UNITED STATES DISTRICT COURT

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

_________________

United States of America, )

) No. 2:18-cr-00422-DJH

Plaintiff, )

)

vs. ) Phoenix, Arizona

) March 20, 2023

Michael Lacey, et al. ) 3:00 p.m.

)

Defendants. )

_____________________________ )

BEFORE: THE HONORABLE DIANE HUMETEWA, JUDGE

REPORTER'S TRANSCRIPT OF PROCEEDINGS

MOTION TO CONTINUE TRIAL

Official Court Reporter:

Hilda Elizabeth Lopez, RMR, FCRR

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

401 West Washington Street, Spc 30

Phoenix, Arizona 85003-2151

(602) 322-7256

Proceedings Reported by Stenographic Court Reporter

Transcript Prepared by Computer-Aided Transcription

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A P P E A R A N C E S

For the Government:

U.S. ATTORNEY'S OFFICE

By: Kevin M. Rapp, Esq.

Mr. Peter S. Kozinets, Esq.

Mr. Andrew C. Stone, Esq.

Ms. Margaret Wu Perlmeter, Esq.

40 North Central Avenue, Suite 1200

Phoenix, Arizona 85004

kevin.rapp@usdoj.gov

peter.kozinets@usdoj.gov

andrew.stone@usdoj.gov

margaret.perlmeter@usdoj.gov

For the Defendant Michael Lacey:

LIPSITZ GREEN SCIME CAMBRIA

By: Mr. Paul J. Cambria, Jr., Esq.

42 Delaware Avenue, Suite 120

Buffalo, NY 14202

pcambria@lglaw.com

For the Defendant James Larkin:

OSBORN MALEDON, PA - Phoenix, AZ

By: Mr. Timothy J. Eckstein, Esq.

Mr. Joseph Nathaniel Roth, Esq.

Ms. Sarah Pook Lawson, Esq.

P.O. Box 36379

Phoenix, AZ 85067-6379

teckstein@omlaw.com

jroth@omlaw.com

slawson@omlaw.com

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For the Defendant Scott Spear:

FEDER LAW OFFICE

By: Mr. Bruce S. Feder, Esq.

2930 East Camelback Road, Suite 160

Phoenix, AZ 85016

bf@federlawpa.com

KESSLER LAW OFFICE

By: Eric Walter Kessler, Esq.

6720 N. Scottsdale Road, Suite 210

Scottsdale, AZ 85253

eric.kesslerlaw@gmail.com

For the Defendant John Brunst:

BIRD MARELLA BOXER WOLPERT NESSIM DROOKS

LINCENBERG & RHOW

By: Mr. Gopi K. Panchapakesan, Esq.

Mr. Gary S. Lincenberg, Esq.

1875 Century Park E, Suite 2300

Los Angeles, CA 90067

gpanchapakesan@birdmarella.com

glicenberg@birdmarella.com

For the Defendant Andrew Padilla:

DAVID EISENBERG, PLC

By: Mr. David S. Eisenberg, Esq.

3550 North Central Avenue, Suite 1155

Phoenix, AZ 85012

david@deisenbergplc.com

For the Defendant Joye Vaught:

JOY BERTRAND, LLC

By: Ms. Joy M. Bertrand, Esq.

P.O. Box 2734

Scottsdale, AZ 85252

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P R O C E E D I N G S

(Proceedings commence at 3:00 p.m.)

THE COURT: All right. Please be seated.

COURTROOM DEPUTY: This is Case No. CR 18-422, United

States of America vs. Lacey and others, on for oral argument.

Counsel, please announce for the record.

MR. RAPP: Good afternoon. Kevin Rapp, Andy Stone,

Peter Kozinets and Margaret Perlmeter on behalf of the United

States.

THE COURT: Good afternoon.

MR. ECKSTEIN: Good afternoon. Tim Eckstein, Joe Roth

and Sarah Lawson on behalf of James Larkin.

THE COURT: Good afternoon.

MR. KESSLER: Good afternoon, Your Honor --

MR. CAMBRIA: Good afternoon, Your Honor, Paul Cambria

on behalf of Michael Lacey.

THE COURT: All right. We're going to go with the

folks who are in the courtroom first, and then we'll move to

those who are appearing by video and anyone who is on the

telephone.

Go ahead, Mr. Kessler.

MR. KESSLER: Good afternoon, Your Honor, Eric Kessler

and Bruce Feder for Scott Spear who is present in the back of

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the courtroom.

THE COURT: All right. Good afternoon.

MR. EISENBERG: Good afternoon, Your Honor,

David Eisenberg on behalf of Andrew Padilla. He resides in

Texas, Your Honor. I've talked to him about this hearing. He

wishes that I would waive his appearance for the hearing, Your

Honor.

THE COURT: All right. Very good. Good afternoon to

you.

MS. BERTRAND: Good afternoon, Your Honor, this is

Joy Bertrand appearing for Joye Vaught and Mr. Padilla.

Ms. Vaught lives in Texas and we would ask that her appearance

be waived today. Thank you.

THE COURT: All right. Good afternoon. Now let's go

to the video again.

MR. CAMBRIA: Paul Cambria, Your Honor, on behalf of

Michael Lacey who I believe is in the courtroom.

THE COURT: All right. I do see him.

MR. LICENBERG: Gary Licenberg and Gopi Panchapakesan

on behalf of Mr. Brunst who is present on Zoom.

THE COURT: All right. And anyone else? All right.

Pending before the Court is Mr. Larkin, through Mr. Eckstein,

and Mr. Spear through Mr. Kessler's Motion to Continue the

trial that is currently set for June the 20th, and that was at

Document 1526, I believe.

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I've receive the government's response, and I asked

the government to provide the Court with its position

regarding, in view of the Motion to Continue, whether or not

severance of Mr. Larkin and Mr. Lacey as lead defendants would

be something that they would consider. I've received that

response at Document 1530.

I've received Defendant Brunst's response at 1534;

Defendant Lacey's response, responses, I should say, with

regard to the Motion to Continue and with regard to severance.

Those are at Documents 1535 and 1538.

I've received a response from Defendant Spear at 1536

essentially reiterating the motion and concurring in the Larkin

motion.

I've received Defendant Vaught's response at 1539

indicating there is no opposition to severance and renewing

her, as I take it, renewing her prior filed motion which was

previously denied, and Mr. Padilla's response opposing the

severance, and that is at Document 1537.

Have I missed any other filings?

MR. ECKSTEIN: Your Honor, on behalf of James Larkin,

we filed a response, as the Court ordered, to the government's

petition regarding severance.

THE COURT: I think I do recall seeing that. I just

didn't write it down. All right. Mr. Eckstein, it's your

motion so I'll hear you.

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MR. ECKSTEIN: Judge, current counsel, Mr. Roth,

Ms. Lawson and I appeared in this case on December 13th of

2022. Two days later, the Court order the removal of prior

counsel.

We then had a status conference on December 19th, and

the Court explained at that time that it did not intend to

entertain any Motion to Continue absent extraordinary

circumstances which may be related to a client's health issue,

or something to that effect. The Court said that it wanted

counsel to make sure that we were completely aware of our

obligations to this Court.

The Court further ordered that new counsel file by

January 17th a report noting our receipt of the case file from

prior counsel and confirmation that we've spoken to the

government and received all the discovery produced in this

case. Notably, the Court did not ask at that time, that it

being on December 19th, for counsel to avow that it would be

prepared for a June 20th trial date. Had I been asked, I was

prepared to say that we certainly hoped to be ready for trial

and will endeavor to do so, but we would absolutely need some

time to review the file, look at the discovery, see the work

done by predecessor counsel, study the docket, research and

analyze the relevant case law, and begin the actual work of

preparing for trial before I could make such an avowal.

Had the Court insisted at that time that we either

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make such an avowal or we cannot proceed, we would have asked

to withdraw because, again, in all candor, I could not have

made that avowal at that time. It would not have been

possible. Even if there had been an avowal, as is evident from

the cases cited by the government, that avowal alone would not

justify the denial of the continuance.

The Walter-Eze case, counsel ultimately avowed that he

would be ready for trial; and the U.S. v. Steinger case, also

cited by the government, there is no attorney statement, no

avowal in that case. Rather, it's the Court warning the

defendant of the potential consequences in terms of a

continuance should that defendant choose to go without counsel.

So instead in this case, we moved forward as the Court

directed, filed our status report on January 17th, and we have

been working diligently to prepare for Mr. Larkin's defense

before and after the filing of that report. Now we are seeing

additional time to prepare for trial because we believe

extraordinary circumstances warrant it. Primarily it is to

allow us to meet our ethical and professional obligations to

ensure that Mr. Larkin's Sixth Amendment right to competent,

prepared counsel is protected. Relatedly, we are asking for

this time to meet our obligations to Court, including the

obligations of candor and professionalism.

Turning to the factors as set forth in United States

vs. Flynt, which is outlined in our motion, we have been

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diligent in preparing for trial. Starting with our appearance,

we have handed off and delayed as much of the other work in our

practices as we can making this case our priority. As

explained in our motion, this case focuses on more than

14 years of a business's operations. The government has

produced more than 178,000 documents totaling 4.9 million

pages.

As the government points out, we don't need to review

them all, but we certainly have an obligation to review and

identify those documents that the government may use at trial

or that may be used for impeachment or that may be used as part

of the defense case.

The government does not dispute its intent to use the

nearly 2000 trial exhibits containing more than 19,000 pages

that the government had proposed using in the first trial

September of 2021. So the government argues in its response

that it has provided defense with discovery indices and

collections of hot documents.

I would note, first of all, that's not responsive at

all to the shear volume of the potential trial exhibits,

documents, witnesses, and novel legal theories at issue in this

case. It doesn't save any time, even if you assume what was

provided there was meaningfully useful. It's not. The hot

docs are about a thousand pages of documents that don't involve

James Larkin or any other individual defendant. It mostly

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showed generalized knowledge that some ads on the site related

to unlawful conduct after the fact, or that others claim they

are related to unlawful conduct. Those 150 so documents gives

no insight into the 19,000 documents comprising the trial

exhibits that the government disclosed or identified

previously.

In terms of the indices, this is described in a little

more detail at Docket No. 527 at page 9 in Exhibit A, and

that's a joint status report that was filed in April of 2019.

As explained there, the indices don't do anything to reduce

time. What the indices are are simply the government's

indexing about 4 million pages of production with one of eight

labels that identify a particular subpoena that it came out

through the United States Attorney's Office, that it came

through a PSI report from the California Department of Justice

or some other additional measure, one of eight broad categories

for 4 million pages of documents.

Of course, for trial preparation it requires more than

three lawyers separately reviewing the government's proposed

trial exhibits. There's lots of other things that need to be

done. The defense, prior to the last trial, disclosed 1157

trial exhibits. There are legal issues. One of the factors

set forth in 18 U.S.C. 3161 are novel questions of law as

appropriate for the continuance of a trial.

We are not suggesting here that we need time to

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re-litigate the issues previously litigated before this or

prior courts, but it's impossible to adequately defend

Mr. Larkin without a deep understanding of the government's

novel legal theories. That requires us to understand the

parties' arguments, the case law cited in those arguments, and

the Court's rulings on those various arguments.

If we don't have a complete grasp of all the material,

we couldn't adequately do our job with respect to Motions in

Limine, arguing at that time or in trial over the admissibility

of evidence, dealing with jury instructions, or setting up and

protecting the record regarding issues for appeal. And there

is a docket. We're now, I think at, what, 15, almost 1540 in

terms of docket entries. It would just be malpractice not to

be as familiar as we can with every single prior filing of the

Court and the parties.

Trial witnesses. We explained in our motion the trial

could involve hundreds of witnesses. That refers to the 76

witnesses that the government identified, as well as potential

defense witnesses. The point is, whether it's 76 or a number

over a hundred, that examining a witness is time sensitive and

a matter that needs great time investment. It's simply not a

matter of reviewing some number of pages that the government

has disclosed and going to trial and examining or

cross-examining witnesses. As the Court understands, it is a

far different endeavor.

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Turning briefly to Mr. Larkin, our client, he is not

alleged to be a minor defendant here; rather, he is the

co-owner of Backpage from 2004 to '15. The government alleges

that he oversaw the website's policies and strategic direction,

and that he retained a significant control over the website

after he sold it in 2015. He is named in 71 of the counts in

the indictment. Every single conspiracy count, every Travel

Act count, every concealment, money laundering count, some of

the international promotional money laundering counts, and two

of the transactional money laundering counts. We simply have

to understand in-depth the entirety of the government's case to

adequately defend Mr. Larkin.

I want to turn briefly to a couple other things the

government alleged in its response. The government doesn't

directly allege that we have not been diligent, which really

should end the inquiry. If counsel, and we have certainly

avowed this, that we have and we have and will continue to do

all we can to be prepared as quickly as possible for this

trial. In an absence of some good faith belief or argument

that we have not been diligent, I think the Court simply has to

grant a continuance of some kind, and the government hasn't

alleged that.

The government has said that we are stepping into the

shoes of a legal team that extensively worked this case up.

The implication being we could simply pick up the file and take

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the case into trial. I will say first that the government has

no idea the work that was done to prepare this case for trial

by predecessor counsel and how transferable that work product

was to us. I am not prepared to discuss further in open court

the status of that file as we received it. I will be happy to

do so in camera if the Court has specific questions or concerns

in that regard.

The government cites to U.S. vs. Mikhel, a Ninth

Circuit case from 2018, for the proposition that counsel

doesn't need additional time to prepare where they benefit from

the work of prior counsel. Only in that case, new counsel had

ten months between the time of their appointment and trial,

they had co-counsel trial in place who had billed 4000 hours to

that point, and we have had little more, or will if the

June 20th date is not moved, little more than five months of

time between our total receipt of the file and when this case

would begin. I'm sorry, a little more than six months.

The government also states that we've long had access

to the public court filings in the case. That simply ignores

the fact that we were retained and appeared in mid-December

several days before we were before this Court. And certainly

had not only no obligation, it wouldn't have made sense to

review 1500 docket entries for a matter that we had not been

retained and not appeared.

We'll also note that the government has seven

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attorneys on this matter, some of whom been working on this

matter for as long as seven years. As I said, the only cases

where courts have denied continuances that have been affirmed

on appeal that we found are ones where there's been some kind

of evidence of bad faith from counsel in requesting that;

evidence that a defendant had changed lawyers in an effort to

delay the trial to obtain a continuance. That is certainly not

the case here.

Second, a continuance will serve useful purpose. That

purpose is to ensure that James Larkin has constitutionally

adequate counsel.

The next point, any inconvenience caused by a

continuance would be minimal compared to the challenges to

Mr. Larkin should his request be denied. There will be some

inconvenience to everyone by moving this June 20th trial date.

Jim Larkin, who is present in the courtroom, would

have preferred this case been revolved at the first trial,

which began in September 2021. It was the government's

misconduct that created a mistrial then, creating far more

delay than we are asking for here. We don't believe the

government is further prejudiced by a six-month continuance.

It started its investigation in 2016, if not earlier, indicted

this case two years later, first brought the case to trial in

2021, more than five years after that investigation began, and

the government's case involves facts going back to 2004, nearly

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20 years ago. There is an impact on some witnesses and some

evidence, but that's born equally by both sides.

There is undoubtedly some inconvenience to the Court,

and we appreciate very much the time the Court has set aside

for this trial. This was a motion we had hoped we would never

have to file, and we did so now begrudgingly more than three

months ahead of the scheduled trial date in hopes that we could

minimize whatever inconvenience would be caused by it.

Finally, the last factor, Mr. Larkin will suffer harm

and prejudice should this request be denied. As the Ninth

Circuit has identified in the Flynt case, this is the most

important factor. There is no question here that having to go

to trial on June 20th with inadequately prepared counsel would

impact Mr. Larkin's rights under the Sixth Amendment. There is

no substitute for the time that we are requesting here today.

THE COURT: Well, I want to point your comments now to

what Mr. Cambria filed. Explain to me a little bit more, as

best you can, what your, I guess divided up roles are with

regard to Mr. Lacey.

MR. ECKSTEIN: So the -- in advance of the first trial

among defense counsel, there was a division of the 76 or so

government witnesses as to which defense counsel would have the

primary role, the lead role in cross-examining that witness.

THE COURT: Well, let me back up because as I read,

Mr. Cambria, and Mr. Cambria certainly can chime in here, I

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read his response to say that it was only an agreement between

Mr. Larkin and Mr. Lacey's counsel. So now it sounds like it

was a division of labor amongst all counsel. Which is it?

MR. ECKSTEIN: Mr. Cambria can speak for himself as to

what he wrote. My understanding is it was a division of all

counsel.

MR. CAMBRIA: All counsel, Your Honor.

THE COURT: All right. Thank you.

All right. Anything further, Mr. Eckstein?

MR. ECKSTEIN: No. I think, unless the Court wants to

ask questions about severance, our position is simply, we are

not asking for severance. Again, if the Court believes

severance is necessary in order to grant the request for a

continuance, then we have no opposition on that basis.

THE COURT: Let me hear next from Mr. Kessler having

joined in the motion, do you have anything further to add?

MR. KESSLER: Briefly, Judge. Thank you, Your Honor.

I'm not going to repeat anything that Mr. Eckstein indicated.

As the Court knows, we joined in that motion. My situation was

a little bit different in terms of how I became involved in the

case. I was contacted by the Federal Public Defender in, I

believe late January of this year as to whether I would be

willing to take on a case that is, quote, labor intensive and

set for trial June 20th. That's the information I had.

I agreed to take it. I immediately contacted Mr. Rapp

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who was gracious enough to assist in re-disclosing the

government's disclosure. Unfortunately, because of the size of

the disclosure, we -- my office did not receive back the hard

disks that had the government's disclosure until, it may have

been late February, but when we did receive it the files were

corrupted and so it took another week or so to finally receive

everything.

To be honest, Judge, there are approximately 5 million

documents out there, and I know we don't have to read every one

of them, but I can't have the government telling me which ones

I should read, which seems to be their position, and it is

physically impossible for somebody in my position with just a

couple months to be prepared for this trial. I think that

would be malpractice on my part, and Mr. Spear would not be

afforded adequate and effective counsel under those

circumstances.

THE COURT: Let me ask Mr. Kessler, what, if anything,

did Mr. Feder provide you?

MR. KESSLER: Well, Mr. Feder has provided me with

quite a bit of the disclosure. Between my office, Mr. Feder's

office, and the U.S. Attorney's office, it was agreed upon that

the U.S. Attorney's office would provide about two-thirds of

the discovery that had been disclosed; that Mr. Feder's office

will provide the other third, and that's what's happened. But

again, I only had this material for about two weeks.

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THE COURT: Well, when you say "this material," the

material that Mr. Feder provided you or the material that the

government provided you?

MR. KESSLER: All of it. It all came in about the

same time.

THE COURT: What is this trial that you reference in

May?

MR. KESSLER: It is a state homicide, double homicide

case. We believe it's going to be resolved, but that won't

happen until it is resolved. It's been pending for about five

years.

THE COURT: And if it is resolved, it will likely be

resolved in May because that was the firm trial date?

MR. KESSLER: Yes, or sooner. It's set for a

settlement conference, I believe, in April.

THE COURT: All right. Anything more, Mr. Kessler?

MR. KESSLER: Nothing further.

THE COURT: All right. Let me -- before I take any

responses to the question of severance, let me hear from the

government. Who is speaking for the government?

MR. RAPP: Judge, it seems the focus here is on the

discovery and witnesses and exhibits and so --

THE COURT: Let me cut to the chase, Mr. Rapp --

MR. RAPP: Sure.

THE COURT: -- somewhere in your response you indicate

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that the government is attempting to whittle down its witness

list, can you give me a better description?

MR. RAPP: Yes. Happy to. There are not hundreds of

witnesses. We believe that we have 58 witnesses currently on

our witness list. After just in the last several weeks

reviewing that 58 named witnesses, we believe we will probably

get these down to about 45 witnesses. And the witnesses are

very -- so maybe that answers the Court's questions. You let

me know.

THE COURT: It does in one respect. Have you had an

ability then to assess as the prior court had set a 12-week

trial, do you have a better assessment of how many weeks then

that would result in trial if you got to, for example, 58 or

45?

MR. RAPP: I certainly think it will reduce it some.

It's so hard to tell how long a case will go because we don't

have a sense of the length of cross-examination and we're

always at a disadvantage because we think a witness will take,

for example, four hours on the witness stand, but we can't

really evaluate the length of the cross-examination. It's

particularly difficult when there is six defense attorneys, who

have every right to cross-examine them.

But I do think that if we estimated a 12-week length

of trial, I do think it's going to be less. And the witnesses

are -- it's very formulaic. We have witnesses who are

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trafficking victims who are going to be testifying to their

postings, but a large part of the case is going to be the

former employees of Backpage.

Then in terms of -- well, that's the witnesses. I'll

be happy to talk about the exhibits if that would be helpful to

the Court's decision.

THE COURT: No, not at this point. You can go ahead

with your argument.

MR. RAPP: Well, our argument is this: This case has

been pending for some time. I understand the defense

arguments, but this is -- the posture is a little bit different

here. This case already went to trial, and so the defense has

an incredible insight into what the prosecution's theory is.

They have the transcripts of the opening statement, they

received -- they've had disclosed the PowerPoint opening, so

they know what our theory is.

They know who our witnesses are. They have gotten a

flavor for what some of the witnesses will testify to,

particularly a trafficking victim. It's very formulaic, as I

said. They will be testifying to their postings. They will be

talking about how they were involved in a business enterprise.

So I think the defense -- this isn't a case where, as

I am sure this Court has seen, where, you know, a defense

counsel gets off the case and a new defense counsel substitutes

in for whatever reason and they are trying to figure out the

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case. This is a case that they know what the theory is and

they have the advantage of all the pleadings that have been

filed in this case, so they know that many of the issues have

been litigated. There's been six Motions to Dismiss that have

been litigated in this case, so they understand that.

With respect to the exhibits, I understand that this

can be daunting to the defense when there is millions of

documents, but the reality here is we count 1800 exhibits on

our exhibit list. It's important to understand what type of

exhibits those are. Those are the internal e-mails of

Backpage. The vast majority of those exhibits will come

through a single witness, Carl Ferrer, the CEO.

And so these aren't -- it isn't as if this is

discovery that comes from some third party that the defense is

completely unfamiliar with it. These are -- the vast majority

of these e-mails are authored by the defendant, and so they are

very familiar with it, and these are sophisticated defendants.

Not unlike some of the cases we have in this court, these are

defendants that can assist their defense attorneys in reviewing

e-mails.

So the thrust of the defense argument is there are

enumerable witnesses. It's not really accurate. There's a

considerable amount of discovery. Well, it has been whittled

down after four years or three years post indictment to

discrete exhibits. Those exhibits are -- many of those

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exhibits are well-known to the defendants because they were the

authors of them, and so there are no real extraordinary

circumstances in this case. And you know, the issue here is if

we have -- this case has been continued enumerable times, and

in many cases for good reason because of a worldwide pandemic,

because counsel have gotten on the case. Some of the counsel

have represented these defendants pre-indictment and have been

very familiar with the litigation that has occurred in the

civil context, which is in some ways related to this case.

So we believe that if this case gets continued once

again, we will be back in front of this court and there will be

some other issue. The Court has correctly carved out a

discrete amount of time. If you recall, we were going to even

try this case earlier and then it got continued to June and all

counsel were aware that this case would proceed in June.

In terms of, we can't speak, of course, to the

division of labor among the defense attorneys. I can only tell

you what we observed during trial was some defense attorneys

would handle a certain witness and other defense attorneys

would handle others, and so they are in a joint defense and so

they have that ability to, you know, carve out certain

witnesses that are more relevant for particular defendants, I

guess, but that's what we observed during the trial.

So for those reasons, we do believe that this case

should proceed in June as scheduled.

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THE COURT: So give me a little bit more about your

position with regard to severance. I mean, when I look at the

indictment, to be sure, the majority of the indicted charges

are as to Mr. Lacey and Mr. Larkin, and so why the opposition

to carving them out from the other defendants especially given

the posture of the case right now?

MR. RAPP: We would go back to the Court's order

regarding Defendant Vaught. This is a conspiracy case, and

they were all clearly involved in a conspiracy. But with

respect to the specific question as to Mr. Lacey and

Mr. Larkin, Mr. Spear is just as involved with both of those

gentlemen. In fact, in some cases more so because he was in

the unique position of straddling. He was a minority owner but

had one foot in the upper management with Mr. Lacey and

Mr. Larkin, but one foot in with middle management with

Mr. Ferrer.

So what you will find certainly on those 1800

primarily e-mails is Mr. Spear is very much involved on the

day-to-day decisionmaking involving the internal prostitution

marketing strategies, and in moderation --

THE COURT: Well, then let me add him into the

severance mix, then why the opposition to severing out

Mr. Lacey, Mr. Larkin and Mr. Spear for a separate trial given

the current posture?

MR. RAPP: Because Mr. Brunst is also very much

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involved in this -- in the running of this 14-year website. As

the CFO, he knows very well what the product is. It isn't -- I

note that Mr. Brunst's attorney filed a motion sort of

attempting to distinguish his role, but I know of no company

where the CFO isn't intimately involved in what product they

are selling. I don't think it's any different here, but what

is particularly important is the money laundering, which if the

Court recalls from litigation and from the Superseding

Indictment, is the circumventing of credit card processing

which Mr. -- starting in 2015 when the credit cards shut down

the ability for individuals to use those credit cards to

purchase postings on the website. It was Mr. Brunst who worked

almost on a day-to-day basis, and the e-mails bear that out, on

trying to circumvent that conventional credit card processing,

which is the money laundering.

So Mr. Brunst is intimately involved with Mr. Spear,

Mr. Lacey and Mr. Larkin, and it is a conspiracy and it makes

no sense to sever him out.

THE COURT: You may continue.

MS. KENNEDY: So on severance, this is a conspiracy

case. And as the Court aptly noted in the order regarding

Ms. Vaught's Motion to Sever, who the Court has already ruled

that she is not appropriate that she be severed out, and she is

arguably as a salaried, salaried employee as opposed to an

owner, she's not appropriate to be severed out. I can't

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imagine a world where these other individuals should be

severed. This was clearly a conspiracy where they were all

working toward a common end and should be tried together, and

it makes -- and I will also add for the Court's consideration

that in any severed trial the evidence would likely be

identical; in other words, we cannot represent to the Court

that if there were separate trials that they would be -- the

length of the trial would be anything less, and that we would

call less witnesses because obviously all of the witnesses we

would have in a trial, for example, with Lacey and Larkin,

Lacey Larkin and Spear, I guess, would apply certainly to a

trial on the balance of the defendants.

THE COURT: Anything more?

MR. RAPP: No, Your Honor. Thank you.

THE COURT: Now, does anybody else want to be heard on

the issue of severance? I guess I will go down the line.

Mr. Eckstein.

MR. ECKSTEIN: Nothing other than what I already said.

THE COURT: All right. Mr. Kessler, did you have

anything?

MR. KESSLER: Nothing further.

THE COURT: Mr. Eisenberg.

MR. EISENBERG: I do, Your Honor. Your Honor, may it

please the Court, I might be one of the only defendants who is

in agreement that there should not be severance, and I will be

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very candid with the Court about how I have had to approach

this case. As a CJA appointed attorney, the budget which was

approved and for which I am very grateful, nonetheless had to

be taken into consideration in terms of what I as a codefendant

could supply to the proof of the case and the defense of the

case.

Now, what that means is that there has been

arrangements among counsel as to where the emphasis would be.

For example, do we have one person who would handle all of the

computerized equipment in court at the time of trial? What can

I contribute to that as a CJA attorney? With respect to

marshalling exhibits, with respect to preparing exhibits, all

of that, Your Honor, in this case is extremely complicated,

it's very time consuming, it's labor intensive, and it's

difficult for a CJA attorney to accomplish all that. And I am

not complaining about it for one minute, excuse me, because I

like these cases and I like to do them, but the reality is that

it's just a limited amount of circumstances for me.

Nonetheless, I'll be prepared to go to trial whenever the Court

orders it.

I will say this as well, the budgeting process now

involves three of us, Mr. -- I'm sorry -- Ms. Vaught,

Mr. Padilla, and now Mr. Kessler's client, Mr. Spear. And with

that grouping, if you will, we are better able to present a

budget to the Ninth Circuit budgeting authority, and that also

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will help us in terms of dividing, if possible, we all have our

own obligations to our clients, dividing the effort among us.

I would love to be able to be the second of the two

cases going to trial, Your Honor, because it's very clear

everybody on the second case would be able to take information

about how the first case evolved. I would have to agree with

Mr. Rapp, I think these cases are going to be the same even

though my client isn't in the money laundering charges, the

other charges, the Travel Act charges, they are the same for

everyone, I believe, and so the case will be proven twice.

There will be two trials of the same length and the same

magnitude.

So Your Honor, I am opposed to severance for a very

practical reason. Thank you.

THE COURT: All right. Thank you. Let me move to

Mr. Cambria. Did you have anything more to add?

MR. CAMBRIA: I do, Your Honor. The problem with

severance generally is that we did split up the witnesses, and

in a conspiracy case I can envision that we would be

responsible -- that all witnesses need to be covered, and so

there would be extra preparation for myself as well as

Mr. Eckstein. I already have between 18 and 21 witnesses

assigned to me from the first trial with the group that we had

at that time.

To sever Larkin and Lacey from the others, again, we

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couldn't go first because Mr. Eckstein would not be prepared by

the 20th. And taking on the other witnesses that the balance

of the defendants were responsible for would put me in a

situation where I couldn't be ready by that time either given

the long -- given the very heavy load, if you will, of

witnesses that I have now that are quite substantial.

So I see a problem either way with preparation, and

either because we have to take on extra witnesses or because

Mr. Eckstein would not be prepared with the two of us in a

trial together if we had to go first.

THE COURT: All right. Thank you.

And Mr. Lincenberg, I do have your position regarding

severance, do you wish to be further heard?

MR. LINCENBERG: I have little to add, Your Honor. We

did not seek a severance. We are not moving for a severance

primarily because I think as a matter of right we are not

entitled to it, but I think the Court has raised this question

of severance in connection with the continuance motions because

the Court does have discretion. And this is a massive

undertaking. It's a three-month trial, and it has gotten

strung out much longer because of COVID and appeal and

government misconduct and various reasons, and resource-wise,

and financially particularly with all the freezes, it's a very

difficult case to work from the defense side. There's a

massive amount of work that's being done.

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As Mr. Cambria said, it's alleviated someone because

witness assignments have been split up. But from my client's

perspective, we're basically sitting in the courtroom for 80,

90 percent of the trial with no witnesses who have anything to

say about my client. You have, as Mr. Rapp noted, the former

CEO of Backpage who will say that when it came to financial

issues, payment issues or money issues, the CFO is involved in

dealing with banking relationships and alike. That's correct.

And so they will put an IRS agent on the witness stand who then

says this is the way the money went between accounts, which is

the way it would go whether it's a legitimate business or not a

legitimate business.

We'll play a role with some of the witnesses when it

gets to the tail of this case, but there is an unfairness

element of it for us to be sitting through a lengthy trial.

So if there's a severance, my point was simply to say

that we should be in the second half of it because, first of

all, I believe that the counts will be dismissed because there

is no offense here. And if there is no underlying offense,

there is no money laundering offense. And if they are not

dismissed, a second trial would be much more abbreviated than

the first one.

So that's all I'd add for the Court's thinking. It's

not taking a position in favor of severance, but only if there

is one, that we should be in the latter part of the case.

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And one very small point, just in terms of the

scheduling of all these dates, I did file a Document 1497 back

in November just noting one week when I was unavailable in

September. As the Court recalled when the Court was setting

the dates, we were all talking about dates in the spring that

fell apart due to various lawyers' conflicts, and the Court

just set a date beginning in June. The trial may be over

before then, but I do want to note that we had that one week

conflict.

THE COURT: All right. Ms. Bertrand.

MS. BERTRAND: Thank you, Your Honor, I would like to

speak briefly just to address the government's comments. I

think it's inaccurate, with what I will call the lower-level of

defendants versus Lacey and Larkin, to say that the trial would

be of comparable length because, first of all, for example,

Mr. Padilla and Ms. Vaught, both are not charged in 50 of the

counts of the indictment. They are not charged with money

laundering. So like Mr. Brunst's situation, we are going to be

sitting through a 12-week trial where several do not pertain to

my -- do not pertain to my client at all.

And I think likewise, the idea that all of these

e-mails coming in, for whatever, Lacey and Larkin and whoever

else is talking with each other, they weren't including

Ms. Vaught because she was at a low level. She wasn't a

policymaker. She was not -- she would not have been looped in

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on those discussions. So the idea that the trial would be of

comparable length I think is an overstatement at best.

I agree with the comments of defense counsel that if

it were to be severed, it would be appropriate for us to go

second, and I note this in our response to the Court's order

that what makes sense is to figure out whether or not any crime

happened in the first place because if it didn't happen for

Lacey and Larkin, it certainly didn't happen for the rest of

the defendants, and certainly for Ms. Vaught. So that would be

the reason to be actually more efficient in the long run.

But I also wanted to note on Mr. Eisenberg's comments.

Mr. Eisenberg, I am a CJA lawyer that takes most complex cases,

and I really appreciate both the opportunity to work with cases

like this in terms of the interest, but also I really

appreciate the camaraderie that the defense counsel have had in

this case and I value it, so I don't make these thoughts -- I

don't set forth his thoughts, comments and position lightly,

but I have to also advocate for what is in the best interest of

my client individually, and I think at this point that should

be severed from the higher-level defendants. Thank you.

THE COURT: All right. Is there anyone else who

wishes to be heard? All right. I think the Court has

sufficient information. I will take the matter under

advisement and you'll have my ruling shortly.

Is there any other matter to be raised at this

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juncture from the government?

MR. RAPP: No, Your Honor. Thank you.

THE COURT: Anything from defense counsel?

MR. ECKSTEIN: No, Your Honor.

MR. KESSLER: No.

MR. EISENBERG: No, Your Honor.

THE COURT: All right. Then we are adjourned.

(Proceedings concluded at 3:47 p.m.)

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C E R T I F I C A T E

I, HILDA E. LOPEZ, do hereby certify that I am duly

appointed and qualified to act as Official Court Reporter for

the United States District Court for the District of Arizona.

I FURTHER CERTIFY that the foregoing pages constitute

a full, true, and accurate transcript of all of that portion of

the proceedings contained herein, had in the above-entitled

cause on the date specified therein, and that said transcript

was prepared under my direction and control.

DATED at Phoenix, Arizona, this 22nd day of April,

2023.

s/Hilda E. Lopez_______

HILDA E. LOPEZ, RMR, FCRR

Case 2:18-cr-00422-DJH Document 1576 Filed 04/23/23 Page 33 of 33