a review on The Erotic Review that was

for something other than a paid-for sexual encounter?

MS. BERTRAND: Objection.

THE COURT: Overruled.

THE WITNESS: No.

BY MR. RAPP: 

Q. How long did this relationship, in one form or another,

exist between Backpage and The Erotic Review?

A. It certainly started as 2006, 2007 and then I believe

that -- it sort of -- we had a relationship with The Erotic

Review right up until the site's closing down in 2018 because

we continued to allow the review IDs on the ads.

Q. All right. So just to be clear, we looked at this

demonstrative exhibit which talked in terms of a link. Did

there come a time where you no longer included the actual URL

links in a Backpage posting?

A. Yes.

Q. All right. When did that occur? Approximately?

A. Approximately 2011 or 2012 I believe. It's after we just

got so much pressure from outside groups to remove the link to

The Erotic Review.

Q. I think you have talked in terms of a -- 02:57:59

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THE COURT: Mr. Rapp, I'm going to ask you to move

closer to the microphone, please.

MR. RAPP: Yes, ma'am.

BY MR. RAPP: 

Q. I think you talked in terms of an identification number in

addition to the link. Can you tell us about that?

A. So we had links in the ads and then users would often just

cite the review ID. They would say, "Check out my reviews,"

and then put in a number. And Johns who used our site knew

that that is The Erotic Review ID number.

Q. All right. And so did those ID numbers, even after you

removed the actual links being embedded in an ad or a posting,

did those ID numbers continue to remain in one form or another

in the postings until the site's closure in 2018?

A. They remained on the site at least through 2017. There

was a period of time, maybe a month or two before Backpage's

closure, that we just had phone numbers and photographs. But

almost the entire life of the site, review IDs were in the

Female Escort ad pages, not all of them but a lot of them.

Q. All right. And I believe your testimony has been that the

referral traffic that was generated by The Erotic Review to

Backpage was important?

A. It was the secret sauce. It was one of the reasons why

Backpage became the default choice when Craigslist terminated

its Erotic Services and Adult Services section. 03:00:04

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Q. Was the importance of that referral traffic from The

Erotic Review, was it discussed with anybody above you in

management or ownership?

A. Yes.

Q. Who was that?

A. Scott Spear and then in budget meetings with Jed Brunst

and Jim Larkin.

Q. Now, in addition to the aggregation and the reciprocal

link relationship, were there any other strategies that you

pursued early on in the development of Backpage that expanded

the site?

A. Yes. We started to cater to super posters, especially

since we were focused on growing the market in New York City.

Q. And when you say "super poster," can you explain to the

jury what you consider to be a super poster?

A. So a super poster for Backpage would post thousands of ads

whereas your average user might just post one or two ads.

Super posters, they had thousands of prostitution ads that they

could bring to the site.

Q. How did you first establish a relationship, a business

relationship, with a super poster?

A. When the company purchased "The Village Voice", Jim Larkin

and Scott Spear sent me to New York City to develop a strategy

to make Backpage successful. And early on we identified

reaching out to those posters who were already posting 03:02:07

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prostitution ads in the paper. And so there were two of them

that come to mind that we immediately -- I went to see.

Q. All right. And so when you say you went to see, you

actually met with them in person?

MR. FEDER: Objection. 404(b).

THE COURT: Overruled.

THE WITNESS: Yes.

BY MR. RAPP: 

Q. All right. And when you -- where did you meet with them

in person?

A. So there was a company called Somad and I was taken by the

classified director of "The Village Voice" to go meet with

Somad with the goal of having them post ads on Backpage.

Q. And when you say you met with some other employee of "The

Village Voice," is this based in New York?

A. Yes.

Q. And who directed you, if anyone, to meet with this person

that ultimately introduced you to this super poster that you

have called Somad?

A. So this strategy of growing New York to meet the

advertisers that are in print and get them to also post online,

that was a strategy from Larkin and Spear. I should say Jim

Larkin and Scott Spear.

Q. So who was the person that you met with from "The Village

Voice" and then ultimately met with Somad? 03:03:57

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A. Her name is Angie Alexander.

Q. And did Ms. Alexander take you to someplace to meet with

Somad?

A. Yes. We went to the Somad office during business hours

when they had numerous customers.

Q. Okay. And what, if anything, did you observe at that

office that -- with Ms. Alexander when you went to meet with

Somad? What did you observe?

A. I observed that these customers were the perfect customers

to post in the Female Escort section of Backpage.

Q. And why do you say that, sir?

A. They appeared to be in the prostitution industry.

MR. EISENBERG: Objection. Foundation.

THE COURT: Sustained.

MR. RAPP: Okay. Well, let's see if we can address

those concerns.

BY MR. RAPP: 

Q. What did you observe? What about them made you think that

they were in the prostitution industry?

MR. CAMBRIA: Think?

THE WITNESS: Well, they were there to post ads in

Craigslist Erotic Services.

BY MR. RAPP: 

Q. All right.

A. They appeared to be dressed in a manner that was 03:05:05

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provocative.

Q. Were they dressed in a way that was consistent with --

MR. EISENBERG: Objection. Leading.

MR. RAPP: I haven't even finished the question.

THE COURT: Let him finish the question.

BY MR. RAPP: 

Q. Were they dressed in a way that was consistent with

postings on Backpage.com?

MR. EISENBERG: Objection --

MS. BERTRAND: Join.

MR. EISENBERG: -- foundation.

THE COURT: Overruled.

He can answer the question.

THE WITNESS: Yes.

BY MR. RAPP: 

Q. All right. Now Somad was one super poster you've

identified. Can you identify other -- if there were others,

super posters that were cultivated by Backpage.com?

A. Yes. I later had a meeting with Dollar Bill, known --

that's how he's known but his real name, I believe, is William

Mersey.

Q. William Mersey. Okay. And what -- what role, if any, did

this person you've identified as Dollar Bill, what role, if

any, did he have as a super poster with Backpage.com?

A. Dollar Bill competed with Somad but he was more in the 03:06:24

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Asian massage parlor niche. And he posted thousands of ads on

Craigslist in Erotic Services, so we wanted him to begin

posting on Backpage, "we" meaning -- well, I did.

Q. All right. When you say Asian massage parlor, how do you

know that that involves prostitution?

A. Well, if you went to Dollar Bill's blog, the Psycho

Roundup, he talks about his advertisers, provides reviews.

MS. BERTRAND: Objection, Your Honor. Hearsay.

THE COURT: Overruled.

THE WITNESS: And we would even later let Dollar Bill

advertise that blog.

BY MR. RAPP: 

Q. On Backpage.com?

A. On Backpage. And very descriptive of sexual services.

Q. Did you also exchange emails with Dollar Bill during the

life of his relationship with Backpage.com as a super poster?

A. Yes.

Q. And have you look at those emails in preparation for your

testimony today --

A. I have.

Q. -- and tomorrow?

So a super poster, I think your testimony was a super

poster would post thousands of ads on Backpage.com?

A. That's correct.

Q. How would anybody make money off of this relationship? 03:08:07

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Can you explain that to the jury?

A. Somad and Dollar Bill would collect a fee for posting ads

on sites like Craigslist or Backpage and the goal is to keep

the ad near the top of the listings, so it requires some effort

on the part of Somad and Dollar Bill to continually move ads to

the top or repost or post new ads. Because ads that are at the

top of the listings of Female Escorts, they generate the phone

calls whereas if ads go to page two or page three, the phone

calls fall off.

Q. All right. How do you know all of that?

A. Well, just years -- I ran Backpage for many years and

competed with Craigslist for many, many years and we figured

out that move to the top was such a money-maker that we ran

reports and gave users the option to pay to move their ad to

the top and it was the vast majority of revenue. People would

move their ad to the top sometimes twice a day. We saw that in

users.

And I -- if they need to get phone calls, the

quickest way to do that is to move their ad to the top.

Q. All right. And did there come a time where -- did these

super posters receive, for lack of a better record, any type of

preferential treatment from Backpage.com?

A. They had VIP treatment. They were able to deal with

managers like myself or Dan Hyer. We assigned personnel to

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where ads were removed, they were given preferential treatment

in terms of advice on what's wrong with their postings and how

they need to change it or if we made a mistake, to restore all

of their ads.

Q. All right. Did there come a time in the life of

Backpage.com where the website began to face pressure to make

changes or even to close the website, to shutter the website?

A. Yes.

Q. When, approximately, did you learn that you were receiving

pressure from some outside entities to either change the

business model or to close the website?

A. I believe in 2009 or 2010 we started to get letters from

the Attorneys General.

Q. All right. When you say letters from the Attorneys

General, what were they asking you to do?

MR. CAMBRIA: Object to the hearsay.

MS. BERTRAND: Join.

THE COURT: Sustained.

BY MR. RAPP: 

Q. Well, did you receive a letter from -- did you receive a

letter from an organization of Attorneys General?

A. Yes. We did. In that letter they were calling for --

MS. BERTRAND: Objection.

MR. CAMBRIA: Not responsive. 

MS. BERTRAND: Move to strike. 03:11:59

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THE COURT: Mr. Ferrer, when Mr. Rapp asks the

question, finish the question, don't offer anything more. And

let him ask the question.

I'll sustain the objection.

Mr. Rapp, ask your next question.

BY MR. RAPP: 

Q. Did they put you on notice that there were problems

with --

MR. KESSLER: Object to the leading.

MS. BERTRAND: Join.

MR. FEDER: Judge, before we go on, I am assuming an

objection by one is an objection by all?

THE COURT: Yes.

MR. FEDER: Thank you.

THE COURT: All right. Restart your question, Mr.

Rapp.

BY MR. RAPP: 

Q. Did you receive a letter from the Attorneys General?

A. Yes.

Q. How did you receive that letter?

A. I believe it was sent to us by email, fax. I certainly

received a copy of it.

Q. All right. Did you come to learn that other people within

Backpage.com also received a copy of it?

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Q. Okay. Why do you say, in your words, it was a huge

development?

MR. KESSLER: Objection, Judge. It calls for

hearsay.

THE COURT: Overruled. As to his knowledge.

BY MR. RAPP: 

Q. What do you base your knowledge on that it was a huge

development?

A. We watched Craigslist be attacked by the state Attorney

Generals and we were very concerned that we're next as a

company and that led to a lot of our moderation efforts in

terms of cleaning up some of the sex act pics.

Q. So let's take a step back. When you say "we," who are you

referring to as we?

A. Jim Larkin, Scott Spear, certainly those two.

Q. All right. In addition to the Attorneys General, did you

also receive any direction from an organization by the name

that uses the acronym NCMEC?

A. Yes. We did.

Q. And what, if any -- well, how did you receive notice by

NCMEC to make some changes to your --

MR. EISENBERG: Objection.

THE COURT: Sustained.

Rephrase the question.

\\\

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BY MR. RAPP: 

Q. Well, how did you receive notice? Did you receive it by a

letter --

MR. EISENBERG: Objection as to the contents.

Notice. I'm sorry, Your Honor.

THE COURT: How did you receive notice, Mr. Ferrer?

BY MR. RAPP: 

Q. How did you receive notice?

A. Well, we hired an individual to represent the company in

its discussions with NCMEC, which is the National Center for

Missing and Exploited Children, and there were phone calls set

up between Jim Larkin and Ernie Allen of the National Center

for Missing and Exploited Children in which I was present on

those phone calls.

Q. Okay. And did you also meet in person with NCMEC?

A. Yes, we did.

Q. All right. And during those meetings, did NCMEC notice

you of problems with your website?

MR. KESSLER: Objection. Hearsay, and also

foundation. Time.

THE COURT: I think you can lay some foundation.

BY MR. RAPP: 

Q. Did you have a meeting with NCMEC?

A. Yes, we did.

Q. Did NCMEC ask to meet with you or did you ask to meet with 03:15:51

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NCMEC?

A. I believe we asked to meet with NCMEC.

Q. All right. And during that meeting, did some

representative from NCMEC tell you that there were issues with

your website?

MR. CAMBRIA: Object to the hearsay.

MR. KESSLER: As part of foundation, time.

MR. CAMBRIA: And hearsay.

THE COURT: And somebody is yelling, "Time."

MR. KESSLER: This is Eric Kessler.

BY MR. RAPP: 

Q. When was this meeting?

A. I believe in 2010 or 2011.

Q. All right. And did a representative from the National

Center of Exploited and Missing Children, did they tell you

that there was prostitution on your website?

MS. BERTRAND: Objection.

MR. KESSLER: Objection, hearsay.

THE COURT: Sustained.

MR. CAMBRIA: Unbelievable.

BY MR. RAPP: 

Q. Did they notify you and give you notice that there was

prostitution --

MR. EISENBERG: Objection. Hearsay.

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THE COURT: Sustained.

MR. CAMBRIA: And leading.

BY MR. RAPP: 

Q. Did you meet with an organization by the name of Polaris?

A. Yes.

Q. Do you remember when that meeting took place?

A. It was shortly after the meeting with National Center for

Missing and Exploited Children.

Q. And do you know what type of organization Polaris is?

A. Yes. They are an anti-human trafficking organization.

Q. And did you ask to meet with Polaris or did Polaris ask to

meet with you, if you know?

A. I believe the company requested to meet with Polaris.

Q. And during that meeting with Polaris, did they notice you

that there was prostitution --

MR. EISENBERG: Objection.

MS. BERTRAND: Objection.

BY MR. RAPP: 

Q. -- on the website?

MR. EISENBERG: Hearsay.

MR. CAMBRIA: And leading.

THE COURT: Sustained.

BY MR. RAPP: 

Q. Well, let's go back to NCMEC. Who was at the meeting at

NCMEC? 03:18:20

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A. At the meeting with NCMEC, I recall myself, Jim Larkin,

Michael Lacey and our user safety experts that we hired, a man

that goes by the name Hemu Nigam and his assistant, Simrin

Hooper I believe.

Q. And who from NCMEC was present, if you remember?

A. There were half a dozen members from NCMEC present with

their CEO, Ernie Allen.

Q. What did Ernie Allen tell you, the members that you've

identified from Backpage --

MS. BERTRAND: Objection.

MR. CAMBRIA: Objection. Hearsay.

BY MR. RAPP: 

Q. What did he tell you you should do with your website?

MS. BERTRAND: Objection.

MR. CAMBRIA: Objection. Hearsay and leading.

THE COURT: Sustained.

BY MR. RAPP: 

Q. Did you meet with anybody else other than NCMEC and

Polaris?

A. Yes.

Q. All right. And who else did you meet with?

A. We met with Mayor McGinn and the Chief of Police and his

Chief of Staff.

Q. All right. And did you receive correspondence from Mayor

McGinn? 03:20:01

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A. We did. We received another letter.

Q. And in that letter did Mayor McGinn tell you --

MR. CAMBRIA: Objection. Hearsay.

BY MR. RAPP: 

Q. -- you should shut down your website?

MS. BERTRAND: Objection.

MR. CAMBRIA: Objection. Hearsay. Rank hearsay.

MR. FEDER: And leading.

MR. RAPP: It's not offered for the truth.

MR. CAMBRIA: Doesn't it? 

Your Honor, that is disingenuous a statement by him.

That's rank hearsay.

THE COURT: Mr. Cambria, let me rule. I'm going to

sustain the objection. Mr. Feder had an objection. I heard

you say something.

MR. RAPP: Let me point out that there's two

attorneys.

MR. FEDER: I want an objection for the entirety of

this line of questioning. He is obviously trying to bring

out --

THE COURT: Mr. Feder, we're not going to have

sidebar conversation right now. I can discuss your objection

when we end today. You can put it on the record.

Let's continue forward, Mr. Rapp.

\\\

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BY MR. RAPP: 

Q. Did you -- did there come a time where certain media

outlets did stories on Backpage.com?

A. Yes, quite often.

Q. All right. Can you identify the media outlets that did

stories on Backpage.com?

A. Perhaps the one that was most impactful was --

MR. CAMBRIA: Your Honor, I object. It's not

responsive.

THE COURT: Overruled. I didn't hear his answer yet

so I don't know if it was nonresponsive, Mr. Cambria, because

you were speaking over him.

BY MR. RAPP: 

Q. I'll tell you what. Why don't we break this down to

broadcast media versus print media? Were there stories in

broadcast media, television, that was critical of Backpage?

A. Yes. There were.

Q. And what broadcast medial outlets did exposés on Backpage?

MR. EISENBERG: Objection. Leading.

MS. BERTRAND: Objection. Misstates the testimony.

THE COURT: Overruled as to both.

THE WITNESS: CNN.

BY MR. RAPP: 

Q. All right. And I believe you had actually answered this

but let's go back over it. On the print media, who did stories 03:22:39

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on Backpage.com that were critical of the website?

MR. KESSLER: Object to the form of the question.

THE COURT: Sustained.

BY MR. RAPP: 

Q. Did anybody in print media write a story an Backpage.com?

A. Yes. The "New York Times".

Q. Was there a particular writer at the "New York Times"?

A. Nicholas Kristof, the columnist.

Q. All right. In addition, did you receive notice of stories

aside from just the "New York Times" but other stories, other

newspaper stories on Backpage.com, either hard print or

digital?

A. Yes. It was very frequent. There were a loot of Google

alerts.

Q. All right. Can you explain to the jury what a Google

alert is?

A. So Google alerts are something that you set up to alert

you -- well, what I did is I set up Backpage.com to send me an

alert whenever it was in the news and I know others in the

company did that, too.

Q. Who else in the company do you know of that also had a

Google alert for Backpage.com?

MS. BERTRAND: Objection. Foundation.

THE COURT: I think he can answer the question who

else does he know. 03:24:14

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THE WITNESS: Scott Spear. I'm sorry.

THE COURT: Overruled.

Go ahead. You may answer.

THE WITNESS: Sorry if I jumped the gun.

Scott Spear.

BY MR. RAPP: 

Q. Anybody else?

A. I'm not sure.

Q. As a result of these meetings that you identified with

NCMEC and Polaris, and I believe you identified a Mayor for

Seattle, as a result of these meetings, did you make some

changes to what you would put on the website in terms of an ad

in the Female Escort section?

A. Yes. We sanitized the site.

Q. When you say you sanitized the site, what do you mean by

that?

A. It means we make it less obvious prostitution.

Q. Do you know what the term "moderation" means?

A. Yes.

Q. All right. What does moderation mean in the website

space?

A. It means that the content is going to be reviewed by

either a human or a computer to conform to the terms of use.

Q. All right. And with respect to Backpage.com, what did you

implement -- did you implement some type of moderation? 03:25:56

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A. Yes, we did.

Q. Can you explain to the jury when you really started

implementing moderation?

A. I believe it started as early as 2006 with Scott Spear's

PowerPoint to get rid of explicit nudity.

Q. All right. And I think earlier on in your testimony you

described the postings from the inception up to approximately

2008, 2009 as having explicit nudity?

A. Yes. It was the wild, wild west in terms of content.

Just about anything was posted. Full sex act pics. 

Q. All right. And then in -- did you implement -- I think

your term was sanitizing the website. Can you explain to the

jury -- let's just start with images. What, if anything, did

you do to sanitize the site when it came to images?

A. So a standard was set earlier on between Hustler and

Playboy standard. This was a term that Scott Spear coined and

so we started the team in that area. That meant sex act pics

needed to go and you could still have full nudity but you

couldn't have extreme closeups of genitalia. And then the

standards would continually be modified to where eventually no

more pictures of genitalia is allowed but topless is okay and

then the standards would change once again as the pressure

mounted to then eliminate topless.

Q. Okay. Starting in 2006, your testimony is that this

started in 2006 and Mr. Spear came up with the Hustler versus 03:28:14

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Playboy standard, going forward, how was that implemented to

remove those types of images? How logistically was that done?

A. So the images would just be removed. Eventually, we would

put it into queues and people would remove the image. But the

point to note here is the person who posted the ad, the whole

ad is not going to be removed, just the image.

Q. Well, all right. So I think your testimony was there were

ads that had full-on sex acts. If you remove the sex acts, did

you continue to post the ad?

MR. KESSLER: Object as to time.

MR. PANCHAPAKESAN: It also misstates testimony.

THE COURT: Overruled as to misstating the testimony.

I guess, Mr. Rapp, there should be more foundation as

to the time frame.

MR. RAPP: Right. Thank you.

BY MR. RAPP: 

Q. When did the removal of sex acts pics, when did that

start?

A. 2006 I believe, 2007.

Q. All right. And you had described, as time went on, that

certain images were even further removed based upon -- I

believe your testimony is based upon pressure that you

received?

A. Yes. And it was done in a graduated manner over a period

of years. 03:30:08

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Q. Did you ever -- did you ever just block the ad entirely?

A. No. We didn't block users for posting sex act pics. We

blocked users if they have used a stolen credit card but not if

they posted a sex act pic.

Q. All right. And so if they weren't blocked, does that mean

that they could continue to post?

A. Yes. They could just post again if they are not blocked.

Q. Now let's talk about text, words. Did there come a time

where you started sanitizing the sites of certain words?

A. Yes.

Q. Why did you do that?

MR. KESSLER: Objection. That's going to call for

hearsay.

THE COURT: Overruled.

THE WITNESS: The rules or some terms made the ads

more obvious prostitution, especially when they referred to a

sex act pic. So we started removing those words from the ad

but not deleting the ad. If they were a frequent violator, we

might delete the ad.

BY MR. RAPP: 

Q. So we have talked about the volume that any given market

was receiving and I believe your testimony is that sometimes

you would receive, in any given market on a given day,

thousands of postings; is that correct?

A. Correct. 03:32:10

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Q. And I believe your testimony is, if it was a large market,

you could receive upwards of 10,000 ads on a given day?

A. Maybe several thousand might be more --

Q. More accurate?

A. More accurate, yeah.

Q. But in any event, how -- what type of a staff did you have

to review these postings to sanitize them of these images and

terms?

THE COURT REPORTER: I'm sorry. Can you put your

hand up when you object? I can't tell who is objecting.

MR. FEDER: Feder objecting. 

THE COURT: And what was the objection? 

MR. FEDER: Foundation. Time. This is a progressive

issue, Judge. We need to know what, when. 

THE COURT: And I would agree, Mr. Rapp, when you're

talking in generalities, it's not really helpful. If you could

narrow down the time frame that you are -- and it may be

redundant but I think it's important.

BY MR. RAPP: 

Q. All right. You had to have a staff to review these

postings to sanitize of images and texts?

A. Yes. Yes. That's correct.

Q. How were you able to -- how was the staff able to keep up

with the sanitation efforts given the volume of ads and let's

just start in, say, 2008? 03:33:46

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A. We needed technology's help.

Q. And what type of technology did you implement to assist in

this?

A. We had filter blocking that could either block an ad from

being posted if it used a forbidden term or it would strip that

term out if it used that term.

Q. All right. But if it would strip the term out, can you

give us an example of a term that you would strip out of the ad

and allow it to continue to be posted?

MR. FEDER: Again, foundation as to time.

MR. RAPP: 2008.

THE COURT: In 2008, yes.

THE WITNESS: In 2008, if the term BBBJ appeared in

an ad, the user would -- may be able to type it in and the ad

would get submitted to our servers. The ad would go live and

then a process would run that would just eliminate that term.

The ad would still go live but BBBJ would no longer be there in

the ad.

BY MR. RAPP: 

Q. Is that BBBJ, is that an acronym for a reference to a sex

act?

A. Yes.

Q. And then once the technology stripped that term out as of

2008 going forward, would the ad continue to be posted?

A. Yes. 03:35:31

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Q. And who within Backpage would implement this removal of

images and the stripping of terms on a daily basis? Who was

responsible for that?

MS. BERTRAND: Objection.

MR. KESSLER: Objection. Foundation. Time.

BY MR. RAPP: 

Q. 2008 going forward.

MR. KESSLER: Well, "going forward" is a long time.

MR. RAPP: There's two attorneys over there objecting

for one defendant.

THE COURT: Yes. I think --

MR. CAMBRIA: What's wrong with that?

THE COURT: Mr. Feder, you can make the objection.

Mr. Rapp, let's clarify. We're in 2008.

BY MR. RAPP: 

Q. I'm talking about 2008 going forward and implementing

sanitation efforts.

MS. BERTRAND: Same objection.

THE COURT: I think that you're going to get the

foundation objection because 2008 could mean 2008 to 2010,

2015, 2018. So maybe just narrow it down in terms of time

frame, Mr. Rapp.

BY MR. RAPP: 

Q. All right. Let's just take 2008 to 2010.

A. The supervisor of the Moderation Department, Andrew 03:36:45

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Padilla.

Q. So when you had postings that had both images that

contained sex acts and a term that was indicative of a sex act,

why wouldn't you just block the entire ad?

MR. FEDER: And we're talking about 2008.

MR. RAPP: I'm talking 2008 to 2010.

THE COURT: I think he's clarified 2008 to 2010. So

unless he states a different year -- 

Mr. Rapp, and you will clarify that?

MR. RAPP: I will.

THE COURT: Reask the question.

MR. EISENBERG: Your Honor, if I may. We haven't had

a definition of an image of a sex act, so I'm not sure -- I'm

sorry. I don't mean to go on about this but I don't think we

have a basis for that, Your Honor.

THE COURT: Well, I guess, Mr. Rapp, you can ask the

question.

BY MR. RAPP: 

Q. Can you -- so you've described at various times starting

in 2006 that there were images on the postings that were sex

acts?

A. Yes.

Q. Can you describe, to the best of your ability, during time

frame before you implemented moderation efforts, can you

describe what the sex act involved? 03:38:25

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A. One example might be a woman giving a man oral sex.

Q. All right. Is there other variations of sex acts similar

to that that would be images on postings that you would

receive?

MS. BERTRAND: Objection. Vague.

THE COURT: Overruled.

THE WITNESS: Yes.

BY MR. RAPP: 

Q. Did the moderation efforts that you implemented, starting

in 2008 going forward, right up until the site was closed in

2018, did the moderation efforts in removing images or terms,

did they in any way impact the revenue for Backpage, if you

know?

MR. FEDER: Objection. Compound. Over a 12-year

period?

THE COURT: Overruled.

THE WITNESS: I was responsible for the revenue. I

worked on setting the budgets and despite our moderation

improvements, the budgets were always aggressive in terms of

growth and revenue, and I never saw any impact to the revenue

from our moderation efforts.

BY MR. RAPP: 

Q. All right. Can you explain to the jury what a charge-back

is?

A. A charge-back would be when a user files a complaint that 03:40:21

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their card was -- a card holder files a complaint that their

card was used unauthorized.

Q. If you blocked a user -- let's just start in 2008 going

forward, to 2018. If you blocked a user based on -- based upon

whatever image or term they included in a posting, would you

retain that poster as a customer going forward?

A. We didn't block the user if they posted sex act pics or

put sex term language in their ads, but we would block them if

they used a stolen -- if they used a credit card unauthorized

and filed a charge-back. That was a big deal. Then we blocked

the credit card. Then we blocked the email address, then we

blocked the phone number from appearing in the ad. A lot of

efforts were given to prevent people from using credit cards

unauthorized.

Q. All right. And why was that the case? Why, why was that

important, that credit card users who were using a fraudulent

credit card, why were they blocked?

A. If you received too many charge-backs, like over half a

percent, for example, you might go on probation with MasterCard

and VISA; and the last thing the company wanted was any kind of

attention by MasterCard and VISA.

Q. Okay. Well, let's talk about that. Why did you not want

to have this attention with these major credit card companies,

MasterCard and VISA?

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THE COURT: He can give his understanding as to why.

The question was posed as why do you. So overruled.

MR. FEDER: But it implies what a credit card company

is doing, Judge. Speculation, hearsay.

THE COURT: The question was posed as to why it was

important to him.

Mr. Rapp, rephrase your question or reask it.

BY MR. RAPP: 

Q. Why was it important to you, working at Backpage.com, that

you didn't have a bunch of charge-backs?

A. Because if we lose our merchant account, our ability to

take credit cards, we could go out of business so very

important -- that's a very important metric in this business,

to keep the charge-back rate lower.

Q. And how do you know that if you had a high rate of

charge-backs, how do you know that would pose a problem with

your merchant bank, your credit card processor?

MR. FEDER: Hearsay. Speculation.

THE COURT: Overruled.

THE WITNESS: We had regular meetings with --

MR. RAPP: Hold on.

I think there was an objection.

THE COURT: There was earlier. I overruled it.

MR. RAPP: I'm sorry. My apologies. I thought I

heard some other objection. 03:44:03

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BY MR. RAPP: 

Q. How would that create a problem with your merchant credit

card processing, a high rate of charge-backs?

MR. FEDER: Objection. Speculation.

THE COURT: Sustained.

BY MR. RAPP: 

Q. How do you know this? How do you know? Did you deal with

your merchant credit card processing bank on some regular

basis?

A. We did. We had regular meetings with a company like

Litle, the credit card processor, who would inform us --

MR. FEDER: Objection. Hearsay. Move to strike.

This appears to be an intentional kind of issue to let -- 

THE COURT: Mr. Feder, let me rule on the objection.

MR. FEDER: Mr. Ferrer is not responding to the

question.

THE COURT: I'll sustain it and the portion as to

beginning that the credit card processor who would inform us,

that part is stricken.

You may reask the question.

BY MR. RAPP: 

Q. That relationship with your merchant bank, was that

important to the success of Backpage?

MR. CAMBRIA: Your Honor, he answered the question.

He said they would lose their credit card business. He 03:45:38

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answered the question.

THE COURT: Reanswer the question. 

And let's move on, Mr. Rapp.

THE WITNESS: It's critical, yes.

BY MR. RAPP: 

Q. Did there come a time where the credit card companies

blocked the use of their cards for Backpage postings?

A. Yes.

Q. When did that happen?

A. That happened in July of 2015. We lost MasterCard and

VISA.

Q. All right. And when you lost those credit card companies,

the ability for somebody to use the credit cards to post an ad,

how -- how were you able to get paid for postings on

Backpage.com?

A. We initially just went free.

Q. All right. Just taking a step back for just a minute. We

talked about the major credit card companies blocking the use

of their cards in 2015 but was there -- and you've referred to

this credit card processor by the name of Litle. Did there

come a time where they stopped allowing you to process credit

card transactions?

A. Yes. Litle terminated us.

Q. All right. And what year did they terminate you?

A. I believe around 2013, sometime in that year. 03:47:33

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Q. All right. And once you began to use -- lose this credit

card processing, let's start with the 2013, how did Backpage as

a company respond to that, the fact that Litle, that you've

identified as your merchant credit card processing bank, when

they discontinued allowing you to process, how did you -- how

did Backpage as a company respond to that?

A. We engaged a consultant and then went looking for

processing in Europe.

Q. All right. And when you went to look for processing, as

you say, in Europe, who was involved in that within Backpage?

Was it you or who else? Who in upper management, if any, was

involved in that?

A. Certainly Scott Spear, who read the banking agreements,

myself, Jim Larkin, and Jed Brunst who had to open up companies

to secure European processing.

Q. And when you say that you secured European processing, can

you explain to the jury why you had to go to Europe to obtain

this processing for the transactions here in the United States?

A. Because U.S. banks did not want to do business with us.

MR. FEDER: Calls for hearsay. Speculation.

THE COURT: Overruled.

THE WITNESS: Because U.S. banks did not want to do

business with Backpage.

BY MR. RAPP: 

Q. All right. And when you went -- so can you explain to the 03:49:31

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jury why -- were you able to secure processing in Europe?

A. Yes. We were able to secure banks by using a company in

Bulgaria and finding a bank in Liechtenstein and the UK.

Q. All right. And those banks that you found -- and this is

in 2013. This is before the July 2015, major credit card

companies like AMEX and MasterCard blocked the use, did the

European banks from 2013 to 2015, did they not have the same

problems with Backpage that the banks in the United States had?

MR. FEDER: Hearsay and speculation.

THE COURT: Sustained.

THE WITNESS: They had --

BY MR. RAPP: 

Q. Let me ask you another question.

A. Oh. Sorry.

Q. Did you do anything to try to conceal the fact that

Backpage was the ultimate recipient of the credit card

transactions, the revenue?

MR. FEDER: Objection. Speculation.

THE COURT: Overruled.

THE WITNESS: Yes. We created holding companies.

BY MR. RAPP: 

Q. And can you explain to the jury first why did you create

holding companies?

A. A European bank only wants to deal with a European company

so you have to set up a European company, even though it's just 03:51:14

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a shell.

Q. All right. And did that -- in so doing, did that allow

you to continue to receive credit card processing?

A. It did. Yes.

Q. Now, you identified another point where the credit cards,

your credit cards were blocked from processing and you

identified that as July of 2015. Your response in July -- in

2013 was to go overseas to Europe. What did you do when the

major credit card companies blocked you in July of 2015?

A. We attempted to secure processing that was even more high

risk in Asia.

Q. All right. And when you say "we," who -- was there

anybody who was either assisting you or giving you direction on

establishing these bank relationships in Asia?

A. I had some assistance from Jed Brunst and representative

working for the sellers, Don Moon.

Q. Okay. And how is it that you were able to obtain this

processing? This is now July -- post-July of 2015. How were

you able to obtain this processing for credit cards?

A. After 2015?

Q. Yes.

A. Well, we -- I signed agreements with the shakiest

companies in the world and they turned out to be, you know,

really some of them just thieves. They didn't send us our

funds. It was very difficult. But later we were able to set 03:53:31

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up partner companies in Europe using five separate holding

companies in Europe with different Web domains.

Q. All right. And when you say using different Web domains,

why did you do that?

A. To conceal the transactions so instead of Backpage.com, it

would be Ad Post 24.

Q. All right. And why were you trying to conceal the fact

that the transaction was being processed for a posting on

Backpage.com?

A. So MasterCard and VISA wouldn't shut it down. They would

have a hard time finding it.

Q. After July of 2015, were there other ways that Backpage

implemented to get paid for an ad posted on the website?

A. Yes.

Q. What was that?

A. There were money orders, which was very successful.

Q. Can you explain that to the jury, how money orders were

utilized instead of credit card transactions on how that was

successful?

A. So we -- we had a line of credit for our customers. If

they were good customers, they could get credit of -- I can't

recall the exact number, maybe $50, $100 worth of credit and

then they could mail us a money order, and they often did.

There were days that we had $70,000 worth of money orders come

in on a single day. 03:55:41

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Q. All right. But when the major credit card companies

blocked their use of the cards for transactions and you had to

find these other avenues to pay, did you lose substantial

revenue?

A. Initially, especially when the site went free. But then

it started to build back up because we had money orders and

other alternative ways of payment.

Q. What were the other alternative ways of payment?

A. Gift cards like Starbucks gift cards.

Q. So explain that to the jury. How would you use, for

example, a Starbucks gift card to post an ad on Backpage.com?

A. So you go to your user account and you buy credits and

when you buy credits, you're given different payment choices.

If you chose gift cards, there were select gift cards that we

would accept and they just put in the number, the gift card

number, and then submit. We would then give them credits and

then take that gift card and then, through a third party, sell

it on the resell market.

Q. All right. And so can you give us an example of, say,

based upon your experience, if you've got a $50 gift card, how

were you able to make any money selling that on some type of

secondary market?

A. A $100 gift card is easier for me.

Q. All right. You choose.

A. So $100 gift card is accepted by Backpage. We send it to 03:57:37

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the secondary market. They send us back -- they take a 35

percent commission so then they send us back $65.

Q. Okay. Do you know the term vanilla VISA?

A. Yes.

Q. And so can you explain to the jury what a vanilla VISA

card is?

MR. FEDER: Foundation as to time and then if this is

after 2015, 401, 403.

THE COURT: Let him first answer the question of what

a vanilla VISA is and then Mr. Rapp can ask the next question.

BY MR. RAPP: 

Q. What is a vanilla VISA?

A. Vanilla VISA is sold in a store like 7-Eleven. It's

anonymous, you pay cash and get a card.

Q. Did there come a time in the life of Backpage.com where

you accepted vanilla VISAs to pay for postings?

A. Yes. It was one of our top-producing cards.

MR. FEDER: Move to strike the final answer as

nonresponsive.

THE COURT: Overruled.

Reask the question, Mr. Rapp.

BY MR. RAPP: 

Q. When did that start? When did you start allowing posters

to use vanilla VISA cards?

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to our attention with the relationship with Litle that vanilla

VISA was 70 percent of your credit card transactions.

Q. So Litle informed you of this fact?

A. They were shocked by it.

Q. Now, did there come a time in the life of Backpage.com

that there were efforts to sell the website?

A. Yes.

Q. I want to take you to 2011. Was there any effort to sell

the website in 2011?

A. Yes, there was.

Q. And what, if anything, did you do in your capacity to

assist in selling the website?

A. I worked with Jed Brunst to create the PowerPoint to sell

the site and then I went on numerous presentations with

investors, buyers.

Q. Do you recall how much you were trying to sell the website

for back in 2011?

A. I thought it was $100 million. I believe.

Q. Okay. And you've mentioned Mr. Brunst. Can you explain

what role, if any, he had with you in trying to sell the

website?

A. He worked closely with Duff Phipps in creating the

PowerPoint and setting up the meetings that we would go to and

we often would make presentations together.

Q. All right. And when you made these presentations to those 04:01:20

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potential buyers, did you discuss with them the strategies that

we spoke about earlier, the aggregation and the reciprocal link

relationship and the super poster relationship?

A. We did not share with them the prostitution ad marketing

activities.

Q. All right. Did you have success selling the website in

2011?

A. We came close but then there was some bad news that came

out in the media and the deal was canceled.

Q. Okay. Then going forward, was the site sold in 2015?

A. Yes, on paper.

Q. Who bought the website in 2015?

A. I became the owner on paper.

Q. All right. When you say you became the owner on paper,

what do you mean by that, Mr. Ferrer?

A. My job description never really changed, only now I could

sign the bank agreements.

Q. So how much -- how much did you pay for the website in

2015?

A. Over $600 million with another kicker that was valued at

50 to 100 million if the site did well. So it was over 600

million.

Q. Can you explain that term "kicker" for the jury?

A. Jim Larkin was concerned that he had sold the site too

cheap; and so if the site continued to grow in revenue, that he 04:03:32

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wanted a kicker added to the agreement where they would get

more money.

Q. Did you have $600 million? Did you pay -- did you write

them a check for the website?

A. I did not write them a check. I did not have the money.

They were going to do it on an earn-out and just sweep the

cash.

Q. All right. And so you have got to explain that to the

jury. When you say they were going to do it as an earn-out and

sweep the cash, what are you talking about?

A. Well, the funds that would go to the Backpage accounts

they would take as payments for principal and interest so

whatever money came in, they would find a way to get swept to

their accounts, their bank accounts.

Q. And so this was -- am -- are we to understand that you

would make a certain amount of money per month running the

website and then that money, if I understand your terminology,

would be swept out of the accounts and then go to the sellers?

A. You know, for the first three months, it wasn't so much

swept out as we made payments. But after losing credit cards,

it just was messy and so they just wanted to get all of the --

any cash that was coming in and so that was payments.

Q. And so who were the sellers? Who sold the website to you?

Who were the people that sold it?

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Jed Brunst, and Scott Spear.

Q. So this sale, from your testimony, happened in 2015;

right?

A. Yes.

Q. And then I believe your testimony a few moments ago,

something else happened in 2015 as well?

A. Right. At three months after the purchase of the site,

MasterCard and VISA terminated and so we went from showing a

profit to losing money -- losing money in the fourth month. It

was going to be impossible to make payments without MasterCard

or VISA.

Q. The months preceding -- let's just call it the credit card

block, how much were you sweeping out to pay Mr. Lacey,

Mr. Larkin, Mr. Brunst, and Mr. Spear?

A. I recall those three months I believe we were making

payments of 14 million per month.

Q. All right. And once the credit card's blocked, I believe

your testimony is -- did you have some difficulty making those

monthly payments?

A. We couldn't make the monthly payments. We were even

concerned with whether we could make payroll.

Q. All right. And as a result of that, what, if anything,

did you do regarding staffing in the wake of this credit card

block?

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Dallas.

Q. And what type of -- what type of positions did you

terminate because of your inability to make payroll?

A. It was mainly moderators.

Q. All right. And once you, in your words, mainly -- am I to

understand that you let go the moderators?

A. Yes.

Q. Did that include Mr. Padilla and Ms. Vaught?

A. No. They continued to remain with the company.

Q. By 2015 when you bought the website for 600 million, what

do you approximate the website making on an annual basis during

that time frame. Let's just say 2014 and then 2015?

A. Annual revenue was annualizing 150 million to 160 million.

There were some days revenue was annualizing at 180,000 -- or

180 million. What I mean by that is, you take the total

revenue and multiply it by 365 then would get your annual

potential revenue.

Q. All right. So when you -- you've discussed now, after the

credit card block, that you had to come up with ways to get

credit card processing?

A. Yes.

Q. And I believe that you identified a name of one of these

shell companies that I think your words were sort of concealed

that Backpage was the ultimate recipient of the revenue; is

that right? 04:09:29

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A. Could you state that again? I'm sorry.

Q. I will. So when the credit card companies blocked the use

of the credit card company's credit cards to do transactions to

post ads, I believe your testimony is you had to go elsewhere,

overseas?

A. Yes.

Q. And who did you deal with from the sellers to assist in

trying to get credit card processing?

MR. PANCHAPAKESAN: Objection. Foundation.

THE COURT: I'm going to overrule. It's a confusing

question as well.

MR. RAPP: I can make it easy.

BY MR. RAPP: 

Q. Is there somebody that you dealt with from the sellers on

the credit card processing -- on trying to establish banking?

A. Yes. Jed Brunst.

Q. All right. And what did you observe became Mr. Brunst's

role in that regard after the sale? What was his role?

A. Bill collector.

Q. All right. And when you say "bill collector," did he --

did he serve any role in trying to assist in getting banking so

that you could process transactions?

A. Yes. He was involved in the financial problems the

company was having and wanted to understand the revenue that

was coming in and what our options were for banking and when we 04:11:15

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might, you know, get the reserves coming from these other

credit card processors that were -- that's what I mean by bill

collector.

Q. All right. And how frequently would you have contact with

him from July of 2015 going forward regarding bill collectors,

in your words?

A. A minimum of a few times a week, either myself or the CFO

that we had we would have contact with him.

Q. Now, in terms of the operation of the site from July of

2015 going forward, who was in control of the site?

A. In terms of the operations of the site through what dates

again?

Q. From July 5, 2015, through 2018.

A. I am. I guess I'm running the site but I'm having regular

meetings with the sellers.

Q. All right. And when you say you're having regular

meetings with the sellers, who from the sellers were you having

regular meetings with?

A. Jim Larkin, Don Moon, Dan Quigley, another intermediary.

Q. All right. Now, Mr. Ferrer, let's talk about you. Sir,

how old are you?

A. 62.

Q. And are you married?

A. I am.

Q. Children? 04:13:10

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A. Yes, three.

Q. Did you go to college?

A. I did. I went to the University of Wisconsin.

Q. And what did you study at the University of Wisconsin?

A. Communication, English, and business.

Q. All right. And when you got out of college, did you serve

in the military at all?

A. I did. I joined the National Guard to pay my student

loans and eventually even reenlisted.

Q. All right. And then as some point, as an adult, did you

get into the classified sales arena?

A. I did a few years after college. I started working for a

shop or a want ad paper, so that's why I have a lot of

expertise in the classified ad business.

Q. And did you eventually go from -- and work at a couple of

newspapers?

A. I did. I worked for "The Milwaukee Journal", a couple of

their papers, and then decided to make a transition into the

alternative weeklies.

Q. All right. And what year was that approximately?

A. 1996 I met with Jim Larkin, had an interview.

Q. And did you start working for one of his alternative

newspapers?

A. I did. I worked for him in Dallas, Texas, so in 1996.

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people.

Q. All right. And how long did you do that before you were

involved in the creation of Backpage?

A. So I did that and I joined the corporate staff after a

number of years, was sent around paper to paper to try to build

revenue. So I was familiar with markets like San Francisco

where I became aware that Craigslist was just devastating the

company's revenue.

And then in 2003 is when I started to develop

Backpage with the company, hiring the developers.

Q. Okay. By the way, with respect to these alternative

newspapers, at the peak, based upon the time that you worked

there from 1996, let's just go to 2018, at the peak, how many

of these alternative newspapers did Mr. Larkin, Mr. Lacey,

Mr. Brunst and Mr. Spear have ownership over?

A. I know it's over -- approximately 12. 11 to 12, maybe

more.

Q. And then at some point did they buy what is known as "The

Village Voice"?

A. Yes. They bought "The Village Voice" but that included

other markets like Minneapolis.

Q. All right. And just for the jury's edification, where is

"The Village Voice" located?

A. In New York City.

Q. Now, you've now testified that Backpage was created in 04:16:57

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2004. By the time you get to 2011, when we just talked a few

minutes ago that it was the first effort to sell Backpage.com,

how were these alternative newspapers doing, if you know, in

terms of revenue?

A. They are not doing well. They are shrinking in page size.

They are cutting back in staff. I'm familiar because, you

know, I know many of the people at the different newspapers.

They are not doing very well. In fact, a year later they would

be sold. 2012.

Q. Mr. Lacey, Mr. Larkin, Mr. Spear, and Brunst sold their

interests in these alternative newspapers?

A. They did.

Q. So if you know, was the only asset that they had, was it

Backpage.com that was generated revenue?

A. I remember that -- well, it was the only asset -- I can't

really speak to that. I can say it's one of the assets that

was continuing to grow revenue dramatically, like double-digit

growth.

MR. RAPP: So Madam Clerk, if you could put so the

witness can see the screen.

BY MR. RAPP: 

Q. We talked earlier about content aggregation. Do you

remember that conversation we had earlier in your testimony?

A. Yes.

Q. So I'm showing you United States 1056. Do you see on your 04:19:02

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screen?

A. Yes, I do.

Q. And is this an email from you to Scott Spear?

A. Yes, it is. It's the Backpage work plan.

Q. Is that attached to the email?

A. It is.

Q. And did you starting in 2004 through approximately 2013,

did you exchange emails with Mr. Spear?

A. We did a lot of email exchanges.

Q. And is this the email address internal that you would have

Mr. Spear's name on it?

A. Yes.

Q. And in preparation for your testimony in this trial, have

you looked at a lot of email exchanges between you and

Mr. Spear?

A. I have.

Q. And are those emails that you either authored and sent to

him or he sent to you?

A. Yes, both.

MR. RAPP: All right. Move to admit United States

1056.

MR. FEDER: 401. 403.

MR. CAMBRIA: There are prior objections, please.

THE COURT: Overruled.

It may be admitted. 04:20:32

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(Exhibit Number 1056 was admitted into evidence.)

MR. RAPP: And request permission to publish, Your

Honor.

THE COURT: It might be published.

BY MR. RAPP: 

Q. All right. I think you were just testifying that this was

a work plan that you were sending to -- from you to Scott

Spear. Why were you sending him this work plan?

A. Scott Spear likes this level of detail. I've organized

the things that we've discussed and I put it into, like, a

functional to-do list that we're going to be working on. And

this is something that I would send to him regularly, these

kind of work plans and agendas.

Q. All right. And I think your testimony earlier was you

were joined at the hip with Mr. Spear?

A. I was in Mr. Spear's office all the time.

Q. All right. And just so the jury understands the layout of

the offices, was your office right next to Mr. Spear?

A. No. My office was in Building A but Building B had better

coffee so I would go over there first thing in the morning for

the good coffee and then say hello to Spear and Larkin and then

go over work plans with them and what we're going to be working

on.

And we were also together trying to sell licenses.

Q. All right. Can you explain that to the jury? They are 04:22:11

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selling licenses?

A. Scott Spear had a lot of connections with all weeklies all

over the country so he's well-known.

Q. How do you know that?

A. Well, because I saw him do it. He knows the publishers of

all of these other papers that we're trying to sell licenses to

and I watched him -- he sold our first license.

Q. All right. But when you sell a license, what does that

mean? What do you get out of selling a license?

A. Well, early on we thought that we're going to make

Backpage a technology company and we're going to provide all

weeklies with this technology solution to compete with

Craigslist. We learned fairly quick that this was a mistake

and we would stop doing that. We didn't need newspapers to get

a website off the ground.

But at this time, in 2005, we're busy trying to sell

licenses.

Q. All right. And so this work plan, I'm now showing you

1056a, and is this the work plan that you were referencing

earlier a few minutes ago that you would frequently provide

him?

A. Yes, it is.

MR. RAPP: Move to admit 1056a as well.

MR. FEDER: 401. 403. 801.

THE COURT: Overruled. It maybe admitted. 04:23:49

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(Exhibit Number 1056a was admitted into evidence.)

BY MR. RAPP: 

Q. All right. And we had talked earlier in your testimony

about content aggregation. Do you see that on your screen

there?

A. Yes, I do, in the middle of the page.

Q. All right. And in that you have a reference to adult. Do

you see that there?

A. Yes.

MR. RAPP: Judge, I'm sorry. I meant to ask that

this be published.

THE COURT: Yes, it may be published -- I'm sorry.

Are you asking now?

MR. RAPP: Yes.

THE COURT: Yes, it may be published.

MR. RAPP: It wasn't published on the jurors' screen.

BY MR. RAPP: 

Q. Just go back a little bit. Do you see the highlighted

portion there?

A. Yes. I do.

Q. Okay. And is this reference content aggregation that we

were talking about before?

A. Yes, it does.

Q. And on that 2, can you read the second -- the number 2

under content aggregation? 04:25:03

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A. Yes. It says, number two: Adult, list every independent

escort. Secure 200 ads in every market.

Q. And can you explain to the jury what the goal was that you

were trying to do? What were you trying to communicate with

Mr. Spear with this?

A. That our intent is to seed the site, the Female Escorts

category, with 200 independent escorts.

Q. Okay. And what does 200 independent escorts mean?

A. Meaning they should have different phone numbers and

different pictures so that it looks like it's a lot of content

that the consumer of those ads would enjoy going through.

Q. All right. You have testified that the Female Escort

section was the most profitable category in Adult?

A. Yes.

Q. Did you also have categories that were Personals?

A. We did. We sometimes called it Dating, same thing.

Personals, Dating.

Q. Did you come to learn -- oh, wait a minute. Did you

charge -- if somebody wants or wanted to put a posting in the

Dating section, did you charge for that posting?

A. At what time timeline?

Q. Well, let's start in 2005.

A. In 2005 it was free to post in Personals.

Q. All right. Did you come to learn that the prostitutes

that posted in the Female Escort section, did you come to learn 04:26:57

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that they were posting for free in the Personal section?

MR. FEDER: Hearsay.

THE COURT: Overruled.

THE WITNESS: Yes, it was a problem.

MR. RAPP: Madam Clerk, if you could publish that

again. Thank you.

BY MR. RAPP: 

Q. And so drawing your attention to this section Sponsor and

Maintenance, do you see that there?

A. Yes, I do.

Q. And do you see under c, there is a reference to personal

ads. Can you read that, what you tell Mr. Spear in that bullet

point under c?

A. I write: Personal ads are hooker-free and posted in the

appropriate categories.

Q. What are you communicating to Mr. Spear in that -- in that

bullet point under c?

A. I'm telling Spear, Mr. Scott Spear, that one of our tasks

that we will accomplish this quarter will be to take the hooker

ads, which are prostitution ads that have a price, and we're

going to get those ads out of there and move them to the

correct category which would be normally Female Escorts.

Q. All right. Moving on to Exhibit 1057, do you see this

email on your screen there, sir?

A. Yes, I do. 04:28:58

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Q. And is this an email exchange between you and Mr. Spear in

2006?

A. Yes, it is.

MR. RAPP: Move to admit United States 1057 and

request permission to publish.

MR. FEDER: 401. 403, 801.

THE COURT: Overrule. It maybe admitted.

(Exhibit Number 1057 was admitted into evidence.)

MR. FEDER: And, I'm sorry, 106.

MS. BERTRAND: Also, I'm not sure if the Government's

moving in simply the excerpt from the document that is

highlighted for the lawyers to see or the entire document and I

can't see the entire document behind it.

THE COURT: Yes. The entire document is blurred. I

mean it's in the background, Mr. Rapp, if you look at the

screen. Okay, because you can't see it.

MR. RAPP: It's an email exchange.

THE COURT: Okay. Now I see it.

MR. RAPP: Thank you.

THE COURT: Well, let me finish. It may be admitted.

Did you move to publish?

MR. RAPP: Yes. I request permission to publish.

BY MR. RAPP: 

Q. And so directing you to this portion there, do you see

that there? 04:30:30

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A. Yes.

Q. And drawing your attention to the middle part of this, is

this an email from Mr. Spear to you?

A. It is.

Q. And could you read the highlighted portion there? And

I'll ask you some questions on the other side of it.

A. Yes. Scott Spear writes: Massage and personal services

in the Services Category Forums, (sex, gay, lesbian -- we need

to do some work here) personals, specifically MSM, which is --

Q. Can I stop you? What does that stand for?

A. Men seeking men.

-- and WSM, women seeking men, as they are loaded

with lewd and lascivious pics as well as escorts.

Q. What did you understand lewd and lascivious pics to mean?

MR. FEDER: Hearsay. Speculation.

THE COURT: Overruled.

MR. CAMBRIA: Relevance.

MS. BERTRAND: Relevance.

THE COURT: Overruled.

THE WITNESS: That is extreme graphic close-ups of

genitalia or sex act pics.

BY MR. RAPP: 

Q. And then he also says: As well as escorts.

What did you take that to mean that?

A. The prostitutes are posting free ads in Dating and this is 04:32:03

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CARL FERRER - Direct

going to be a lot of work to try to convert them into paid

customers in the Female Escorts category.

Q. All right. Was that something of a concern?

A. It was a concern. Scott Spear was invested in this

project to build --

MR. FEDER: Move to strike. Hearsay. Speculation.

THE COURT: Sustained. Sustained and I think we --

are you done with this exhibit or are you going to move on?

MR. RAPP: I've got just a couple quick questions.

THE COURT: The only reason I ask is, if we can

finish quickly, we should because we're at about 4:33 now and

so I promised our jurors we would break around this time. But

if you have one question left . . .

MR. RAPP: I'll tell you what. How about we just

break and I'll -- we'll take it up tomorrow.

THE COURT: Okay.

Members of the jury, we are now at our afternoon

recess. And, again, it's vitally important that you not make

up your minds. We're at the very beginning stages of the case,

as you know.

We took a week off, essentially, to enable some of

our participants to get better and, hopefully, I'm on the mend

here, too. But in any event, I just ask that you, again, not

do any research, not talk to any of your co-workers or your

family members or your friends about what has transpired in the 04:33:37

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CARL FERRER - Direct

court. Doing so will then kind of lead you down the rabbit

hole of trying to make up your mind about what's going on and

what's being said.

We still have a long way to go so simply just keep an

open mind. Maybe do something more enjoyable tonight and get

out there. I think it's under 100 degrees today, thankfully. 

And so with that, we will stand in recess until

sharply nine a.m. tomorrow.

Please all rise for the jury.

(Jury departs at 4:34.)

THE COURT: All right. Please be seated and I ask

those who are in the courtroom to remain seated for a few

minutes to permit our jurors to leave uninterrupted.

Now, let me just clarify for the record, Mr. Rapp. I

know that previously the prior Court and this Court did

indicate to you that the letters, the Attorney General letters

and so on were admissible; but the way in which you went about

seeking to admit, I thought that what you were going to do is

show Mr. Ferrer the letters.

MR. RAPP: I am going to do that.

THE COURT: So in any event, I sustained the hearsay

objection because of the manner in which the testimony was

being elicited so I just wanted to clarify that so that you

understand.

MR. RAPP: I do. 04:35:44

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CARL FERRER - Direct

THE COURT: And I will say that Mr. Feder's point is

a good one in terms of identifying the time frame in which

you're talking about because we've talked about a whole range

of time, from 2004 to 2018.

When you talk about so many activities occurring, it

would be very helpful for the jury to understand the time frame

because, as you know, some of the individuals here have claimed

that they weren't employed at the time at Backpage at the time

that certain things happened.

With that, we will resume --

Oh, and I wanted to say, Mr. Cambria, although I

enjoy hearing from you and your objections, we need not

highlight the objection. Hearsay objection is a hearsay

objection. It doesn't necessarily have to be emphasized by

saying it's a rank hearsay objection, so just be mindful of

that.

MR. RAPP: Can I just briefly, Judge. You know, we

went through a huge process of going through these exhibits and

the defense made a very robust record on that. I don't know if

we need to have them throw out all of the citations to the

Federal Rules of Evidence. If they could just say "our

previous objections," I think that does it for the record. I

only suggest this just in the interest of time.

The second part of this is a minor point is, once I

admit it, can we just automatically just publish it just so I 04:37:21

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CARL FERRER - Direct

don't have to ask those additional, because I would have to do

that on 400 exhibits, so I'm just looking for ways to

streamline this.

THE COURT: So you're asking for an automatic

publication after it's been admitted?

MR. RAPP: Yes.

THE COURT: Is there an objection?

MS. BERTRAND: I don't know because I don't know how

it's going to come in.

THE COURT: And I think that's the problem with

respect to some of the exhibits, because I think some of the

exhibits, depending on how you're going to show them, either

are going to be part of the email or not. So let's just move

forward in terms of the publication.

And with regard to the other objections, I did tell

counsel that in order to preserve the record at the appropriate

time that the exhibit was being offered, that they were

entitled to place their actual objections on the record. And

so we'll move forward in that way. I think it's fine the way

it's going in terms of citing the rule and not arguing the

objection.

So with that, let's stand in recess.

MR. EISENBERG: Your Honor, I'm sorry. Dave

Eisenberg. I do have a housekeeping question for you. I

believe -- I heard that this witness may be on the witness 04:38:35

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CARL FERRER - Direct

standard for several days, maybe weeks. We have discussed

among ourselves when we should be letting the Government know

what exhibits we intend to use in cross-examination. I'm not

sure, the way I read some of the trial orders, whether that --

is that a three-day? So --

THE COURT: Yes. It is a three-day requirement.

So -- well, I think, you know, Mr. Rapp or part of his team can

kind of tell you or give you an idea how much further

Mr. Ferrer is going to go but you're talking about in

cross-examination?

MR. EISENBERG: Correct, Your Honor, yes.

THE COURT: And I think they can alert you as to when

they are getting ready for him to finish his testimony. 

And if you could be mindful of that, it would help

you in the long run in terms of receiving those exhibits that

will be used on cross-examination as well.

MR. EISENBERG: It would be helpful.

THE COURT: I mean it's unpredictable, we know, but

do the best that you can.

MR. RAPP: Certainly.

THE COURT: All right. Have a good evening.

COURTROOM DEPUTY: All rise.

(Whereupon, these proceedings recessed at 4:39 p.m.)

* * * * * 

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C E R T I F I C A T E 

I, ELAINE M. CROPPER, do hereby certify that I am

duly appointed and qualified to act as Official Court Reporter

for the United States District Court for the District of

Arizona.

I FURTHER CERTIFY that the foregoing pages constitute

a full, true, and accurate transcript of all of that portion of

the proceedings contained herein, had in the above-entitled

cause on the date specified therein, and that said transcript

was prepared under my direction and control, and to the best of

my ability.

DATED at Phoenix, Arizona, this 12th day of

September, 2023.

s/Elaine M. Cropper 

_________________________________ 

 Elaine M. Cropper, RDR, CRR, CCP 

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