UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

___________________

United States of America, )

 ) 

 Plaintiff, ) NO. 2:18-cr-00422-DJH

v. ) 

 ) Phoenix, Arizona

Michael Lacey, et al., ) October 20, 2023

 ) 9:01 a.m.

 Defendants. )

_____________________________)

BEFORE: THE HONORABLE DIANE J. HUMETEWA, JUDGE

REPORTER'S TRANSCRIPT OF PROCEEDINGS

JURY TRIAL DAY 22

Official Court Reporter: 

Teri Veres, RMR, CRR

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

401 West Washington Street, Spc. 38

Phoenix, Arizona 85003-2151

(602) 322-7251

Proceedings Reported by Stenographic Court Reporter

Transcript Prepared by Computer-Aided Transcription

UNITED STATES DISTRICT COURT

Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 1 of 116
 1 A P P E A R A N C E S

 2 For the Plaintiff:

UNITED STATES ATTORNEY'S OFFICE

 3 By: Kevin M. Rapp, Esq.

 Andrew C. Stone, Esq.

 4 Peter Shawn Kozinets, Esq.

 Margaret Wu Perlmeter, Esq.

 5 40 North Central Avenue, Suite 1800

Phoenix, Arizona 85004-4408

 6

 7 For the Defendant Michael Lacey:

LIPTSUTZ GREEN SCIME CAMBRIA, LLP

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

42 Delaware Avenue, Suite 120

 9 Buffalo, New York 14202

 10 For the Defendant Andrew Padilla:

DAVID EISENBERG, PLC

 11 By: David S. Eisenberg, Esq.

3550 North Central Avenue, Suite 1155

 12 Phoenix, Arizona 85012

 13 For the Defendant Scott Spear:

KESSLER LAW OFFICE

 14 By: Eric Walter Kessler, Esq.

6720 North Scottsdale Road, Suite 210

 15 Scottsdale, Arizona 85253

- and -

 16 FEDER LAW OFFICE, PA

By: Bruce S. Feder, Esq.

 17 2930 East Camelback Road, Suite 160

Phoenix, Arizona 85016

 18

 19 For the Defendant John Brunst:

BIRD MARELLA BOXER WOLPERT NESSIM DROOKS

 20 By: Gary S. Lincenberg, Esq. 

 Gopi K. Panchapakesan, Esq.

 21 1875 Century Park E, Suite 2300

Los Angeles, California 90067

 22

 23 For the Defendant Joye Vaught:

JOY BERTRAND, ESQ, LLC

 24 By: Joy Malby Bertrand, Esq. 

P.O. Box 2734

 25 Scottsdale, Arizona 85252-2734

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 2 of 116
 1 I N D E X

 2

 3 GOVERNMENT WITNESS: PAGE 

 4 MEGAN LUNDSTROM

Continued Direct Examination by Ms. Perlmeter...............5

 5 Cross-Examination by Mr. Eisenberg..........................9

 6 Rule 29 Motion..............................................19

 7

 8

 9 EXHIBITS

 10 EXHIBIT RECEIVED

 11 NO. DESCRIPTION

 12 2036a Attachment: Backpage Ad dated 11/29/2012 5

 “New In Town ... Bubbly Blonde ... Lets Play-26” 

 13 USAO-BP-0034733

 14

 15

 16

 17

 18

 19

 20

 21

 22

 23

 24

 25

UNITED STATES DISTRICT COURT

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 1 P R O C E E D I N G S

 2 (Whereupon the proceedings began at 9:01 a.m.)

 3 THE COURT: Please be seated. I believe all of our 

 4 jurors are present so we will bring our jurors -- oh, let's 

09:01a 5 have our witness come forward.

 6 MS. PERLMETER: And, Your Honor, regarding the 

 7 Exhibit 2036a, I did speak with a couple members of the 

 8 defense yesterday afternoon about the redactions; and 

 9 Mr. Feder informed me if I redacted the handwritten portions 

09:01a 10 of the exhibit out, that he would not have an objection to it. 

 11 So what I would propose, if the Court is okay with 

 12 this, is if we keep the same exhibit number and I would just 

 13 remove the yellow sheet from the current version and place it 

 14 on the redacted version. For the record, the redacted version 

09:02a 15 will become the new 2036a.

 16 THE COURT: That's fine.

 17 MS. PERLMETER: Okay, thank you.

 18 THE COURT: All rise. 

 19 (Jury in at 9:03 a.m.)

09:03a 20 THE COURT: Okay, please be seated. 

 21 Members of the Jury, welcome back. The record will 

 22 reflect the presence of the witness and, Ms. Perlmeter, you 

 23 may continue.

 24 MS. PERLMETER: I'll wait for Mr. Feder to sit 

09:04a 25 down.

UNITED STATES DISTRICT COURT

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MEGAN LUNDSTROM - CONT'D DIRECT EXAMINATION BY MS. PERLMETER

 1 CONTINUED DIRECT EXAMINATION

 2 BY MS. PERLMETER:

 3 Q. Good morning, Ms. Lundstrom. 

 4 A. Good morning.

09:04a 5 Q. When we left off yesterday afternoon we had 26 -- 2036a 

 6 on the screen for your eyes only, and you had explained to us 

 7 that it is your Backpage ad?

 8 A. Yes.

 9 Q. And it was the very last Backpage ad that you posted for 

09:04a 10 yourself?

 11 A. Yes.

 12 Q. Do you see the exhibit?

 13 A. Yes, I do.

 14 Q. Now, is the bottom part of the exhibit where the 

09:04a 15 handwritten notes were made by the police officer, has that 

 16 been blacked out?

 17 A. Yes.

 18 Q. But other than that, is this still the same Backpage ad 

 19 you were looking at yesterday?

09:04a 20 A. Yes.

 21 MS. PERLMETER: Move to admit Exhibit 2036a.

 22 MR. EISENBERG: No objection, Your Honor.

 23 THE COURT: 2036a may be admitted and it may be 

 24 published.

09:05a 25 (Exhibit No. 2036a admitted in to Evidence.)

UNITED STATES DISTRICT COURT

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MEGAN LUNDSTROM - CONT'D DIRECT EXAMINATION BY MS. PERLMETER

 1 BY MS. PERLMETER:

 2 Q. Ms. Lundstrom, can you please tell us where this ad was 

 3 posted and on what date that it was posted? 

 4 A. So it was posted on Backpage in the adult entertainment 

09:05a 5 section in the Rockies subsection in Colorado.

 6 Q. Now, what words in your ad suggest prostitution?

 7 A. So in addition to the subject line, the title, in this 

 8 part "I'm here for only a couple days," "meeting some new 

 9 friends," "love having fun," "never play games," and "we can 

09:05a 10 get together" all suggest a commercial sex transaction.

 11 Q. Are you focusing or directing your attention to the 

 12 higher end clientele you were telling us about yesterday 

 13 afternoon?

 14 A. Yes.

09:06a 15 Q. And was this particular ad -- like were you in Vail, 

 16 Colorado, at this time?

 17 A. Yes.

 18 Q. Now, Ms. Lundstrom, at this point in time in roughly 

 19 2012, how much were your clients paying to have sex with you?

09:06a 20 A. Generally in Vail around $500 an hour or more.

 21 Q. All right, thank you. Now, I want to fast forward to 

 22 2015. Was there a time where in 2015 you posted ads on the 

 23 Backpage website? 

 24 A. Yes, I did.

09:06a 25 Q. Okay. Was that in conjunction with a speaking 

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 6 of 116
MEGAN LUNDSTROM - CONT'D DIRECT EXAMINATION BY MS. PERLMETER

 1 arrangement -- or a speaking engagement you had with a law 

 2 enforcement group?

 3 A. Yes, it was.

 4 Q. And in what city and state was this meeting in?

09:07a 5 A. Greeley, Colorado.

 6 Q. Was part of your presentation to the law enforcement 

 7 group, was that involving the posting of Backpage ads?

 8 A. Yes.

 9 Q. Could you please explain to the jury -- 

09:07a 10 MR. EISENBERG: Objection -- I'm sorry, ma'am. 

 11 Objection, Your Honor, relevance.

 12 THE COURT: Overruled.

 13 BY MS. PERLMETER:

 14 Q. Could you please explain to the jury your posting of 

09:07a 15 Backpage ads in 2015?

 16 A. So in 2015 I had just started my organization that at the 

 17 time was Free Our Girls, and I wanted to demonstrate to local 

 18 law enforcement that prostitution was happening in our 

 19 relatively rural community even though you couldn't see it 

09:07a 20 like street prostitution, and so I set up a demonstration 

 21 using Backpage ads.

 22 Q. What did you use in this presentation? Did you purchase 

 23 things in advance to demonstrate the posting of Backpage ads?

 24 A. Yes.

09:08a 25 MR. EISENBERG: Again, Your Honor, I'm sorry, 

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 7 of 116
MEGAN LUNDSTROM - CONT'D DIRECT EXAMINATION BY MS. PERLMETER

 1 relevance. This is an extension of something that's not 

 2 contained within the charges. It has nothing to do with the 

 3 case.

 4 MS. PERLMETER: Your Honor, this goes to Count 1.

09:08a 5 MR. EISENBERG: Demonstrating to the police -- 

 6 THE COURT: No, no more speaking about the objection 

 7 yet. Overruled.

 8 MS. PERLMETER: Please continue.

 9 THE WITNESS: So what I did was I went to a local 

09:08a 10 grocery store and I purchased five or six prepaid Visa gift 

 11 cards and then five or six disposable cell phones, and I 

 12 registered all of those with fake names and addresses; and 

 13 then I created one Backpage ad for each region in Colorado, 

 14 and I paid for the ad with the prepaid gift card and used one 

09:09a 15 of those prepaid cell phones for each ad and then I turned -- 

 16 I submitted all of those so that the ads went live and then 

 17 demonstrated to police how quickly phone calls started coming 

 18 in for those ads.

 19 BY MS. PERLMETER:

09:09a 20 Q. Did you post the ads officially in front of the group 

 21 that you were presenting before?

 22 A. Yes, they witnessed the process.

 23 Q. And how quickly after you posted each of the five or six 

 24 ads did the burner phones begin to ring?

09:09a 25 A. Less than five minutes.

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 8 of 116
MEGAN LUNDSTROM - CONT'D DIRECT EXAMINATION BY MS. PERLMETER

 1 MS. PERLMETER: Your Honor, I have no further 

 2 questions for the witness.

 3 THE COURT: Who is coming forth to examine --

 4 MR. EISENBERG: I am, Your Honor. 

09:09a 5 CROSS-EXAMINATION

 6 BY MR. EISENBERG:

 7 Q. Good morning, Ms. Lundstrom.

 8 A. Good morning.

 9 Q. The ad that's in 2036a -- 

09:09a 10 MR. EISENBERG: Could we get that back up on the 

 11 screen, ma'am. I can see it over there. 

 12 Can you take away your computer?

 13 BY MR. EISENBERG:

 14 Q. So there's a -- if you look over to the right in the 

09:10a 15 column, it looks to me like there are two pictures, right?

 16 A. Yes.

 17 Q. Would you agree with me they're awfully hard to see at 

 18 this point?

 19 A. Yes.

09:10a 20 Q. They're very dark and almost non-visible, right?

 21 A. Yes.

 22 Q. Okay. When you made a picture or posted a picture in an 

 23 ad of yourself, you determined that you wanted to do tasteful 

 24 photographs when you put them in Backpage; is that correct?

09:10a 25 A. Yes.

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 9 of 116
MEGAN LUNDSTROM - CONT'D DIRECT EXAMINATION BY MS. PERLMETER

 1 Q. And that they didn't contain any nudity, right?

 2 A. Yes.

 3 Q. With respect to posting in Backpage, your ads did not 

 4 come back to you, if you will, either deleted or cancelled or 

09:11a 5 anything of that nature; isn't that correct?

 6 A. Correct.

 7 Q. And the reason for that is that you looked like an adult; 

 8 is that right?

 9 A. I have no idea what the decision process was.

09:11a 10 Q. Well, as far as you were concerned, the reason why they 

 11 didn't come back to you, I believe, is that you attributed 

 12 that to the fact that you were an adult and because there was 

 13 no nudity in your photos?

 14 MS. PERLMETER: Objection, compound question.

09:11a 15 MR. EISENBERG: Okay. One, you attributed -- 

 16 THE COURT: Sustained.

 17 BY MR. EISENBERG:

 18 Q. You attributed the fact that you didn't get anything 

 19 rejected because there was no nudity in the photos, right?

09:11a 20 A. I believe so, yes.

 21 Q. And, ma'am, if you look up on your ad right at the top 

 22 there, it says "Let's play - 26." Do you see that?

 23 A. Uh-huh, yes.

 24 Q. You were actually -- at that time were you 26 years old?

09:12a 25 A. No.

UNITED STATES DISTRICT COURT

10

Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 10 of 116
MEGAN LUNDSTROM - CONT'D DIRECT EXAMINATION BY MS. PERLMETER

 1 Q. You were 24?

 2 A. No.

 3 Q. Older?

 4 A. Older.

09:12a 5 Q. How old?

 6 A. I believe I was 28 at the time.

 7 Q. Okay. So, obviously, you were an adult?

 8 A. Yes.

 9 Q. Okay. I think in your direct you said that when you 

09:12a 10 first started posting on Backpage things were like the Wild 

 11 West?

 12 A. Yes.

 13 Q. Wild West. And that is -- basically, what you were 

 14 saying is anything goes, is that the idea?

09:12a 15 A. Yes.

 16 Q. And you first started posting in 2008; is that correct?

 17 A. Yes.

 18 Q. At that time when you first started posting, you were 

 19 able to post hours and rates, correct?

09:13a 20 A. Yes.

 21 Q. And then there came a time when things changed, right?

 22 A. Yes.

 23 Q. And what the change was, rates were no longer allowed, 

 24 right?

09:13a 25 A. Yes.

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 11 of 116
MEGAN LUNDSTROM - CONT'D DIRECT EXAMINATION BY MS. PERLMETER

 1 Q. And the way you knew that is how?

 2 A. Through websites like The Erotic Review.

 3 Q. You learned that rates being posted in Backpage were not 

 4 allowed; is that correct?

09:13a 5 A. Yes.

 6 Q. And you also knew that you -- by that time you knew that 

 7 you shouldn't post sexually explicit pictures, right?

 8 A. Yes.

 9 Q. Or use terms that were descriptive of sex acts, correct?

09:13a 10 A. Yes.

 11 Q. And the reason that you knew -- well, your ad would be 

 12 flagged and it would be rejected if you posted things like 

 13 that; is that correct?

 14 A. Correct.

09:13a 15 Q. Okay. Ma'am, do you know someone named Brad Myles?

 16 A. Yes, I do.

 17 Q. Who is he?

 18 A. He is the former CEO of Polaris.

 19 Q. And you're currently with Polaris?

09:14a 20 A. As of January of this year, yes.

 21 Q. Okay. Did you know that he testified here yesterday or 

 22 the day before?

 23 A. I was aware that he testified.

 24 Q. Did you and he talk about your testimony?

09:14a 25 A. No.

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 12 of 116
 1 MR. EISENBERG: Thank you, Your Honor.

 2 THE COURT: Ms. Perlmeter? 

 3 MS. PERLMETER: Does anyone else from the defense -- 

 4 THE COURT: Oh, I'm sorry, yes. Thank you for the 

09:14a 5 reminder. Not enough coffee this morning. 

 6 Mr. Cambria? 

 7 MR. CAMBRIA: No, Your Honor.

 8 THE COURT: Ms. Bertrand? 

 9 MS. BERTRAND: No, thank you.

09:14a 10 THE COURT: Mr. Lincenberg? 

 11 MR. LINCENBERG: No, Your Honor.

 12 THE COURT: Mr. Kessler? 

 13 MR. KESSLER: No, Your Honor.

 14 THE COURT: All right. Ms. Perlmeter? 

09:14a 15 MS. PERLMETER: Thank you, your Honor. We have no 

 16 redirect for the witness.

 17 THE COURT: May the witness be excused from 

 18 subpoena? 

 19 MS. PERLMETER: Yes, please.

09:14a 20 THE COURT: Any objection from defense? 

 21 MR. EISENBERG: No, Your Honor.

 22 THE COURT: All right. Ma'am, you are excused from 

 23 subpoena. Thank you for your testimony. You may step down 

 24 and be cautious of the stair right there, and you may leave 

09:15a 25 the courtroom. Thank you. 

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 13 of 116
 1 Call your next witness.

 2 MS. PERLMETER: Your Honor, at this time the United 

 3 States has completed its presentation of this case and we will 

 4 rest.

09:15a 5 THE COURT: Okay. Well, at this moment, Members of

 6 the Jury, I'm going to have you go on a short break. I'm 

 7 going to discuss some matters with the counsel. I'll have 

 8 Liliana retrieve you in a few moments. 

 9 Simply because the Government has rested its case in 

09:15a 10 chief does not mean that you should come to any conclusions. 

 11 We still have the defendants' case to proceed with, but in 

 12 that interim period just continue to keep an open mind and 

 13 don't discuss the matter. Remember the admonition and I'll 

 14 have Liliana come and retrieve you in about 10, 15 minutes. 

09:15a 15 Please all rise for the jury.

 16 (Jury out at 9:15 a.m.)

 17 THE COURT: All right, please be seated.

 18 At this point, let me ask whether or not there are 

 19 any motions that have been contemplated by defense counsel? 

09:16a 20 What just happened there, Mr. Kessler? 

 21 MR. KESSLER: I'm sorry, I just dropped. . .

 22 THE COURT: Okay, we'll have them retrieve it.

 23 MR. PANCHAPAKESAN: Your Honor, we intend to make a 

 24 Rule 29 motion.

09:17a 25 THE COURT: And are you -- let me just ask in terms

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 14 of 116
 1 of procedure, are you each going to individually make those 

 2 arguments? 

 3 MR. PANCHAPAKESAN: I think the procedure -- at 

 4 least orally I plan to make a presentation, and then counsel 

09:17a 5 will follow up.

 6 THE COURT: Okay. What order -- have you determined 

 7 an order? 

 8 MR. PANCHAPAKESAN: I'll likely go first and broadly 

 9 cover some joint issues. And then, of course, if the Court at 

09:17a 10 some point wants briefing, we'd be prepared to do that; but 

 11 after that I think Mr. Cambria or Mr. Feder would go next.

 12 THE COURT: All right. So I'm trying to get a sense 

 13 of time here because, obviously -- I'd like to get a sense as 

 14 to how long your motion -- your oral motion is going to take, 

09:18a 15 permit the Government to respond and, of course, permit a 

 16 reply and then I want to understand whether or not -- 

 17 depending on how the motions are presented, whether you have a 

 18 witness available in the defense case in chief? 

 19 MS. BERTRAND: Your Honor, I think we've been 

09:18a 20 relying on the Court's instruction that we could bring our 

 21 witnesses in on Tuesday.

 22 THE COURT: Okay. And so at this juncture, then, I 

 23 guess what I can do is have -- is there an objection to that 

 24 process? 

09:18a 25 MR. RAPP: Well, I don't think they -- I don't think 

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 15 of 116
 1 they have witnesses here so we don't have an objection, no.

 2 THE COURT: All right. So at this point, then, I 

 3 will bring the jury back in. I will release them with the 

 4 full admonition, inform them that we have to take up some 

09:19a 5 legal issues in order for them to come back and begin fresh on 

 6 Tuesday and that is how we will proceed and then I'll permit 

 7 you -- I'll take a little bit of a break, and then I'll permit 

 8 you to come forward with your motions. 

 9 All right, let's go ahead and have the jury in.

09:19a 10 (Jury in at 9:21).

 11 THE COURT: All rise for the jury.

 12 All right, please be seated.

 13 Members of the Jury, because we are at the end of 

 14 the Government's case in chief, as I instructed you in the 

09:22a 15 preliminary instructions, what will happen next is the 

 16 defendants will have an opportunity to present their case in 

 17 chief and then the Government will have an opportunity if they 

 18 wish to bring in any what we call rebuttal case, and then once 

 19 that occurs there will be further procedure; but at this 

09:22a 20 juncture it's necessary for me and the lawyers to all meet and 

 21 confer about some legal matters which will not involve you, 

 22 and so what that means is I'm going to release you for the 

 23 day, but I'm going to release you with the full admonition 

 24 that I gave you at the outset of your service. 

09:22a 25 And the reason that I'm going to do that with your 

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 16 of 116
 1 patience and your attention is because, as you know, you have 

 2 been diligently coming to court for now roughly five weeks and 

 3 so we want to make sure that we preserve the integrity of the 

 4 possible. 

09:23a 5 And so I'm going to tell you to continue to keep an

 6 open mind throughout the trial and do not decide what the 

 7 verdict should be until you and your fellow jurors have 

 8 completed your deliberation at the end of the case. Because 

 9 you must decide this case based only on the evidence received 

09:23a 10 in the case and on my instructions as to the law that applies, 

 11 you must not be exposed to any other information about the 

 12 case or to the issues it involves during the course of your 

 13 jury duty. 

 14 Thus, until the end of the case or unless I tell you 

09:23a 15 otherwise, do not communicate with anyone in any way and do 

 16 not let anyone else communicate with you in any way about the 

 17 merits of the case or anything to do with it. 

 18 This restriction includes discussing the case in

 19 person, in writing, by phone, tablet or computer or any other 

09:24a 20 means via e-mail, via text messaging or any Internet chat 

 21 room, blog, website or application including, but not limited 

 22 to, Facebook, YouTube, X, Instagram, LinkedIn, Snapchat, 

 23 TikTok or any other forms of social media. 

 24 This restriction also applies to communicating with 

09:24a 25 your fellow jurors until I give you the case for deliberation 

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 17 of 116
 1 and it applies to communicating with everyone else, including 

 2 your family members, your employer, the media or press, and 

 3 the people involved in the trial. Although you may notify 

 4 your family and, again, your employers that you've been 

09:24a 5 selected as a juror to hear this case and how long you expect 

 6 the case to continue to go, if you are asked or approached in 

 7 any way about your jury service or anything about this case, 

 8 you must respond you have been ordered not to discuss this 

 9 matter. In addition, you must report the contact to the 

09:25a 10 Court. 

 11 Because you will receive all of the evidence and

 12 legal instruction you properly may consider to return a 

 13 verdict, do not read, watch or listen to any news or media 

 14 accounts or commentary about the case or anything to do with 

09:25a 15 it. Do not do any research such as consulting dictionaries, 

 16 searching the Internet or using other reference materials, and 

 17 do not make any investigation or in any other way try to learn 

 18 about the case on your own. 

 19 Do not visit or view any place discussed in this

09:25a 20 case, and do not use the Internet or any other resource to 

 21 search for or view anyplace discussed during the trial. Also, 

 22 do not do any research about this case, the law or the people 

 23 involved, including the parties, the witnesses or the lawyers 

 24 until you have been excused as jurors. If you happen to read 

09:26a 25 or hear anything touching on this case in the media, turn away 

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 18 of 116
 1 and report that to me as soon as possible. 

 2 A juror who violates these restrictions jeopardizes 

 3 the fairness of these proceedings and a mistrial could result 

 4 that would require the entire process to start over. If any 

09:26a 5 juror is exposed to any outside information, please contact 

 6 the Court immediately.

 7 With those instructions, again, do bear in mind that 

 8 you are not to come to any conclusions and just simply enjoy 

 9 the extended Friday early dismissal for yourselves, and I 

09:26a 10 expect you to be present and return Tuesday morning so that 

 11 you can take your seats promptly at 9:00 a.m. 

 12 With that, I thank you for your attention this week, 

 13 as well as all other weeks, and please all rise for the jury. 

 14 Thank you for the goodies this morning.

09:27a 15 (Jury out at 9:27 a.m.)

 16 THE COURT: Let's say we give you about a 15-minute 

 17 break and we can return.

 18 (Recess taken at 9:27 a.m.) 

 19 (Back on the record at 9:47 p.m.)

09:47a 20 THE COURT: All right, we may proceed.

 21 MR. PANCHAPAKESAN: Morning, Your Honor.

 22 THE COURT: Good morning.

 23 MR. PANCHAPAKESAN: So I'm going to make a 

 24 presentation jointly on behalf of the defendants and then 

09:47a 25 others may come up individually as well. 

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 19 of 116
 1 So I'm going to start with the Travel Act and the 

 2 fifty substantive charges Counts 2 through 51, and so we'll 

 3 start with the legal standard. 

 4 The Travel Act requires the Government to prove that 

09:47a 5 a defendant intentionally promoted or intentionally

 6 facilitated the promotion of business enterprises involved in 

 7 state law prostitution offenses, and it's a specific intent 

 8 crime. The Court's held this at Docket 946 at Page 14. The 

 9 US v. Polizzi case, P-o-l-i-z-z-i, for example, at 500 F.2d 

09:48a 10 856, that notes the required intent under the Travel Act is 

 11 quote "specific intent to facilitate an activity which the 

 12 accused knew to be unlawful," under state law; and so there's 

 13 sort of two main aspects to this, Your Honor.

 14 One is a specific intent to facilitate a business 

09:48a 15 enterprise, and second is that the defendant must know that 

 16 the advertisement, one of the fifty ads, advertised a 

 17 transaction that's unlawful under state law; and the backdrop 

 18 here, Your Honor, is that the Travel Act, it is not a 

 19 generalized prostitution statute. It's not even a 

09:48a 20 facilitation of prostitution statute. 

 21 The key here, the critical link that the Government 

 22 has to prove and we don't think they've proven, is the intent 

 23 to promote a business enterprise involved in one of the fifty 

 24 advertisements, and so I'll start with this business 

09:48a 25 enterprise element.

UNITED STATES DISTRICT COURT

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Case 2:18-cr-00422-DJH Document 1903 Filed 10/21/23 Page 20 of 116
 1 What the Court's held -- and this is at Docket 946 

 2 at Pages 15 to 16, and this is in connection with a Motion to 

 3 Dismiss we brought as to the Travel Act charges, the Court 

 4 held, quote, "one cannot intend to promote/facilitate a 

09:49a 5 business enterprise one does not know exists," and so we can 

 6 start with that premise. 

 7 The alleged business enterprises here and the 

 8 testimony the Government's drawn out is that the individuals 

 9 who posted the ads or a pimp who posted the ad, for example, 

09:49a 10 the Government's theory is that is the business enterprise. 

 11 That's why they've drawn out testimony about a pimp not having 

 12 other legitimate employment or someone posting multiple ads. 

 13 That's their theory. That's the business 

 14 enterprise; and if the Court looks, for example, at Docket 

09:49a 15 776, Pages 1 to 2, that was the Government's opposition to our 

 16 Motion to Dismiss the Travel Act, that lays out the 

 17 Government's theory of what a business enterprise is. 

 18 And to be clear, the business enterprise here is not 

 19 Backpage itself. The business enterprise, it's what the 

09:50a 20 Government claims are these individual prostitution

 21 enterprises that have posted ads; and so when we focus on the 

 22 business enterprise, there's no evidence that any defendant, 

 23 including my client, Mr. Brunst, associated themselves in some 

 24 meaningful, specific, intentional way with any one of the 

09:50a 25 individuals who testified, whether it's a woman who was 

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 1 advertised or a pimp who advertised her.

 2 And, for example, as to my client, Mr. Brunst, it's 

 3 not enough to say that Mr. Brunst was at a budget meeting and 

 4 the agenda mentioned The Erotic Review or that third parties 

09:50a 5 advised him or others that there were prostitution ads on the 

 6 site, right. 

 7 That's generalized information about the nature of 

 8 the ads on the site, but the Travel Act does not criminalize 

 9 being on notice that there's prostitution being advertised on 

09:51a 10 a website platform; but that's precisely the type of case the 

 11 Government's put on as the Travel Act.

 12 So, for example, in US v. Gibson Specialty, it's a 

 13 Ninth Circuit case, 507 F.2d 446, that case which the Court 

 14 has cited before, involves the sale of gambling materials to 

09:51a 15 known gambling outfits under the Travel Act case. 

 16 What the Court said there, the Ninth Circuit said 

 17 is, quote, "...the prosecutor must show that the manufacturer 

 18 in some significant manner associated himself with the 

 19 purchaser's criminal venture for the purpose of its 

09:51a 20 advancement." 

 21 The Court goes on to say, "Were we not to define

 22 intent in the Travel Act in this manner, the act would be 

 23 plagued by the very overexpansiveness which Congress sought to 

 24 rule out by inclusion of an express mens rea requirement," and 

09:51a 25 that's particularly apt here because the overexpansiveness 

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 1 that Congress was concerned about is precisely the 

 2 overexpansiveness that you see in the Government's prosecution 

 3 where they're attempting to treat the Travel Act as this sort 

 4 of general intent, generalized notice statute as opposed to 

09:52a 5 showing that my client or the other defendants in some 

 6 specific, significant, meaningful way associated themselves 

 7 with a business enterprise.

 8 Now, second, Your Honor, is this element that a 

 9 defendant must know one of the fifty ads involved in activity 

09:52a 10 that violates state law. 

 11 Now, there's multiple steps here, right. There's an 

 12 advertisement. There's a buyer and a seller that get 

 13 together. They agree on a service for a fee, and then maybe 

 14 some sort of transaction is consummated. There's no evidence 

09:52a 15 that Mr. Brunst or the other defendants knew ahead of time 

 16 that one of these fifty charged ads would, in fact, lead to a 

 17 prostitution transaction. 

 18 Now, for example, there's been law enforcement 

 19 officers who have testified that they didn't even have 

09:53a 20 probable cause under state law to arrest -- to make a 

 21 prostitution arrest on the face of an advertisement. 

 22 I believe one of the law enforcement officers 

 23 testified, it may have Mr. Murry or Mr. Griffen, that the 

 24 advertisement's, quote, "only the first step towards some sort 

09:53a 25 of prostitution investigation." 

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 1 And so, in effect, what the Government's theory on 

 2 knowledge is here, Your Honor, is -- is they are pointing to 

 3 what resulted from an ad. They're saying these ads resulted 

 4 in prostitution, but the focus for the purpose of the Travel 

09:53a 5 Act has to be on what the defendant knew beforehand under the 

 6 defendant's ex-ante knowledge about whether an advertisement 

 7 would, in fact, lead to prostitution. 

 8 And that theory of prosecution, it runs a foul of 

 9 the First Amendment. Mr. Cambria is going to spend a bit of 

09:53a 10 time on that but, for example, you have the -- there's a case 

 11 out of the Second Circuit. It's Locust Valley. It's 868 F.3d 

 12 104. What that case says is quote, "...the First Amendment 

 13 offers no protection to speech that proposes a commercial 

 14 transaction if consummation of that transaction would 

09:54a 15 necessarily constitute an illegal act. However, if, as here, 

 16 there are plausible ways to complete a proposed transaction 

 17 lawfully, speech proposing that transaction 'concerns lawful 

 18 activity' and is therefore protected commercial speech," and 

 19 that's precisely what we have here.

09:54a 20 For example, Ms. Beck, one of the women who 

 21 testified, she said on a couple of occasions that despite the 

 22 advertisement, one instance it led to, like, a legal massage, 

 23 in another instance it led to a walk; and so these are 

 24 examples that sort of highlight not only is there no evidence 

09:54a 25 that a defendant knew ahead of time something would lead to 

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 1 prostitution, but there are even advertisements at issue with 

 2 advertisers who testified where the ad itself led to something 

 3 perfectly legal and there's no way for someone to predict 

 4 ahead of time what might happen with an ad.

09:55a 5 Now, given the Government's presentation in that 

 6 respect, they're likely to advance a theory of deliberate 

 7 ignorance. We see that from the proposed jury instructions, 

 8 and so I'll deal with that briefly.

 9 First is, I'm not aware of a Ninth Circuit case in 

09:55a 10 which this notion of deliberate ignorance has been adopted in 

 11 the context of a Travel Act case, that's one. 

 12 Two is deliberate ignorance is not a substitute for 

 13 intent. It's not a substitute for the Government to prove 

 14 specific intent to facilitate a business enterprise. The only 

09:55a 15 context in which we should be having this discussion about 

 16 deliberate ignorance is in the context of whether a defendant 

 17 had knowledge regarding, you know, was one of the fifty ads 

 18 for prostitution. 

 19 And what the Ninth Circuit's held is that the only 

09:55a 20 instance in which it's appropriate to give a deliberate 

 21 ignorance instruction for that framework to apply is where 

 22 there is evidence put on by the Government of a defendant's 

 23 willful ignorance.

 24 So, for example, in US v. Alvarado, 838 F.2d 311 the 

09:56a 25 Court says, quote, "In determining whether a Jewell

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 1 instruction," meaning a deliberate ignorance instruction, "is 

 2 appropriate in this case, the government must present evidence 

 3 supporting an inference that" defendants "purposely avoided 

 4 obtaining actual knowledge that the suitcase contained the 

09:56a 5 cocaine." The Court goes on to say, "If the evidence 

 6 indicates" the defendants" had either actual knowledge or 

 7 lacked any knowledge of the presence of the cocaine, then 

 8 giving the Jewell instruction was inappropriate."

 9 So stepping back, first of all, this kind of 

09:56a 10 highlights the classic example of where a deliberate ignorance 

 11 framework is appropriate. It's where you have a drug mule and 

 12 they've sort of put their head in the sand regarding what 

 13 might be in some compartment, right, drugs or the like. 

 14 That -- that doesn't really fit in this case. That's one. 

09:56a 15 Two is the Government has not put on a theory of 

 16 prosecution that aligns with the notion of deliberate 

 17 ignorance. In fact, their presentation's been the exact 

 18 opposite. Their presentation has been everyone knows these 

 19 are ads for prostitution. There's third parties who have been 

09:57a 20 consistently telling you these are ads for prostitution, and 

 21 so there's no evidence that my client or any of the defendants 

 22 deliberately ignored what an ad might be for, let alone one of 

 23 the fifty ads; and so the Government hasn't met this 

 24 foundational predicate of, you know, the application of a 

09:57a 25 deliberate ignorance framework in this case.

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 1 And then further, let's explore the framework of

 2 deliberate ignorance that the Government wants to pursue here. 

 3 So their proposed instruction is that, quote, "The defendant 

 4 was aware of a high probability that the vast majority of 

09:57a 5 escort ads were for prostitution." That's -- that's a 

 6 framework that they ask the Court to apply here; and that 

 7 instruction, that framework, I think, it highlights a problem 

 8 with this approach, right. 

 9 So what does "vast majority" even mean, right? Is 

09:58a 10 that 70 percent? Is that 80 percent, right? How do we play 

 11 that out? Does that mean that these fifty ads my client's 

 12 never seen, do they fall with the majority? Do they fall with 

 13 the minority? What's a jury supposed to do with that? Does 

 14 that mean 30 of the ads, 35 of the ads, 40 of the ads are for 

09:58a 15 prostitution? It highlights that this is an unworkable 

 16 approach in the context of what's being charged here.

 17 In essence, this deliberate ignorance framework, it 

 18 would almost by fiat impute to my client or others that they 

 19 must have known a given ad was for prostitution without 

09:58a 20 establishing any kind of foundation that they were 

 21 deliberately ignorant as to what one of these ads was for. 

 22 And so ultimately as to these Travel Act counts,

 23 Your Honor, under Rule 29, no rational trier of fact could 

 24 find beyond a reasonable doubt the elements of, one, an intent 

09:59a 25 to facilitate a business enterprise tied to one of the fifty 

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 1 ads or, two, actual knowledge that one of the fifty ads 

 2 involves a state law prostitution offense. 

 3 In that context it's worth noting briefly that my 

 4 client wasn't even charged in any of the Travel Act counts in 

09:59a 5 the initial indictment, either the conspiracy count or the 

 6 Travel Act counts; and I think the Government's presentation, 

 7 frankly, illustrates why, that there's been no connection made 

 8 between him and any business enterprise or any ad that's at 

 9 issue.

09:59a 10 Now, briefly, I'll address the conspiracy count and

 11 the Government's Pinkerton theory as to the Travel Act counts. 

 12 So I think the initial starting point here, again, is the law 

 13 of the case. So in an order denying our Motion to Dismiss in 

 14 the Travel Act counts, the defendants raise concerns in 

10:00a 15 connection with the conspiracy count that it alleged some sort 

 16 of boundless conspiracy to violate the Travel Act, meaning 

 17 some unknown, unlimited amount of advertisements. 

 18 What the Court said in response in denying the 

 19 motion was, quote, "Such a claim is simply untrue. Defendants 

10:00a 20 were not indicted for facilitating the amorphous notion of 

 21 prostitution. They were indicted for facilitating via 

 22 publishing ads on fifty distinct occasions for prostitutes, 

 23 prostitution-related businesses or other groups were involved 

 24 in the business of prostitution."

10:00a 25 This is an order the Court issued -- Judge Brnovich

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 1 issued it in May of 2020. This is the case that we've been 

 2 defending against, and so the law of the case is that the 

 3 conspiracy charge here is, in fact, tied. It's specific to 

 4 the fifty charged ads. It doesn't go beyond that.

10:00a 5 THE COURT: That was related to a Motion to Dismiss

 6 the indictment, wasn't it? 

 7 MR. PANCHAPAKESAN: It was, Your Honor, yes.

 8 THE COURT: And so she was applying a different 

 9 standard in reviewing that -- 

10:01a 10 MR. PANCHAPAKESAN: Well -- 

 11 THE COURT: -- as to each of those -- each of the 

 12 arguments on each of the counts.

 13 MR. PANCHAPAKESAN: The standard the Court was 

 14 applying dealt -- of course, the Court assumed the truth of 

10:01a 15 the allegations; but I think what the Court said in terms of 

 16 the scope of the conspiracy count, I think that still holds 

 17 true, right. 

 18 Because in May 2020 the Court is telling the parties 

 19 that this is not a boundless conspiracy, that the case you 

10:01a 20 defendants are defending against on the conspiracy is tied to 

 21 the fifty counts; and so that's the case that we've been 

 22 preparing for and defending against and so -- and that's the 

 23 law of the case and I think to expand it to --

 24 THE COURT: And how -- how is that different from 

10:01a 25 the -- my recollection is the conspiracy is alleged to have 

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 1 occurred and begun in roughly 2004 up to sometime in 2018. 

 2 How does that relate to the time frame? 

 3 MR. PANCHAPAKESAN: I believe the charged counts, 

 4 the fifty counts start in, I think, September of 2013; and so 

10:02a 5 in some sense there's a distinction between, on the one hand, 

 6 evidence that might be relevant to the conspiracy. 

 7 So, for example, the Government's put on evidence of 

 8 a budget meeting or something, right, in 2007 or 2008, which 

 9 might be relevant to this notion of an alleged conspiracy 

10:02a 10 during that time frame; but in terms of an agreement to commit 

 11 a substantive crime, right, which is a requirement to show a 

 12 conspiracy, those substantive crimes -- those alleged 

 13 substantive crimes are the fifty Travel Act counts. 

 14 I don't think -- the Court has held they don't -- 

10:02a 15 they don't go beyond that into some unknown advertisements or 

 16 counts that, you know, we've never been put on notice of and 

 17 that the Court said we're not defending against.

 18 And so a conspiracy requires -- it requires an 

 19 agreement, right, to engage in criminal activity. It requires 

10:03a 20 overt acts and it requires an intent to commit the substantive 

 21 crime, that crime here being one of the fifty Travel Act 

 22 counts.

 23 THE COURT: So let me just pose a hypothetical. 

 24 Let's assume that they had a conspiracy charge and then they 

10:03a 25 allege Travel Act violations, but they weren't as descriptive 

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 1 in terms of this particular ad on this particular day. 

 2 How would that change the argument?

 3 MR. PANCHAPAKESAN: Well, there's a couple 

 4 responses, Your Honor. One is the conspiracy has to be 

10:03a 5 bounded by something, right. I don't think it's appropriate 

 6 to allege a criminal conspiracy that -- because over the 

 7 course '04 to '18 millions, right, of escort ads and it would 

 8 be impossible practically, right, to defend against an unknown 

 9 set of advertisements; and that's why the Court previously 

10:04a 10 said the crime that is the alleged objective of this 

 11 conspiracy, the crimes of the fifty counts, that's one and 

 12 then --

 13 THE COURT: So -- so would it be any different, for 

 14 example, if the Government alleged on or about May 1st through 

10:04a 15 May 31st of 2014 these advertisements for sex acts for money 

 16 were posted on Backpage? Would that be any different?

 17 MR. PANCHAPAKESAN: Well, I mean, I think there 

 18 needs to be some specificity, right. I don't think that an 

 19 indictment or the Government's presentation can sort of just 

10:04a 20 vaguely be there may have been ads that were posted that could 

 21 have been for prostitution, right. 

 22 The Travel Act, which is the object of a conspiracy, 

 23 it requires proof of the advertisement of the business 

 24 enterprise, right, that the act led to prostitution, that 

10:05a 25 someone knew it was for prostitution; and so that's, I think, 

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 1 why the Court in its order bound it to those fifty ads, 

 2 because that's all that they've charged in that respect or 

 3 endeavored to prove. 

 4 If they put someone up, you know, NCMEC or whoever 

10:05a 5 saying, "Yeah, I've looked at these ads broadly and our view 

 6 is they're for prostitution," that obviously doesn't come 

 7 close to establishing a Travel Act violation or conspiracy to 

 8 violate the Travel Act.

 9 Now, under -- under Pinkerton, which I'll also 

10:05a 10 address, a Pinkerton theory of liability requires, one, a 

 11 conspiracy, which in our view has not been established here. 

 12 Two, it requires that another alleged co-conspirator -- and I 

 13 imagine they're going to say that person is Carl Ferrer, that 

 14 he actually committed one of these substantive Travel Act 

10:06a 15 violations; and then, three, it requires that the commission 

 16 of the offense is reasonably foreseeable. 

 17 And so, as the first point, the conspiracy, I think 

 18 we've made the argument there's not been a conspiracy 

 19 established here as to these fifty charged ads.

10:06a 20 Taking the second point, as to whether Mr. Ferrer, 

 21 for example, committed one of these fifty charged offenses, 

 22 there has been no evidence that Mr. Ferrer or any alleged 

 23 co-conspirator in some meaningful, intentional way associated 

 24 themselves with one of the advertisers or pimps or what have 

10:06a 25 you who posted one of the fifty ads. 

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 1 Now, the only communication I'm aware of that 

 2 Mr. Ferrer testified to is he -- there were communications 

 3 with one of the posters, Pamela Robinson, and so the 

 4 Government put in evidence use of an e-mail address. It was 

10:07a 5 carl@backpage.com, and this is on September 14th in the 

 6 afternoon. It starts at Page 80 of the transcript. 

 7 So what the Government elicited was that there was 

 8 communications between Pamela Robinson -- she's the subject of 

 9 several of the fifty counts -- and this carl@backpage e-mail 

10:07a 10 address, and the Government's questioning in this respect was 

 11 very careful. 

 12 The Government said, "What do you respond?" asking 

 13 Mr. Ferrer. The next question is, "What does 

 14 carl@backpage.com respond?" and so what we elicited on 

10:07a 15 cross-examination -- this is October 10th, the morning 

 16 transcript, Pages 103 to 104.

 17 Carl Ferrer says, quote, "It really wasn't my e-mail 

 18 address." He said others would use it. He said it was this 

 19 sort of general Backpage marketing account that several people 

10:07a 20 might use. There's no evidence as to who actually sent those 

 21 e-mails, whether the person who sent those e-mails was part of 

 22 an alleged conspiracy. There's been no testimony that every 

 23 marketing employee at Backpage is part of a conspiracy. 

 24 That hasn't been established, and so that's the only 

10:08a 25 instance I'm aware of in which Mr. -- in which the Government 

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 1 claims Mr. Ferrer might have had some direct communication 

 2 with one of the advertisers of the fifty ads; and even in that 

 3 instance, there is no competent evidence that he was the one 

 4 who was interacting with her.

10:08a 5 And then lastly in the context of Pinkerton, there's 

 6 -- there's due process constraints in terms of foreseeability. 

 7 So, for example, in US v. Castenada case, 9 F.3d 761, Court 

 8 says, "Several circuits, including this one, recognize that 

 9 due process constrains the application of Pinkerton where the 

10:08a 10 relationship between the defendant and the substantive offense 

 11 is slight."

 12 So, for example, as to my client, for example, just 

 13 because Mr. Brunst is aware there's a moderation function at 

 14 Backpage but he's not directly involved in it, the connection 

10:09a 15 between that fact and one of the fifty ads is too slight. 

 16 These are fifty ads out of millions, right. It's not 

 17 foreseeable to him, there's been no testimony in this respect, 

 18 that one of the fifty ads, for example, might be moderated in 

 19 some improper way, right, to facilitate prostitution. There's 

10:09a 20 multiple steps between what he knows and that potential fact 

 21 that haven't been established.

 22 Now I'm going to turn to the money laundering 

 23 counts, Your Honor. So I'll start with Counts 53 to 62 and 

 24 I'll come back to the conspiracy count later. So these are -- 

10:09a 25 excuse me. These are concealment money laundering charges in 

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 1 Counts 53 to 62. These are charged under 18 U.S.C. 

 2 1956(a)(1)(B)(i). 

 3 What that statute says is the transaction that's the 

 4 subject of the money laundering count. It has to be designed, 

10:10a 5 in whole or in part, to conceal or disguise the nature, 

 6 location, source, et cetera, of the proceeds; and the 

 7 operative word there is "designed."

 8 And so what the record is on these transactions, 

 9 which are post April 2015 wire transfers from Website 

10:10a 10 Technologies to Cereus Properties, the only testimony on the 

 11 record on these counts was from Carl Ferrer; and what Ferrer 

 12 said is that there was a sale of Backpage in April 2015. 

 13 There were two loan agreements. The larger loan was on the 

 14 sale on the U.S. portion of Backpage. The smaller loan was on 

10:10a 15 the sale of the foreign business. 

 16 And so, for example, September 21st in the afternoon 

 17 at Page 91, starting at Line 1, Mr. Ferrer says, quote, 

 18 "Cereus Properties collected the interest and debt payments 

 19 from the 600 million dollar loan, referring to the sale. 

10:11a 20 He goes on to say -- later on that same page he 

 21 says, "Payments would be made to Cereus Properties. We made 

 22 those payments from US banks and European banks. We would 

 23 make a payment on the interest or principal of the loan. That 

 24 was for Europe" -- meaning the foreign -- foreign 

10:11a 25 operations -- "and then interest payments for the loan in the 

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 1 US." 

 2 And he goes on to say on Page 93 of that same day, 

 3 September 21st in the afternoon. He's asked, "What was the 

 4 purpose to go from Ad Tech B.V. to Cereus?" 

10:11a 5 His answer was, "It was to make interest and 

 6 principal payments on the smaller note," meaning the sale of 

 7 the foreign -- the foreign operation of Backpage.

 8 So the only testimony on these transactions from

 9 Website Technologies to Cereus Properties, from Ad Tech B.V. 

10:12a 10 to Cereus Properties is that there was a sale, the sale from 

 11 Lacey, Larkin, Brunst and Spear of Backpage to Ferrer and that 

 12 there were loan payments. 

 13 There has been no testimony whatsoever that the sale 

 14 itself or that these loan payments were, quote, "designed" to 

10:12a 15 conceal or designed to effectuate some kind of money 

 16 laundering scheme. The evidence, frankly, is to the opposite. 

 17 The evidence is that there's a documented 

 18 transaction with loan agreements, lawyers on both sides, a 

 19 major accounting firm. BDO is involved. There's forbearance 

10:12a 20 agreements, and so all the evidence on this substantiates that 

 21 this is a legitimate transaction. 

 22 For example, the loan agreements which are in 

 23 evidence at Exhibits 5427 and 5459, the very top of the loan 

 24 agreements they say "Sale of Backpage's US Operations" or Sale 

10:12a 25 of Backpage's Foreign Operations." That's the opposite of 

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 1 concealment. 

 2 There's no concealment that there's a sale of 

 3 Backpage or that a loan payment made from Ferrer to one of the 

 4 sellers necessarily involves Backpage proceeds. It's not 

10:13a 5 enough for concealment money laundering to establish the mere 

 6 movement of Backpage proceeds. There has --

 7 THE COURT: How does -- how does the creation of

 8 Website Technologies and Cereus Properties relate to your 

 9 argument?

10:13a 10 MR. PANCHAPAKESAN: So Mr. Ferrer testified that 

 11 Cereus Properties received the payments from these loan 

 12 payments in connection with the sale.

 13 THE COURT: Well, my question more specifically is 

 14 the creation of these two entities. 

10:13a 15 MR. PANCHAPAKESAN: So what the Government's going 

 16 to argue -- they're going to say -- you know, they're going to 

 17 say Website Technologies is a front or something, right, for 

 18 Backpage. 

 19 That's what they're gonna say; but if we focus on 

10:13a 20 the actual transaction, right, the transactions in these 

 21 counts, which is a transfer from Website Technologies to 

 22 Cereus Properties, the testimony is that there's a sale, it's 

 23 a loan payment, whatever they want to say about Website 

 24 Technologies and sometimes is a red herring because there's no 

10:14a 25 testimony that any of these specific transactions were 

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 1 designed to conceal anything from anyone.

 2 So, for example, there's no testimony that the Bank 

 3 of Montreal or Arizona Bank and Trust, or whatever banks 

 4 they've mentioned, there's no testimony that it was -- this 

10:14a 5 loan payment or this sale was designed to conceal it from 

 6 those banks, that these loan payments included Backpage 

 7 proceeds. There's been no testimony to that effect as to 

 8 these specific transactions. 

 9 And so, for example, one case I think is guiding on 

10:14a 10 this, it's a US Supreme Court case, it's Cuellar v. US, 

 11 C-u-e-l-l-a-r, 553 US 550, and what the Court says there is 

 12 that, quote, the statutory text makes clear, however, that a 

 13 conviction under this provision requires proof that the 

 14 purpose -- not merely the effect -- of the transportation was 

10:15a 15 to conceal or disguise one of the elicited attributes. 

 16 The only testimony in the record about the purpose 

 17 of these transactions is that the purpose was to pay the 

 18 seller's loan payments for the sale of Backpage. There's been 

 19 no testimony that the purpose of these transactions was to 

10:15a 20 conceal, and it's not enough for the Government to say, well, 

 21 the effect or something may have been X, Y, Z, right. 

 22 They have to elicit testimony. They need to have 

 23 direct evidence that the purpose of a loan payment on a sale 

 24 was to hide, was to conceal, to disguise that the source of 

10:15a 25 the loan payments was from Backpage; and no one's saying that 

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 1 was concealed because it's open. It's known that Backpage is 

 2 being sold. That's what the loan agreement says, that it's 

 3 for the sale of Backpage.

 4 And so -- they're not saying it's a sale of some

10:16a 5 front or website technology -- on the loan agreement it says 

 6 sale of Backpage, and that's not being concealed. 

 7 Now, turning to Counts 63 to 68 which in turn --

 8 which concern international promotional money laundering 

 9 that's 18 U.S.C. 1956(a)(2)(A), that statute requires the 

10:16a 10 defendant acted with the intent to promote the carrying on of 

 11 some specified unlawful activity; and the key in connection 

 12 with Counts 63 to 68 is there has to be a specific intent to 

 13 promote.

 14 So, for example, there's a case out of the Fifth

10:16a 15 Circuit, US v. Brown, 553 F.3d 768. That case says, quote, 

 16 "The crime of money laundering promotion is aimed not at 

 17 maintaining the legitimate aspects of a business nor at 

 18 proscribing all expenditures of ill-gotten gains, but only at 

 19 transactions which funnel ill-gotten gains directly back to 

10:17a 20 the criminal venture."

 21 And so when we look at these counts, Counts 64 

 22 through 68, those two are loan payments on the sale. So 

 23 Mr. Ferrer is asked September 21st in the afternoon, Page 93, 

 24 Lines 20 through 23, quote, "What was the purpose to go from

10:17a 25 Ad Tech B.V. to Cereus?" His answer, quote, "It was to make 

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 1 interest and principle payments on the smaller note," smaller 

 2 note referring to the sale of Backpage's foreign operations. 

 3 That's literally the only evidence in the record on 

 4 these transactions, and the purpose that Mr. Ferrer testified 

10:17a 5 to is not a -- he didn't say this was to conceal or fool banks 

 6 or fool credit card companies. He said the purpose was a loan 

 7 payment on a sale; and so not only does it fail to show an 

 8 intent to promote, it shows the opposite. 

 9 And, further, what the Court -- what the case law 

10:18a 10 says is to promote, the money's got to be put back into the 

 11 criminal venture. At most what this shows is money flowing 

 12 away from Backpage, to the sellers of Backpage. 

 13 There's no evidence in the record that Mr. Brunst or 

 14 Lacey or Spear took the money they received from the loan 

10:18a 15 payments and then invested it back in Backpage or used it to 

 16 promote prostitution. There's been no evidence of that, and 

 17 so at that level these counts fail as well.

 18 Now, Count 63 is a little unique. It's not a loan 

 19 payment, but it's a payment to a web developer. That's what 

10:18a 20 the Government alleges. There's been no evidence on this 

 21 transaction. I asked Quoc Thai about it. He said he didn't 

 22 know what the purpose was. I don't believe Ferrer testified 

 23 about Count 63 or what it was for or whether there was 

 24 promotion. So there's no -- there's no evidentiary link there 

10:19a 25 between that payment to a web developer and some sort of 

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 1 intent to promote a Travel Act violation. 

 2 And then we shift to Counts 69 through 99, which

 3 are -- which are transactional money laundering. So that 

 4 statute is 18 U.S.C. 1957 and a requirement of transactional 

10:19a 5 money laundering is that the property was, in fact, derived 

 6 from some specified unlawful activity; and what the model jury 

 7 instruction said, it says the property was, in fact, derived 

 8 from -- in brackets it says "describe the specified unlawful 

 9 activity alleged in the indictment." 

10:19a 10 So it's -- it's got to be an SUA that the Government 

 11 alleges in the indictment, and what the predicate unlawful 

 12 activity -- alleged unlawful activity here is, is it's a 

 13 Travel Act violation. It can't be a conspiracy, Your Honor, 

 14 right. So if you look at 18 U.S.C. 1956(c)(7), if you also 

10:20a 15 look at 18 U.S.C. 19611, those define what specified unlawful 

 16 activity is. 

 17 They include the Travel Act, but they don't include 

 18 a conspiracy, a general conspiracy or a conspiracy to violate 

 19 the Travel Act; and so necessarily what we're left with are 

10:20a 20 the fifty charged ads in the indictment. 

 21 That just by default has to be the specified 

 22 unlawful activity that the Government alleges in the 

 23 indictment. It can't go beyond that. As a matter of what's 

 24 alleged in the indictment, it just is a matter of statutory 

10:20a 25 interpretation.

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 1 And in our view, these counts, therefore, fail for 

 2 the same reason that the fifty Travel Acts counts fail because 

 3 if those fail, then there's no -- there's no predicate 

 4 specified unlawful activity. 

10:21a 5 And then briefly as sort of an aside, there are a 

 6 handful of counts where my client is sort of named 

 7 secondarily, right. So there may be some wire transfer from, 

 8 you know, Mr. Lacey or something to, like, a title company, 

 9 for example. Those counts are, like, 69 through 70, 83 

10:21a 10 through 84. There's no -- there's been no evidence presented 

 11 as to why Mr. Brunst is included on those counts or what role, 

 12 if any, he may have had in the transfer.

 13 Count 100 I'll let Mr. Cambria deal with as to 

 14 Mr. Lacey, and then lastly to address the money laundering 

10:21a 15 conspiracy count. There's -- there's no evidence here of an 

 16 agreement to commit money laundering in connection with these 

 17 -- these transactions. 

 18 And this notion that, well, you know, credit cards 

 19 might have terminated for reputational reasons or this 

10:22a 20 testimony about allegedly circumventing credit card companies, 

 21 things of that nature, the Government has not made a 

 22 connection between that, that alleged conduct, and these 

 23 specific transactions; and what the record is on most of these 

 24 counts, I think like 37 of the 48 counts, as Ferrer testified, 

10:22a 25 they're loan payments in connection with the sale and there's 

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 1 been no connection made on the part of the Government between 

 2 those loan payments and what they will contend is some broader 

 3 effort to fool a bank or a credit card company. That 

 4 evidentiary link is missing. 

10:22a 5 And so I'll conclude by noting and I'll yield to 

 6 Mr. Cambria, as to my client, really, the state of the 

 7 evidence is that he might have been at a budget meeting or an 

 8 e-mail agenda says something like TER. He might have been 

 9 copied on e-mails. He might have been aware that credit card 

10:23a 10 companies, banks, things of that nature, were canceling 

 11 Backpage for reputational reasons.

 12 All of that does not come remotely close to 

 13 establishing on his behalf either a criminal intent to 

 14 facilitate business enterprises involved with fifty 

10:23a 15 advertisements or to engage in money laundering in connection 

 16 with the legitimate sale of a business where Ferrer testified 

 17 the purpose of those transactions was to pay back the sellers; 

 18 and as to my client and, frankly, all these individuals, this 

 19 is a deeply misguided attempt to use a statute, the Travel 

10:23a 20 Act, that requires specific intent as to particular business 

 21 enterprises, to expand that into something the statute was not 

 22 intended to cover.

 23 THE COURT: Let me ask you, in terms of the specific 

 24 intent requirement, is it or is it not sufficient to look at 

10:24a 25 individual communications, conversations related to the 

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 1 years-long allegation that what the primary purpose of the 

 2 Backpage was was to provide a platform to offer sex acts for 

 3 money?

 4 So, in other words, if, as alleged by the 

10:24a 5 Government, the individuals who ran the company, who were the 

 6 governing board of the company, understood that with the 

 7 shutdown of Craigslist suddenly their profits skyrocketed and 

 8 in looking at their finances the skyrocketed activity was 

 9 occurring in the escort section and if you have an argument or 

10:25a 10 you have witness testimony or evidence about years' worth of 

 11 meetings and reviewing financials and so on and so forth, at 

 12 some point doesn't that accumulate to specific intent? 

 13 MR. PANCHAPAKESAN: So I think the response, Your 

 14 Honor, is to go back to the text of the Travel Act. The 

10:25a 15 Travel Act is -- it does not criminalize knowledge. It does 

 16 not criminalize -- let's say hypothetical you have knowledge 

 17 for ten years that there are prostitution ads that are 

 18 appearing on the site, right. That's not what the statute 

 19 criminalizes. 

10:26a 20 The statute criminalizes an intent to facilitate 

 21 specific business enterprises involved in prostitution 

 22 offenses under state law, and those business enterprises have 

 23 to be tied to these fifty ads; and so the broad knowledge, 

 24 right, if third parties are telling folks or Craigslist is 

10:26a 25 shut down that there are prostitution ads that are appearing 

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 1 on your site, there's a missing link between that and the 

 2 fifty substantive counts which concern individual ads, 

 3 individual advertisers, individual pimps, what have you. 

 4 There's a missing link there, and there's no 

10:26a 5 evidence that my client or others knew or would have known 

 6 that those fifty ads, those fifty individuals, would engage in 

 7 a prostitution transaction; and that's how the Travel Act is 

 8 framed. It's not a general notice statute.

 9 THE COURT: I guess under that argument, though,

10:26a 10 then it would seem highly unprobable that any business like -- 

 11 a business like Village Voice or Backpage would ever find 

 12 themselves liable for a Travel Act violation like this.

 13 MR. PANCHAPAKESAN: Right, and that's a point --

 14 THE COURT: Because that would require each 

10:27a 15 individual defendant to look at the ad and know what it was 

 16 about and that there was a prostitution ring that was involved 

 17 in advertising these -- these individual women. Is that --

 18 MR. PANCHAPAKESAN: And that's our position, Your 

 19 Honor, is that just because the Government's brought this 

10:27a 20 prosecution does not mean that there, therefore, needs to be 

 21 liability under the Travel Act. 

 22 They chose to bring it under the statute. That does 

 23 not fit the facts of this case. The Travel Act is not 

 24 intended to be used in fairness, Your Honor, in the way that 

10:27a 25 you're describing it or the way that the Government's trying 

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 1 to prosecute under it.

 2 THE COURT: How does that differ, though, in cases 

 3 related to gambling operations, for example?

 4 MR. PACHAPAKESAN: Right. So the Gibson case, for 

10:28a 5 example, right, what the Court said there is that the 

 6 manufacturer has to in some significant manner associate 

 7 himself with the purchaser's criminal venture; and so it 

 8 wasn't enough there that this company making -- I think it's 

 9 like pull tabs, some sort of old school gambling

10:28a 10 paraphernalia, it wasn't enough that they knew with certainty 

 11 that a criminal gambling operation would buy what they were 

 12 selling. 

 13 That wasn't enough under the Travel Act. There has 

 14 to be specific intent. There has to be evidence that the 

10:28a 15 manufacturer of this gambling paraphernalia in some specific 

 16 way associated themselves with the person who was buying it. 

 17 It's not enough to just know, right, and that's the constraint 

 18 of the Travel Act; and, frankly, Your Honor, you heard a 

 19 little bit about this with the Senate PSI hearings. 

10:29a 20 There's been laws that were passed FOSTA, SESTA, 

 21 that were passed to remedy the issue Your Honor is dressing, 

 22 but that's not the charge here. Those aren't the statutes 

 23 they were charged under. The Travel Act, frankly, just 

 24 doesn't fit the facts of this case; but that's the statute 

10:29a 25 they chose to bring their charges under, and there may be laws 

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 1 that address this sort of conduct, but it's not this law.

 2 THE COURT: All right, thank you. 

 3 Mr. Cambria, did I hear you're going next?

 4 MR. CAMBRIA: I heard that as well, Your Honor, 

10:29a 5 thank you. 

 6 I'd like to start off by distinguishing the 

 7 hypothetical that you asked about gambling cases. Gambling 

 8 cases do not have a First Amendment overlay. That's one of 

 9 the main differences. Here we're dealing with speech, and as 

10:30a 10 a result of that there is a First Amendment overlay.

 11 The other question that you asked was with regard to 

 12 the language of Judge Brnovich. I think clearly what -- what 

 13 she did there was, first of all, define the criminal conduct 

 14 and that was the part about it's not just amorphous 

10:30a 15 prostitution, but it's a prostitution enterprise that was 

 16 conducted through these 50 ads. 

 17 Once she defined what the criminal conduct was, then 

 18 she moved to the motion that was actually in front of her, 

 19 which was that the indictment was insufficient; and she said, 

10:30a 20 "You alleged these facts. They fit in to what I've defined as 

 21 the criminal conduct so it's sufficient."

 22 That didn't change the fact that she ruled that in 

 23 this case the criminal conduct was as she defined it; and so 

 24 the other thing is, you have to ask yourself, what is the 

10:31a 25 relevance of the 50 -- 50 acts -- ads, if you will, that are 

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 1 in the indictment unless they have some meaning to the case, 

 2 and the meaning to the case is that as Brnovich -- Judge 

 3 Brnovich said, the Government has to prove that these 

 4 so-called enterprises, if you will, were run by these 50 ads 

10:31a 5 and there is no way that a person can be guilty of that unless 

 6 they know of the ads. 

 7 There has to be some proof that they know of these 

 8 specific ads. Otherwise, we're in to this amorphous 

 9 prostitution that Judge Brnovich said they are not charged 

10:32a 10 with and so that --

 11 THE COURT: Let me ask you this, Mr. Cambria: There 

 12 was a witness, one of the organizational witnesses who 

 13 testified, for example, that they created this PowerPoint. 

 14 They listed ads from Backpage. They put those PowerPoint 

10:32a 15 slides directly in front of your client, and then would it be 

 16 sufficient then for the Government to have alleged that 

 17 particular ad that your client was then aware of? 

 18 MR. CAMBRIA: No.

 19 THE COURT: And why not? 

10:33a 20 MR. CAMBRIA: Well, because there still has to be 

 21 some sort of aiding and abetting or some kind of action. It 

 22 isn't simply a matter of here's something historically that we 

 23 claim was on a website. 

 24 This is to promote. So you have to promote it and 

10:33a 25 not just know that it's -- generally they say that it's there, 

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 1 but that you did something that would promote it; and, of 

 2 course, we don't have that and, frankly, I don't remember who 

 3 was present at that particular meeting but, again, it wouldn't 

 4 be a pro-active thing on the part of the people there to 

10:33a 5 simply merely be there and somebody says, "Here, look at this. 

 6 This is a historic ad."

 7 The charge here is facilitating and promoting a 

 8 specific operation. So you would have to do something going 

 9 forward. 

10:34a 10 The other thing, Your Honor, is on the First 

 11 Amendment aspect of the case, we in the past had submitted to 

 12 the Court what we titled an objection to the Court's proposed 

 13 jury instructions and it talked about the First Amendment. I 

 14 have another copy of that, and I'd like to hand it up as part 

10:34a 15 of our argument here. 

 16 Before I move to that, however, I'd like to say 

 17 this: Every charge in this indictment that requires the 

 18 element of concealment has not been supported, prima facie, 

 19 and Mr. Thai supplied the evidence that shows that that 

10:34a 20 concealment was not supported. I asked him specifically and 

 21 for the reason of having him say, "I had no problem finding 

 22 everything. It was all in proper names. There was no, you 

 23 know, fake names, fake companies or anything like that." 

 24 He said everything was readily available and I 

10:35a 25 reviewed it; and not only that, but he did a chart and had all 

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 1 the names and all the places and all the accounts and all the 

 2 rest of it.

 3 If it was concealed, I don't know how he would 

 4 accomplish all that he accomplished; and I asked him 

10:35a 5 specifically, was there anything hidden? Was there anything 

 6 camouflaged, whatever? No, not at all. So there's no 

 7 concealment that has been -- that there was any proof of with 

 8 regard to any of these charges that have as a necessary 

 9 element concealment, including Count 100, which is my client's 

10:36a 10 specific one on the trust.

 11 Again, this memo, if we could resubmit it, there is 

 12 a First Amendment issue here and it's funny, you might recall 

 13 at the bench we talked about a certain issue and you said 

 14 well, I'm bound by the Ninth Amendment -- I'm sorry, the Ninth 

10:36a 15 Circuit. I got a little smile on my face because the Ninth 

 16 Circuit cases that we have in our memo demonstrate that the 

 17 proposed jury instruction and any argument in this case that 

 18 if the conduct is related to criminal activity, that it is not 

 19 protected by the First Amendment. 

10:36a 20 Submitted case after case, Your Honor, that 

 21 absolutely refutes that. The Ninth Circuit makes it 

 22 abundantly clear that the historic cases that they are talking 

 23 about and interpreting are Hudson and also Pittsburgh -- the 

 24 Pittsburgh Press case, and the Ninth Circuit said the ad 

10:37a 25 necessarily has to be illegal on its face. It isn't a matter 

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 1 of it could relate to or a third party could use this 

 2 particular ad to submit a crime. Necessarily on its face --

 3 THE COURT: Let me ask you, then, Mr. Cambria, just 

 4 for clarification procedurally, are you asking me to 

10:37a 5 reconsider a prior ruling? 

 6 MR. CAMBRIA: Well, you haven't instructed the jury 

 7 yet and, of course, we -- we believe at the whatever 

 8 appropriate time, if this is it, that the instruction of 

 9 "related to criminal activity" is clearly inconsistent with 

10:37a 10 the Ninth Circuit.

 11 So what I -- what I wanted to do was hand our memo 

 12 up again and it lays out our argument as to what these ads 

 13 have to have on their face and, frankly, we only had one such 

 14 ad in this indictment and then that -- and it was interesting, 

10:38a 15 because then the police when they testified said, well, that 

 16 wouldn't be enough to go forward, you know, for an arrest. 

 17 That would be the first step kind of thing, but our position 

 18 has always been that the ad has to be -- has to necessarily 

 19 propose an illegal act on its face.

10:38a 20 If we think back to that Pittsburgh Press case, 

 21 there, of course, what they said was females only, males only 

 22 wanted kind of thing; and the Court said that was obvious on 

 23 its face it was illegal because it was gender specific and 

 24 that was discriminatory. 

10:39a 25 And here we're saying that it isn't a matter of an 

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 1 ad leading to or maybe a third party's gonna use it for. It 

 2 has to say illegal activity on its face, and all those Ninth 

 3 Circuit cases support that, Your Honor. So that's why I'd 

 4 like to submit this again so that you'd have the opportunity 

10:39a 5 to, you know, at your pleasure consider it.

 6 THE COURT: All right, thank you.

 7 MR. CAMBRIA: Thank you.

 8 THE COURT: Ms. Bertrand.

 9 MS. BERTRAND: Good morning.

10:39a 10 THE COURT: Good morning.

 11 MS. BERTRAND: From the outset, my client has been 

 12 uniquely situated in this case because she wasn't management. 

 13 She -- I don't think there's any evidence she participated in 

 14 any type of policy making and, in fact, she was hired to 

10:40a 15 police the site and I don't believe that there's any -- that 

 16 any rational trier of fact could find beyond a reasonable 

 17 doubt that she knowingly joined any agreement to do anything 

 18 illegal.

 19 She was hired with the understanding that she would 

10:40a 20 keep illegal conduct from occurring on the site, and there's 

 21 been no testimony to the contrary. There's a bunch of e-mails 

 22 that she's cc'd on where they talk about changes to the 

 23 policies that we heard Dan Hyer say yesterday were a moving 

 24 target; and she was the person at Backpage, along with the 

10:40a 25 moderators, getting notices of this moving target sometimes on 

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 1 a daily basis and scrambling to implement it.

 2 There -- there's no evidence that she knew what Carl 

 3 Ferrer and whoever else was doing. Carl Ferrer couldn't even 

 4 say the right name for her. He called her Joyce, and when 

10:41a 5 asked to identify her in court he struggled. There's no 

 6 evidence that he ever even met her, and I found it notable a 

 7 couple moments ago when the Court was talking to, I think, 

 8 Mr. Panchapakesan that the Court referenced evidence about the 

 9 individuals who ran the company being at meetings with NGOs 

10:41a 10 and government representatives. 

 11 Ms. Vaught was at none of those meetings. There's 

 12 no evidence that anything that was stated at those meetings, 

 13 shared at that meetings trickled down to Ms. Vaught.

 14 So while there might be these First Amendment 

10:42a 15 concepts and really broad ideas about culpability here, 

 16 Ms. Vaught's is much more simple. She had no idea, none; and 

 17 in a way, you know, almost used as a human shield by Ferrer 

 18 and the moderators, and what's really notable is we heard from 

 19 Ferrer and we heard from Hyer. 

10:42a 20 The moderators are in the trenches every day dealing 

 21 with this craziness and the changes and looking for boobs one 

 22 day and not the next, and these guys are overmarketing 

 23 changing their work and undercutting the work they're doing 

 24 just because someone calls up and says, "Hey, I'm mad you 

10:43a 25 pulled my ad," or "You pulled my photo," and the moderators 

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 1 didn't even know. They had no idea this was going on.

 2 So there's no evidence here Ms. Vaught signed up for 

 3 any of this; and, in fact, there's evidence of Ms. Vaught 

 4 saying to moderators, "Look, if you don't pay attention and 

10:43a 5 you don't follow these rules and enforce this -- if you don't 

 6 police like we're telling you to police, you can be fired."

 7 There's nothing, nothing that the Government has put 

 8 into this that shows she ever took this lightly or that she 

 9 was in any way intentionally ignorant. She was facing it 

10:44a 10 every day and fighting it. 

 11 So I -- I don't see how -- frankly, I don't see how 

 12 Ms. Vaught ended up here in the first place. Maybe it was 

 13 pressure to cooperate that she's resisted because she has said 

 14 to me, "I'm not gonna lie to save my skin. I didn't know." 

10:44a 15 And I think the evidence has been consistent with 

 16 that, Judge. She didn't know, and there's been nothing in the 

 17 government's case in chief to show that she knowingly joined 

 18 an agreement to commit any of the crimes listed in the 

 19 indictment. The evidence shows the opposite. Thank you.

10:44a 20 THE COURT: Thank you. 

 21 Mr. Kessler.

 22 MR. CAMBRIA: Your Honor, I'm sorry, may I ad 

 23 something? I got wrapped into the legal part of this, and I 

 24 did want to say that with regard to Mr. Lacey, they really 

10:45a 25 haven't put him anyplace or doing anything. They allege that 

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 1 he made some money; but, you know, that's not a crime that I 

 2 know of, but they have no statements. They have no meetings. 

 3 He's not anyplace. 

 4 In fact, the last witness said in the twelve years 

10:45a 5 he worked at Backpage he never even met Mr. Lacey. So I 

 6 submit that they have not carried their case with regard to 

 7 him at this stage. Thank you.

 8 THE COURT: Thank you.

 9 Mr. Feder.

10:45a 10 MR. FEDER: Obviously I join in the comments that 

 11 have already been made, Judge, and I just bring a couple of 

 12 things to the Court's attention. 

 13 The evidence was that the Government's theory about 

 14 TER and aggregation and moderation and the phrases of GFE and 

10:46a 15 those kinds of things, the testimony from their main 

 16 cooperators has been by the time of the first of the 50 ads 

 17 and obviously after that aggregation, at least as to adult, 

 18 was gone. No longer in effect. Moderation had been taken 

 19 over by Liz McDougall such that Mr. Spear, at least, and none 

10:46a 20 of these other defendants were involved with that anymore. 

 21 That GFE had already been prohibited, that TER was 

 22 gone per Mr. Hemu Nigam and others, that they did at the 

 23 suggestion of some of these NGOs and the AGs. Took out stuff 

 24 that they were asked to do voluntarily. There was no 

10:46a 25 regulation law at all that made them take it out. Unless the 

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 1 ad was overtly sex for money, these were all suggestions and, 

 2 I mean, to go to -- if this world, this law, this case is 

 3 gonna say that something is illegal because of suggested, then 

 4 we're -- we are really lost in this country and we're Iran and 

10:47a 5 Afghanistan. 

 6 None of these ads are overtly sex for money except 

 7 Ms. Beck, and Ms. Beck's count was after Mr. Ferrer purchased 

 8 the Backpage and then you have the testimony to reiterate from 

 9 the police officers that even on that ad they didn't even have 

10:47a 10 probable cause to make an arrest, much less the standard for 

 11 Rule 29. 

 12 There's been no testimony whatsoever that any of

 13 these defendants, including Mr. Spear, knew of any of the 50 

 14 ads, contributed to any of the 50 ads, talked to any of the 

10:48a 15 advertisers, et cetera; that they received any money from that 

 16 specific ad as to the money laundering counts. 

 17 And then as to Mr. Spear, I mean, again, his primary 

 18 role, according to the testimony, has been that he was trying 

 19 to regulate moderation, which as Mr. Hyer said yesterday, got 

10:48a 20 stricter and stricter, more and more rigid to avoid -- not to 

 21 encourage, not to aid and abet, but to avoid sex for money ads 

 22 on the site. That's what they were doing, to avoid any overt 

 23 sex for money ads. 

 24 And the Government can have their theory that that's 

10:48a 25 somehow an effort to hide what they were doing. Well, under 

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 1 Rule 29 they certainly have not proven that notwithstanding 

 2 them saying -- Mr. Ferrer and Mr. Hyer saying, "Well, these 

 3 are sex ads on their face," and their so-called victims 

 4 claiming that these are sex ads on their face when all they 

10:49a 5 have is suggestive words that are in every ad in every 

 6 magazine in this country. That's all I have, thanks.

 7 THE COURT: I don't know what magazines you're 

 8 reading, Mr. Feder, but in any event I appreciate the 

 9 argument.

10:49a 10 MR. FEDER: I'll bring you the Sunday New York Times

 11 magazine for the cosmetics and perfume.

 12 THE COURT: All right. 

 13 Mr. Eisenberg.

 14 MR. EISENBERG: Thank you, Your Honor. 

10:49a 15 May it please the Court. I want to first start by 

 16 going back to something that was said before by one of my 

 17 colleagues that has to do with the specific intent concept and 

 18 how it relates to Pinkerton. Pinkerton is a theory of 

 19 evidence, if you will, and how it can be applied in a jury's 

10:50a 20 determination of guilt or innocence whereas specific intent is 

 21 a much more higher level of law. That is, it's an element. 

 22 So when we're dealing with specific intent and we 

 23 want to apply the Pinkerton theory to it, I have the following 

 24 concerns: 

10:50a 25 Now, my math may be wrong and I'm gonna say ahead of 

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 1 time that I'm gonna use the yard stick of 3,000,000 ads a year 

 2 -- it may have been more -- and I'm gonna use the time frame 

 3 running from Count 2 and it's Count 51, September 10, 2013, 

 4 through February 6th, 2018, and by my count that's roughly 

10:51a 5 four and a half years.

 6 So if over four and a half years times 3,000,000

 7 advertisements published in Backpage we have 13.5 million ads; 

 8 and, again, I'll stand corrected if it's only 2,000,000 a 

 9 year, whatever. My point is that at that amount of 

10:51a 10 publication, how does one remotely conceptually extrapolate 

 11 using the Pinkerton theory to the idea that somebody has had 

 12 the specific intent to facilitate or promote the business of 

 13 prostitution on a specific ad? 

 14 You simply couldn't do it, and it allows the theory 

10:52a 15 to adulter -- not adulter -- well, it allows the theory to 

 16 overcome the element so that we're almost to the point of 

 17 dealing with an absurdity; and, of course, it applies to every 

 18 -- every defendant, including my client.

 19 As to my client specifically, Your Honor, the 

10:52a 20 evidence shows that given his job for as long as he did it, 

 21 both Messrs. Ferrer and Hyer commented that it was a very 

 22 difficult job. Neither one of them, they're co-conspirators 

 23 put on the stand to give whatever testimony they could with 

 24 respect to my client and others, said anything about the fact 

10:52a 25 -- or alleged fact that my client knowingly committed the act 

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 1 of Travel Act prostitution or anything close to that, Your 

 2 Honor.

 3 His job was just the opposite and, that is, not to 

 4 -- let me put it this way: The rules changed. The standards 

10:53a 5 changed, but he was not the person who was in charge of making 

 6 those standards and making those rules. He had the thankless 

 7 job of trying to implement those rules to see that an ad would 

 8 be acceptable. 

 9 So in our terms if we are looking at this to say, 

10:53a 10 "Oh, yeah, but the ad is on its face an ad for prostitution," 

 11 his intent and his job is to make sure those ads pass muster 

 12 by somebody above him, not his concept; and for what he got 

 13 paid in order to do this job, not only was it a thankless 

 14 task, but it was relatively -- I wouldn't say worthless with 

10:54a 15 respect to him. He did have a job and he respected the job 

 16 that he had.

 17 So how do you rationalize -- oh, I know what the

 18 Government will say. He had these, I think, e-mails in which 

 19 he said we are not to leave notes about knowing that this is 

10:54a 20 something from prostitution. 

 21 That can be looked at two ways. We're here on a

 22 beyond a reasonable doubt basis, and whether that means that 

 23 he's acknowledged prostitution in any ad or does it mean you 

 24 got to do your job and your job is to make sure that these 

10:54a 25 rules apply so that there is no, as far as we are concerned, 

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 1 ad for prostitution in what we are doing as moderators. 

 2 Four hundred moderators at the most -- the highest 

 3 period of time, Judge, over -- well, I guess that might have 

 4 been the last couple of years, but most of the time it was 

10:55a 5 really 100, perhaps 200 moderators. Indeed, when it started, 

 6 there were only 40 people to do this thankless task; and I 

 7 think that ties us right back into the specific intent content 

 8 here. 

 9 How do you show that anybody, any moderator, 

10:55a 10 irregardless of whether he's chief or not, and I could go on 

 11 and on about that but not for the purposes here, how did 

 12 anybody have any idea about any ad that goes through the queue 

 13 and gets moderated?

 14 Judge, in my view, the Government has overcharged 

10:55a 15 this case. They've done it with all of us, but they've 

 16 particularly done it with the guy in the trench. 

 17 Thank you, Your Honor.

 18 THE COURT: Thank you, Mr. Eisenberg. 

 19 Who is coming forward from the Government? 

10:56a 20 MR. KOZINETS: I am, Your Honor.

 21 THE COURT: Just -- just to be clear, Mr. Cambria, 

 22 before I permit the Government to proceed, this objection is 

 23 related to our prior discussion on proposed instruction, and 

 24 for the Government's awareness it's Document 1657. So I don't 

10:56a 25 necessarily know that there needs to be a new response from 

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 1 the Government.

 2 MR. CAMBRIA: Yeah, this is just our -- this is just 

 3 all the First Amendment law that was in there so that's why I 

 4 sent it up.

10:56a 5 THE COURT: All right, thank you. 

 6 Mr. Kozinets.

 7 MR. KOZINETS: Thank you, Your Honor. 

 8 I think Your Honor hit the nail on the head with

 9 your question about the defendants' approach to the law here. 

10:57a 10 Under their view, anybody who operated a website like Backpage 

 11 knowing that their entire revenue generating business model 

 12 was based on the sale of prostitution ads or other illegal 

 13 goods or services, those people could never be held liable 

 14 under the Travel Act unless they reviewed and saw every single 

10:57a 15 ad that they posted or allowed to be posted. That is not the 

 16 law and it cannot be the law. 

 17 The notion that a website operator can simply hide 

 18 behind the technology of how websites are run to avoid 

 19 criminal liability is a theory that has been rejected in other 

10:57a 20 cases, and I direct your court to United States v. Ulbricht, 

 21 31 F.Supp. 3d 540 from the Southern District of New York. 

 22 That involved the Silk Road case, a website where 

 23 narcotics and other illegal goods and services were sold. The 

 24 website operator was successfully prosecuted. 

10:58a 25 Now, he could not possibly have reviewed or seen 

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 1 every single ad or overseen every single transaction that 

 2 transpired in the website, but the Court ruled that didn't 

 3 matter. As long as he had the knowledge and intent to set up 

 4 a website that was designed to promote, facilitate, to create 

10:58a 5 the sort of platform, that that -- that was enough. 

 6 And we've litigated these legal -- these sort of

 7 preliminary legal issues almost ad nauseam over the 

 8 approximately six-year history of the case. The same legal 

 9 arguments were made over and over again in multiple motions to 

10:58a 10 dismiss, and I point the Court, for example, to Doc. 793 where 

 11 a lot of same time of intent and knowledge arguments were made 

 12 and the Court objected them. 

 13 On Page 16 of Doc. 793, for instance, the Court 

 14 discussed the Michigan case, 383 US at Page 503, which 

10:59a 15 involved the level of intent required to prosecute an operator 

 16 of an adult bookstore; and the argument was made well, you 

 17 know, unless that proprietor had looked at every single book 

 18 in the bookstore, they can't be liable. There's no liability 

 19 there, and the Supreme Court said no a scienter and intent 

10:59a 20 requirement that shows that the defendants were, quote, "In 

 21 some manner aware of the character of the material they 

 22 attempted to distribute was sufficient," was enough. That's 

 23 at Page 510 of that decision. 

 24 And in Doc. 793 the Court recognized that the 

11:00a 25 Government's proposed mens rea standard, specific intent to 

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 1 promote or facilitate prostitution, is consistent with Gibson, 

 2 Tavelman, Polizzi, the Ninth Circuit cases discussing the 

 3 requirements of the Travel Act. That's at page -- at Doc. 

 4 793, Page 18. 

11:00a 5 The Court went on to discuss that the alleged facts

 6 in the superseding indictment taken as true establish 

 7 defendants have the specific intent to promote prostitution 

 8 in violation of the Travel Act. This is at Page 20 of that 

 9 Doc. 793. They conspired together to do so. The conspiracy 

11:00a 10 was successful and resulted in the 50 ads for prostitution 

 11 that make up the 50 counts of violating the Travel Act. 

 12 The Court also rejected this notion of kind of a

 13 boundless conspiracy. That's in Doc. 946. And so when 

 14 counsel for Mr. Brunst first got up here, counsel referred to 

11:01a 15 this case as reflecting that the Court held that specific 

 16 intent in the context of this case requires that the 

 17 defendants knew that they had this sort of knowledge about 

 18 each ad, and I refer the Court to page -- Pages 15 to 16. 

 19 That was Judge Brnovich kind of restating the defendants' 

11:01a 20 argument. It wasn't the holding of that order. 

 21 Instead, again, the Court referred back to its 

 22 earlier ruling -- this is Page 15 of Doc. 946 -- its finding 

 23 that the defendants had specific intent to promote or 

 24 facilitate an unlawful activity as charged in the indictment. 

11:02a 25 And with respect to this -- this notion of 

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 1 conspiracy being boundless, I think you need to look -- it's 

 2 important to look at the entire context of where that occurs 

 3 at Pages 13 and 14 of Doc. 946. 

 4 After going over the language that Mr. Brunst's 

11:02a 5 counsel mentioned, the Court went on to say, quote, "Many of 

 6 the factual allegations place Defendants' roles at Backpage in 

 7 context and further illustrate this," the conspiracy. To be 

 8 sure, the allegations certainly describe a course of conduct 

 9 where Defendants facilitated 'unlawful activity,' including 

11:02a 10 numerous pimps, prostitutes and traffickers in violation of 

 11 the Travel Act. They also certainly describe how these 

 12 various groups continuously engaged in prostitution, which 

 13 plausibly fits within the definition of a 'business 

 14 enterprise.'" 

11:03a 15 The Court went on to say, When read in its entirety

 16 and construed according to common sense, the Superseding 

 17 Indictment adequately alleges the underlying businesses 

 18 involved in prostitution that defendants intended to 

 19 facilitate and thereafter facilitated or attempted to 

11:03a 20 facilitate. 

 21 And then the Court went on to conclude there that 

 22 the Superseding Indictment alleges a continuous course of 

 23 criminal conduct, the operation of Backpage, supported on 

 24 fifty distinct occasions. 

11:03a 25 So, essentially, Your Honor, I think a lot of the 

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 1 legal arguments that were just made have already been 

 2 considered by the Court and do not preclude -- or do not 

 3 support the arguments being made here. 

 4 The Gibson Specialty case is an interesting case 

11:03a 5 that counsel also mentioned, and in that case the Court talked 

 6 about evidence showing that the manufacturer in some 

 7 significant manner associated themselves with their -- with 

 8 their customers, with the business enterprises that they were 

 9 charged with promoting or facilitating. 

11:04a 10 And I think what is -- what is very telling here --

 11 or very key to looking at that issue is the People v. Lurie

 12 case from California State Court. This is a case that we have 

 13 cited in the proposed jury instructions and sort of the legal 

 14 discussion supporting our position on the instructions and, 

11:04a 15 basically, what that case stands for -- and this is at page -- 

 16 at Doc. 1626-3, Page 22. 

 17 That case stands for the proposition that intent can 

 18 be inferred from knowledge in a variety of circumstances, 

 19 including those that fit within the evidence here, and those 

11:04a 20 indicia of intent that have been well recognized here are 

 21 proof of inflated charges for the goods or services that are 

 22 tied to illegal activity, evidence of an unusual volume of 

 23 business with prostitutes, evidence that it demands to a high 

 24 proportion of the seller's total business, you know, and we 

11:05a 25 have introduced a very large amount of evidence showing that 

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 1 Backpage derived the lion's share of its revenues from 

 2 prostitution. 

 3 Also, evidence that the sale of these illegal goods 

 4 or services have become the dominant portion of the seller's 

11:05a 5 business. We've shown that here.

 6 THE COURT: Well, let me ask you with respect to the 

 7 second element of the Travel Act violations, the way that the 

 8 jury was instructed in the preliminary instructions relates to 

 9 the defendant performed or attempted to perform an act that 

11:06a 10 did promote, manage, established, carry on or facilitate the 

 11 promotion, management, establishment or carrying on of a 

 12 business enterprise involving prostitution offenses.

 13 Given that element of these Counts 2 through 51, is 

 14 it necessary then for the Government to put forward specific 

11:06a 15 evidence related to the business enterprise as it relates to 

 16 the specific ads that are stated in each of those counts?

 17 MR. KOZINETS: So --

 18 THE COURT: Do you understand the question? 

 19 MR. KOZINETS: I -- I'm not entirely sure. Are you 

11:06a 20 referring to just the evidence about the business 

 21 enterprise -- 

 22 THE COURT: Yes.

 23 MR. KOZINETS: -- reflected in the ads? 

 24 THE COURT: Yes, and what I'm trying to understand 

11:06a 25 is you've determined the count based on a particular ad on a 

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 1 particular day.

 2 MR. KOZINETS: Right.

 3 THE COURT: And so what is the -- what is the 

 4 necessity for the Government to put forward evidence related 

11:07a 5 to a business enterprise to that particular charge? 

 6 I don't know if that's any clearer.

 7 MR. KOZINETS: I think that -- you know, as alleged 

 8 under that second count, an act -- a subsequent act, you know, 

 9 in furtherance of promoting or facilitating the promotion of 

11:07a 10 the business enterprise.

 11 So there has to be proof of something, you know -- 

 12 facilitation or promotion which we contend, you know, is 

 13 written all over the trial evidence that's been presented over 

 14 the last 21 days; but as Your Honor focused more not so much 

11:07a 15 on the defendants' act, but on the business enterprise being 

 16 promoted or facilitated? 

 17 THE COURT: Yes.

 18 MR. KOZINETS: Well, we think there -- we've 

 19 litigated this to some extent and this was in Doc. 840, Motion 

11:08a 20 to Dismiss the Superseding Indictment with respect to this 

 21 issue, and the Court recognized in that -- I'm sorry, it's not 

 22 Doc. 840. That was the CDA. It was Doc. 946.

 23 THE COURT: 946? 

 24 MR. KOZINETS: 946. And the Court recognized that 

11:08a 25 that element -- it is -- it is part of the element, but 

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 1 there's a very, very low bar to putting forward evidence of a 

 2 business enterprise and the Court in a footnote in that 

 3 decision cited to -- give me a moment. I might be able to 

 4 find it -- cited to a Fourth Circuit case. This is Doc. 946 

11:08a 5 at 1104 where just the discovery of a triple-beam balance 

 6 scale in the defendant's premises, that was enough indicia of 

 7 a continuous heroin selling enterprise, just that really small 

 8 amount of evidence, something to show that there was some sort 

 9 of continuous course of -- of conduct. 

11:09a 10 That is what a business enterprise is under the 

 11 Travel Act, and we believe that the record here contains ample 

 12 direct and circumstantial evidence that each of these fifty 

 13 ads were tied to something that was more than just a sporadic 

 14 or occasional solicitation for prostitution, and I'd be happy 

11:09a 15 to elaborate further if Your Honor would like on that.

 16 THE COURT: Can you move to -- with respect to the 

 17 remaining counts -- and, actually, I'd like to kind of get 

 18 your theory or what you believe the evidence is with regard 

 19 Count 63. As Mr. Panchapakesan stated, that essentially money 

11:10a 20 to a web developer is the allegation, how does that relate to 

 21 the substantive charge? 

 22 MR. KOZINETS: Sure. Thank you, Your Honor. 

 23 So on September 21st at about 3:18 p.m. Mr. Ferrer 

 24 did testify about this. He talked about receiving fees from a 

11:10a 25 company in India and how they were looking for non-adult 

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 1 content that we could import to increase the ad count in our 

 2 categories that were not adult, and that's what this payment 

 3 in Count 63 was for. 

 4 And if Your Honor recalls -- so do you remember the 

11:11a 5 exhibit -- I believe it was Exhibit 120 marketing presentation 

 6 that Mr. Brunst and Mr. Ferrer put together in 2011?

 7 In that presentation, which showed that --

 8 THE COURT: Well, let me -- let me just generally 

 9 ask this question: So is it your position that, essentially, 

11:11a 10 then, any proceeds that were received from the operation of 

 11 Backpage at that time then -- because they were considered 

 12 illegal proceeds, then whatever was used with that money to 

 13 purchase then could be alleged?

 14 MR. KOZINETS: Absolutely, Your Honor.

11:11a 15 THE COURT: That's the -- that's the position? 

 16 MR. KOZINETS: Absolutely. So -- go ahead.

 17 So with respect to Count 63, which is charged as a 

 18 promotional money laundering transaction, the promotion was 

 19 the use of these Backpage derived funds to pay this website 

11:12a 20 developer in India for the purpose of further promoting the 

 21 Backpage business. 

 22 So they would take those fund and then supply 

 23 Backpage with these fees, which Mr. Ferrer testified were just 

 24 sort of -- kind of computer-generated or 

11:12a 25 automatically-generated sources of legitimate ads, you know, 

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 1 trucking, employment, what have you, things that Backpage 

 2 wasn't actually in the process of selling to its own customers 

 3 but sort of imported almost fake content to make it appear 

 4 that Backpage's business was legitimate, that it really was 

11:12a 5 another Craigslist, another very general purpose classic 

 6 advertising site that earned revenue from all kinds of ad 

 7 categories. 

 8 It was an effort to deceive and to mask the true

 9 nature of the website, which was singularly focused on earning 

11:13a 10 money from the sale of prostitution ads, and that's -- so this 

 11 Exhibit 120, we could look at it if Your Honor wants, we don't 

 12 have to, but that's -- that's the exhibit that shows that 

 13 approximately 94 percent of Backpage's revenue is from the 

 14 adult section. 

11:13a 15 Mr. Ferrer testified -- and I think the exhibit 

 16 actually has another slide showing that about 80 percent of 

 17 that came from female escorts and when you ad body rubs and 

 18 the other escort categories, the percentage actually comes up 

 19 to 96 percent. So 96 percent of the website's revenue is 

11:13a 20 coming from the sale of prostitution ads and we've had witness 

 21 after witness after witness who's come here and testified 

 22 under oath right here that on Backpage when an ad was denoted 

 23 an escort ad, "escort" meant prostitution; and we've seen that 

 24 just in any number of overwhelming ways, and I could go 

11:14a 25 through that chapter and verse, but I don't think we need to 

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 1 because of the standard that applies here under Rule 29. 

 2 The sufficiency of the evidence standard is an 

 3 extraordinarily low one. It's extraordinarily liberal in 

 4 terms of what is needed to present charges to the jury. 

11:14a 5 Looking at the evidence in the light most favorable to the 

 6 Government, drawing all inferences in favor of the Government, 

 7 could any rational juror find guilt here? 

 8 It's under that -- we far exceed that standard here, 

 9 but that is what applies.

11:14a 10 THE COURT: Let me ask you about -- there was a -- I 

 11 think Mr. Cambria is the one that raised this. He suggests 

 12 that there is no evidence to -- well, there was no connection 

 13 between the loan payment and concealment, that essentially 

 14 there was no concealment that occurred.

11:15a 15 MR. KOZINETS: So I think there are a few different

 16 responses to that, Your Honor.

 17 The first is that the entire sale was a sham, as

 18 Mr. Ferrer testified to. The sale itself was designed to 

 19 further distance the owners, three of the defendants here, 

11:15a 20 from their connection to Backpage, put everything on paper in 

 21 Mr. Ferrer's name while they continued to reap all of the 

 22 profits.

 23 Mr. Ferrer testified that these payments that he was 

 24 making, he was obligated to pay the owners eight million 

11:15a 25 dollars a month under the so-called sale and loan agreements; 

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 1 and he also testified that an elaborate web of companies were 

 2 created in connection with the sale, a whole chain of holding 

 3 companies on Mr. Ferrer's side and a whole chain of holding 

 4 companies on the defendants' side as well, Mr. Brunst, 

11:16a 5 Mr. Spear and Mr. Lacey, to further distance the ultimate 

 6 owners from the business entities involved. So the sale 

 7 itself had a deceptive purpose, a purpose of concealment. 

 8 Then we go into the entities that were used to make 

 9 these transactions. Mr. Ferrer testified that Website 

11:16a 10 Technologies itself was created to conceal the real source of 

 11 these funds, which was Backpage, which was 96 percent funded 

 12 by revenue from these prostitution ads.

 13 So you have concealment with respect to this -- to 

 14 this money being funneled through Website Technologies. Then 

11:17a 15 you have concealment that it's being then paid to this Cereus 

 16 company, this holding company that is -- is not just created 

 17 for the purpose of taking in loan payments, but instead is 

 18 created for the purpose of taking in Backpage's revenues which 

 19 are coming in by way of loan payments, but taking Backpage's 

11:17a 20 revenues and then using them to make -- to pay Backpage 

 21 obligations.

 22 Carl Ferrer testified that the moment the money hit 

 23 Cereus' account there were distributions to the three owners 

 24 and a fourth owner and, in addition, Mr. Ferrer, and I believe 

11:17a 25 even Mr. Quoc Thai testified, that Cereus also functioned as a 

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 1 kind of payroll processing entity for Backpage. 

 2 So the money would go up to Cereus and then would 

 3 come back out and be used to pay certain Backpage payroll 

 4 expenses as well, and so these are all done in a way -- if one 

11:18a 5 wanted to not conceal or not disguise, why have the money go 

 6 through all these different entities and kind of go through 

 7 all these sort of transactional gymnastics, if you will, if 

 8 there was any sort of purpose of being completely transparent?

 9 We submit that the evidence here is more than 

11:18a 10 sufficient to show that the purpose was to conceal in whole or 

 11 in part, or in part, as the statute says, and I don't know if 

 12 -- okay, so then -- so does Your Honor have any other 

 13 questions about that issue?

 14 THE COURT: Well, I do want to just ask you: So the 

11:18a 15 Pinkerton theory that you're advancing, I just want you to 

 16 tell me -- Mr. Panchapakesan also pointed out Count 69 through 

 17 70 and 82 through 84 as it relates to his client. 

 18 That's the theory that you're -- you've alleged the 

 19 allegations against Mr. Brunst. Is that -- do I get that 

11:19a 20 correctly? 

 21 MR. KOZINETS: I think that's true as an alternative 

 22 theory, but I don't think that's the whole -- the whole basis 

 23 there. I think the evidence shows that Mr. Brunst was the CFO 

 24 of the entities that funneled the money involved in those 

11:19a 25 accounts and that he was one of two signatories, one of two 

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 1 people connected to those accounts who had the authority to 

 2 make those transactions. So we think there is a direct theory 

 3 of liability there. 

 4 Alternatively, there's a --

11:19a 5 THE COURT: And those relate to the Ad Tech and the

 6 Cereus Properties?

 7 MR. KOZINETS: Mr. Stone can address this with more 

 8 particularity. 

 9 MR. STONE: Your Honor, two of those counts, 69 and 

11:20a 10 70, relate to Camarillo, the company Camarillo Holdings.

 11 THE COURT: Ah, okay, okay.

 12 MR. STONE: And there was testimony and evidence

 13 that Mr. Brunst was the CFO of Camarillo. 

 14 In addition, there was lots of testimony by 

11:20a 15 Mr. Ferrer about Mr. Brunst' role post sale in terms of being 

 16 the bill collector for all of Backpage's proceeds that were 

 17 being funneled back to the owners and the individuals who sold 

 18 the company, lots of testimony by Mr. Ferrer about that.

 19 The other counts in 69 through 99 where Mr. Brunst 

11:20a 20 is charged relate to Cereus Properties where he's also the 

 21 CFO, according to the testimony and the evidence at trial, and 

 22 was one of two signatories on the bank account was Mr. Brunst 

 23 and Mr. Spear; but, again, there's ample evidence that it was 

 24 Mr. Brunst who was in charge of the banking transactions via 

11:21a 25 all the e-mails with the banks and all the discussions he had 

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 1 with Mr. Ferrer and that came out in testimony from 

 2 Mr. Ferrer. 

 3 So those -- that's our theory on the Counts 69 

 4 through 99, which are all transactional money laundering 

11:21a 5 counts. The individuals who are charged either received the 

 6 transaction or, in Mr. Brunst's case, were the ones who made 

 7 the transaction happen that went to the individual.

 8 THE COURT: All right, thank you. 

 9 Anything further?

11:21a 10 MR. KOZINETS: There were several points made about

 11 the individual defendants and the sufficiency of the evidence 

 12 as to each of them. I'd be happy to address any questions you 

 13 have about any of the specific defendants.

 14 THE COURT: I would like you to take a moment and 

11:22a 15 respond to Ms. Bertrand, her argument with regard to her 

 16 client, and Mr. Eisenberg's with regard to his client. 

 17 What is the evidence as the Government sees it?

 18 MR. KOZINETS: Thank you, your Honor. 

 19 So Mr. Padilla and Mr. -- and Ms. Vaught ran the

11:22a 20 moderation department. The moderation department was the 

 21 engine room of Backpage, particularly during the years covered 

 22 by the substantive counts here.

 23 All of the prostitution ads ran through that 

 24 department or were supposed to have run through that 

11:23a 25 department, and what we see in the trial evidence is e-mail 

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 1 after e-mail after e-mail showing that these two defendants 

 2 were managing that department, were instructing the employees 

 3 of that department and were actively engaged in this -- what 

 4 Mr. Ferrer described as making the ads look less obviously 

11:23a 5 like prostitution ads, that being the purpose of the 

 6 moderation department during these years.

 7 And so, for instance, in Exhibit 56 we have an 

 8 e-mail from Mr. Padilla to Jeff Lyons on which Ms. Vaught is 

 9 copied. This is from October 8th, 2010, where he says until 

11:23a 10 further notice do not leave notes in user accounts because 

 11 this particular moderator, Mr. Lyons, left a note saying, 

 12 "Hey, I think this is a prostitution ad," and he was 

 13 instructed by the people running the moderation department, 

 14 "We're not going to say anything in writing about whether 

11:24a 15 these are prostitution ads."

 16 Then we have e-mails, such as Exhibit 49, about 

 17 cleaning up the site as the Attorney Generals started to put 

 18 some pressure on Backpage and Mr. Padilla instructing that 

 19 only the "worst apples" quote/unquote should be affected. 

11:24a 20 We have him disseminating e-mails about terms for 

 21 the strip out filter. This is the filter that removed code 

 22 words, solid sex for money terms that the defendants had 

 23 identified and still allowed the ads to be published without 

 24 kind of interfering with the underlying purpose of the ads.

11:24a 25 Another example is Exhibit 1928 where Mr. Ferrer has 

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 1 -- has said the terms GFE and PSE, which the Court has heard a 

 2 lot of about as being a prostitution -- prostitution terms, 

 3 those have to be removed; and Mr. Padilla says in response, 

 4 that will mean I have to edit -- you know, having to edit 

11:25a 5 every ad on the site. This is in October of 2010, knowledge 

 6 that these ads are prostitution ads.

 7 And kind of -- the e-mails go on and on. There was 

 8 one exhibit, 610, from the same time period where Mr. Padilla 

 9 is instructing the moderation staff, "No nudity below the 

11:25a 10 waist." "No crotch shots." You know..."g-strings are okay." 

 11 "Boobs are okay." A list of prices with no time increments 

 12 are okay, like 60, 80, 100, 120; and he's basically putting 

 13 the word out these are -- this is what we have to do to make 

 14 these ads less obviously prostitution ads. 

11:26a 15 And then if Your Honor recalls, at the end of that 

 16 e-mail he says, Scott, defendant Mr. Spear, "Scott's really 

 17 pleased with the work we've been doing and he's giving us all 

 18 movie passes, if not this week, then next. If you work from 

 19 home, we'll mail yours."

11:26a 20 There are more and more e-mails showing all of this. 

 21 Eventually we get to the e-mail Exhibit 647 regarding The 

 22 Erotic Review and this is an e-mail where Mr. Padilla -- well, 

 23 first of all, there is a lot of evidence in the record now 

 24 about The Erotic Review, about what it was, what it meant, how 

11:26a 25 it showed that ads associated with The Erotic Review were 

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 1 unquestionably for prostitution. 

 2 The defendants -- Mr. Lacey was confronted with this 

 3 evidence and Mr. Spear when they met with NCMEC in 2011. The 

 4 Wall Street Journal wrote about it. It came up in other media 

11:27a 5 accounts, public officials, non-government organizations. 

 6 Internally the company and the defendants knew what this 

 7 purpose of The Erotic Review was. 

 8 So now we're getting to a point, though, where the 

 9 Attorneys General are putting pressure on Backpage and they're 

11:27a 10 trying to make the site look less obviously like prostitution.

 11 So Carl Ferrer testified that he discussed this with 

 12 Mr. Spear and they decided to unthread the needle by taking 

 13 out these hyperlinks to The Erotic Review and maybe taking out 

 14 the words TER but leaving in the ID numbers so people could 

11:27a 15 look up the reviews on their own, and so Mr. Padilla is 

 16 instructed by Mr. Ferrer and he disseminates this message to 

 17 all of the moderation staff in Exhibit 647 and he says leaving 

 18 the ID number is okay. "If you have any questions, please ask 

 19 me or Joye," defendant Vaught.

11:28a 20 And later on in March of 2016 in Exhibit 199 

 21 Mr. Padilla writes to the staff, and he says the term GFE is 

 22 now back. We can start using that again.

 23 So the defendant as to Mr. Padilla -- and this is 

 24 just a slice, a sampling, of the kinds of e-mails and 

11:28a 25 discussions and meetings that Mr. Padilla was involved in that 

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 1 showed that he was -- that he and Ms. Vaught were really the 

 2 ones who were the tip of the spear, if you will, in 

 3 implementing this strategy of making these ads look less like 

 4 prostitution. 

11:29a 5 And as Mr. Ferrer and Mr. Hyer, other witnesses 

 6 testified at trial, this was really deliberate and intentional 

 7 effort to allow the continued promotion and facilitation of 

 8 prostitution and to assist Backpage's customers by helping 

 9 them continue to ply their wares, if you will, and to continue 

11:29a 10 to use Backpage as this platform for doing that.

 11 So with respect to Ms. Vaught, in particular, we

 12 know that she was the second in command of the moderation 

 13 department -- and just to circle back, to take a step back, 

 14 one of the defendants today said something about Liz McDougall 

11:29a 15 assuming control of the moderation department from 2012 

 16 onward. 

 17 That is not the case. That is not consistent with 

 18 the trial testimony here. Mr. Ferrer testified that 

 19 Ms. McDougall was, in his words, herself moderated by 

11:30a 20 Backpage's owners. She wasn't given all of the information 

 21 about revenue sources and other information about how the 

 22 company was being run and was essentially sidelined. 

 23 She wasn't involved in the day-to-day business 

 24 operations of the moderation department. Instead, what we 

11:30a 25 have is Mr. Padilla and Ms. Vaught, his second in command, 

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 1 reporting directly to Carl Ferrer. That's what the trial 

 2 evidence shows.

 3 And Ms. Vaught in that position, helping to run the 

 4 moderation department, is copied on many of these e-mails that 

11:30a 5 we've just discussed involving Ms. Vaught and sends many of 

 6 her own e-mails. A good example is Exhibit 646 referring -- 

 7 and this is from February 18th, 2011. It's called "Edit Lock 

 8 Out" where Ms. Vaught writes the whole moderation department 

 9 and cc's Mr. Padilla and says, "We are giving the users a 

11:31a 10 clean slate regarding editing rights. Any ad that has 

 11 previously been locked out from editing, will have those 

 12 rights restored." 

 13 And if Your Honor recalls, lock out -- let me put it 

 14 this way: After somebody posted an ad and it went up on 

11:31a 15 Backpage, that wasn't the end of the story. The poster could 

 16 still go back in and edit their ad and change them after they 

 17 had been moderated. That was testimony from Mr. Ferrer as 

 18 well; but what the moderators did was if there was somebody 

 19 that they thought was an egregious or repeat offender, they 

11:31a 20 could occasionally lock out, prevent the poster from editing 

 21 ads after they'd gone through moderation. 

 22 And what Ms. Vaught is saying here in this e-mail is 

 23 for those -- essentially, those worst offenders, we're going 

 24 to give them a clean slate. We're going to start over with 

11:31a 25 them and "This time around," she says, "we should go easy on 

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 1 certain types of violations," and -- and goes on to say that 

 2 blank pricing, "69" in the age field, breasts covered by hands 

 3 or arms and thongs riding a little too low shouldn't be 

 4 treated the same as something that says, you know, explicitly 

11:32a 5 an offer for a blow job, for instance. And then she says, "If 

 6 you aren't sure what this means please ask me or Andrew." So 

 7 the two of them working together were -- were working to -- to 

 8 carry out this part of the conspiracy. 

 9 There are additional -- I mean, there were so many 

11:32a 10 e-mails introduced that relate to this. Ones that involve 

 11 Ms. Vaught also include Exhibits 103a and b, Exhibits 1697 and 

 12 1697a where Ms. Vaught goes through certain images and ads and 

 13 says these are okay, these are not okay; but upon looking at 

 14 them and showing them to the jury, one can see that all of the 

11:33a 15 ads are -- fit within kind of the ads that have been 

 16 demonstrated to be ads for prostitution in the course of the 

 17 evidence that's been presented here. The same thing with 

 18 Exhibit 1698 and 1698a. 

 19 In Exhibit 1219 Ms. Vaught writes, we've restored 

11:33a 20 images that were deleted by the Avion crew. That's an 

 21 offshore moderation crew, because these do not break the 

 22 rules; but, again, the ads, the images, fit clearly within, 

 23 you know, the other ads and images that we've been looking at 

 24 that witnesses have identified as being prostitution ads.

11:33a 25 In Exhibit 1816, this is from 2013, she's responding 

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 1 to a moderator who took down an ad or wanted to report it and 

 2 she says, "I probably wouldn't have reported this one," and 

 3 the moderator tells her -- responds and says, "she looked 

 4 drugged and has bruises..." That was really why I decided to 

11:34a 5 slate it for reporting. And Ms. Vaught responds, "She just 

 6 doesn't look under 18. These are the kind of reports the cops 

 7 question us about. I find them all the time, it's just 

 8 usually you who sends them." 

 9 So she's saying to this moderator, this isn't the 

11:34a 10 kind of thing that we report up.

 11 In Exhibit 1696, this is in 2011, she tells the 

 12 moderation staff, "We are going to start allowing users to 

 13 post the word prostate again. If you have any questions let 

 14 me know. Thank you. Joye."

11:34a 15 In Exhibit 1909 Ms. Vaught is forwarded a lengthy 

 16 e-mail discussing Nicholas Kristof's documentary about the 

 17 victim, who actually is one of the victims who testified here, 

 18 Ms. Figueroa. This was the -- a documentary that provided 

 19 further information and background. He had been writing in 

11:35a 20 the New York Times about prostitution occurring on Backpage. 

 21 This comes up to Ms. Vaught. She is aware of that. 

 22 And then Exhibit 198 is an e-mail from Ms. Vaught to 

 23 the moderation staff also communicating that GFE, that very 

 24 well-known prostitution term, is now allowed back on the 

11:35a 25 website. 

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 1 So we think for purposes of Rule 29 and the 

 2 sufficiency of the evidence standard, drawing all the 

 3 inferences in favor of the Government that there is more than 

 4 enough to meet that very low threshold to get the charges 

11:35a 5 involving Mr. Padilla and Ms. Vaught to the jury.

 6 THE COURT: All right, thank you. 

 7 Before I entertain any replies, I assume defense

 8 wants to make replies, let's go ahead and take another 

 9 15-minute break. After I hear those replies, I do want to 

11:36a 10 take a moment to just ask some questions about each of your 

 11 proposed forms of verdict, and then we can adjourn for the 

 12 day. All right, we'll stand in recess.

 13 MR. LINCENBERG: Your Honor, can I ask what time is 

 14 the Court anticipating adjourning for the day? 

11:36a 15 THE COURT: I don't know, it depends on how those 

 16 discussions go.

 17 COURTROOM DEPUTY: All rise. 

 18 (Recess taken at 11:36 a.m.) 

 19 COURTROOM DEPUTY: All rise.

11:52a 20 (Back on the record at 11:52 a.m.)

 21 THE COURT: All right, please be seated. 

 22 At this point I will take up any reply by the 

 23 defendants. Mr. Panchapakesan, yes.

 24 MR. PANCHAPAKESAN: Thank you, your Honor. 

11:53a 25 So I'm going to start, I think, where the Court left 

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 1 off during my argument and Mr. Kozinets addressed this notion 

 2 of, well, if the Travel Act is not a mechanism to deal with 

 3 this sort of situation, then what is? 

 4 And I highlight for the Court that in 2018 there

11:53a 5 were laws passed. FOSTA's one of them. It allow states and 

 6 victims to fight on-line sex trafficking act and in connection 

 7 with that act -- for example, there was a report from the 

 8 committee on the judiciary from the House in connection with 

 9 that act and it talks about Backpage and Craigslist and how do 

11:53a 10 we address this issue? 

 11 And what that report says is, quote: Importantly, 

 12 current federal criminal law which is unaffected by the CDA 

 13 presently lacks proper prosecutorial tools to combat these 

 14 websites."

11:54a 15 At the end it says, in connection with the sex 

 16 trafficking statute -- the federal trafficking statute -- 

 17 further, general knowledge that sex trafficking occurs on a 

 18 website will not suffice as a knowledge element and must be 

 19 proven as to a specific victim. 

11:54a 20 And so our position is that the Travel Act requires

 21 specific intent as to business enterprises. It's not enough 

 22 to say, for example, as to my client, that a five percent 

 23 minority owner, a CFO of a business is criminally liable 

 24 because some user may have posted illegal content on the site. 

11:54a 25 And while I'm not suggesting that Facebook and 

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 1 Backpage are the same thing, the Government's presentation of 

 2 evidence as to my client to say, for example, "You were aware 

 3 these ads were on the site," it's really no different than 

 4 what the case would be against a CFO of any website platform, 

11:54a 5 that you were aware of the types of content that was on the 

 6 site; and the missing link there is specific intent as to the 

 7 business enterprises, right, the fifty ads, the advertisers, 

 8 pimps, et cetera who are posting those ads.

 9 Second is there was a lot of discussion about Docket 

11:55a 10 946, which is the Court's prior order on a Motion to Dismiss. 

 11 What we're relying on this order to show -- and I didn't hear 

 12 any push back on this from the Government -- is that the 

 13 conspiracy count is limited to the fifty ads, right, because 

 14 that's what we've been on notice of; and I think what the 

11:55a 15 Government said is, well, in that order in denying the Motion 

 16 to Dismiss the Court says, well, the indictment sufficiently 

 17 talks about things like super posters and William Mersey, 

 18 right, and these individuals that the Government claims were 

 19 affiliated with Backpage.

11:55a 20 The problem is that at trial as to my client, 

 21 Mr. Brunst, there's been no evidence that he was affiliated 

 22 with a super poster, for example, but he was in a conspiracy 

 23 with Mr. Mersey, who I think the Government's called Dollar 

 24 Bill. There's no evidence that a super poster, for example, 

11:56a 25 was responsible for one of the fifty ads. 

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 1 So it's one thing for the Court to say, well, 

 2 looking at the allegations of the indictment, these types of 

 3 things might qualify as business enterprises. It's another 

 4 thing at trial to establish the existence of the business 

11:56a 5 enterprise, one, and, two, to show that my client, Mr. Brunst, 

 6 intended to facilitate those business enterprises and I 

 7 think -- Mr. Kozinets, he cited a California State case, 

 8 People v. Lurie, and I think it to some extent demonstrates 

 9 the Government's grasping at straws here, right. 

11:56a 10 They don't site to a Ninth Circuit Travel Act case 

 11 that says, well, what's going on here is evidence of intent. 

 12 They site to an irrelevant State California -- California 

 13 State case on this notion of intent, which is -- it's not only 

 14 inapplicable here, but I think it demonstrates the problems in 

11:57a 15 their case in terms of intent.

 16 Now shifting to the money laundering counts, Count 

 17 63 was one of the counts that the Court referenced. That was, 

 18 I think, a count dealing with a website developer and this is 

 19 one, of many instances, where Government counsel to some 

11:57a 20 extent was sort of testifying in some extent -- to some 

 21 extent. 

 22 I didn't hear the Government cite testimony on this 

 23 specific transaction, about this transaction, what it was for, 

 24 what its purpose was. I heard a reference to a PowerPoint and 

11:57a 25 94 percent of the ads are for adult. 

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 1 That doesn't come close as to this count or other 

 2 counts to establish what the specific purpose of it was; and 

 3 so, for example, in the US v. Brown case I cited in my initial 

 4 argument, the Fifth Circuit case, 186 F.3d 661, on promotional 

11:58a 5 money laundering what the Court says is, quote, "The problem 

 6 with the government's position is that it ignores the intent

 7 aspect of the promotion element. Section 1956(a)(1)(A)(i) is 

 8 not satisfied by a showing that a financial transaction 

 9 involving the proceeds of specified unlawful activity merely 

11:58a 10 promoted the carrying on of an unlawful activity. The 

 11 provision has a specific intent element."

 12 I think that's the element that's missing as to 

 13 these promotional counts.

 14 And then lastly turning to the concealment money

11:58a 15 laundering counts, the Government's cases of these counts is 

 16 extraordinarily weak. Mr. Kozinets in response to the 

 17 Government's -- in response to the Court's question said, "He 

 18 said the entire sale was a sham," right.

 19 But the testimony, Your Honor, from Mr. Ferrer was 

11:58a 20 the price was too high, the negotiations were unfair, the 

 21 interest rate was too high, the monthly payments were too 

 22 high. At best, even construing that evidence in the 

 23 Government's favor, all Ferrer is saying is he thought the 

 24 sale was unfair, right. 

11:59a 25 The undisputed testimony is that the purpose of 

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 1 these payments, they were payments on loans. Even the 

 2 contemporaneous e-mails put in by the Government I think 

 3 towards the end of Mr. Ferrer's direct, like Exhibit 1214, 

 4 talks about, like, a default on the loan, right.

11:59a 5 So in these communications about these transfers, 

 6 the parties are talking about them in the context of a loan, 

 7 loan payments, forbearance on a loan. There is no direct 

 8 evidence that any of these loan payments, these specific 

 9 transactions, were part of some effort to conceal or disguise 

11:59a 10 the source of the payments.

 11 Now, Mr. Kozinets, I think, asked a question at the 

 12 end when we were talking about these counts. He says quote -- 

 13 why have money go through all these entities is basically what 

 14 he said. That's not proof beyond a reasonable doubt. It's 

11:59a 15 not enough for -- it's not enough for the Government to just 

 16 sort of pose the question. Well, there's lots of entities 

 17 here and why have the money go through them? That must be 

 18 concealment. That's not direct evidence of concealment. 

 19 There's been no testimony from Ferrer or anyone else 

12:00p 20 that the sale structure itself, that the sale of Backpage was 

 21 set up intentionally in some sort of deceptive or disguising 

 22 manner. That's not what the record is.

 23 And so, for example, I think Mr. Kozinets cited some 

 24 testimony from Quoc Thai. He's a former agent. He said 

12:00p 25 something to the effect of, you know, Cereus Properties pays 

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 1 the bills of Backpage. 

 2 Cross-examination of Mr. Thai and he pretty clearly 

 3 stated multiple times he hasn't looked in to the purpose of 

 4 these transactions. He doesn't know what these entities do. 

12:00p 5 He said this repeatedly. So he can't be the witness through 

 6 whom the Government is trying to establish the purpose of 

 7 these transactions and whether they were deceptive or 

 8 concealed something. That had to have been through Ferrer, 

 9 and he didn't do that as to these transactions.

12:01p 10 And then, lastly, there's several transactional 

 11 money laundering counts where my client is sort of a secondary 

 12 defendant; and those counts, just for the record, are 69, 70, 

 13 78, 80 through 81, 83 through 84 and 86 through 93 and I think 

 14 the Government's argument there -- I think they said something 

12:01p 15 to the effect of, you know, he's one of two signatories on the 

 16 account and that's the extent of their evidence.

 17 They have no proof. There's nothing in evidence

 18 that he authorized these transactions or he signed something 

 19 effectuating these transactions. It can't be the case that 

12:01p 20 someone's responsible -- directly responsible for 

 21 transactional money laundering because they were one of two 

 22 signors on an account; and if that's the extent of their 

 23 evidence on that, and as I understand it is, then they've 

 24 clearly -- even construing that evidence in the Government's 

12:02p 25 favor, no rational juror could find beyond a reasonable doubt 

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 1 that my client was responsible for -- for those -- those 

 2 transactional money laundering counts.

 3 THE COURT: Thank you.

 4 MR. PANCHAPAKESAN: Thank you.

12:02p 5 THE COURT: Mr. Cambria.

 6 MR. CAMBRIA: At one point, Your Honor, Mr. Kozinets 

 7 said, well, we can't have a situation where -- he says you're 

 8 not saying that you have to be aware of every single ad. 

 9 We didn't say that at all. What we said was there 

12:02p 10 needs to be proof of knowledge of the fifty ads that are in 

 11 the Indictment. Why are they in the Indictment, unless 

 12 they're giving us notice? And Judge Brnovich in her prior 

 13 decisions made it clear that they were the vehicle that would 

 14 be used to, if you will, advance the so-called enterprises. 

12:03p 15 Well, you have to know about it. I don't know why, but they 

 16 took those steps to try to prove at all that anybody knew 

 17 anything about any of these ads.

 18 The other thing is this -- he cited the Michigan

 19 case. Michigan's an obscenity case, and it's certainly not a 

12:03p 20 specific intent Travel Act case. It's apples and oranges here 

 21 as far as this is concerned.

 22 And finally, you know, talking about lack of things, 

 23 with regard to Mr. Lacey, they don't have him doing any 

 24 affirmative act. The only thing they talked about was that he 

12:03p 25 was at a meeting where there was shouting and red faces, and 

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 1 they didn't even go in the meeting. They just -- after it was 

 2 over. There was nothing in there about signing anything, 

 3 about ordering anything. It's just none of -- none of that 

 4 has occurred at all. 

12:04p 5 So I submit that particularly with regard to the 

 6 fifty ads there had to be proof somewhere of knowledge of 

 7 these ads because they're the vehicle that supposedly is 

 8 advancing this enterprise. Thank you.

 9 THE COURT: Thank you. 

12:04p 10 Ms. Bertrand.

 11 MS. BERTRAND: The Government's burden remains 

 12 beyond a reasonable doubt and while this is simply -- you 

 13 know, at this phase in the case the -- all we have is the 

 14 Government's evidence. They still have to prove beyond a 

12:05p 15 reasonable doubt each element of the crimes alleged against 

 16 each of these defendants, and it is not enough to say there's 

 17 a reasonable inference if there is an alternative to that 

 18 reasonable inference.

 19 So here, the Government cannot point to any evidence 

12:05p 20 that Ms. Vaught knew about a conspiracy to violate the law. 

 21 They show she got hired to do a specific job, and Carl Ferrer 

 22 testified that she progressed in the organization because she 

 23 did that job so well. She was careful. She was detail 

 24 oriented. She was hard working. There's been nothing in this 

12:06p 25 record that says "and she did it all with a wink and a nod." 

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 1 In fact, there's nothing to show that these 

 2 moderators, thrown into a maelstrom of weird, knew that they 

 3 were doing anything other than trying to follow the law; and 

 4 the e-mails cited by the Government underscore that 

12:06p 5 alternative inference, and if we have an alternative inference 

 6 they have not met their burden beyond a reasonable doubt. 

 7 And that alternative inference is that these e-mails 

 8 are coming in weekly, daily, several times a day saying this 

 9 is the new target, understanding the chaos that Ms. Vaught was 

12:07p 10 trying to create order of.

 11 There is nothing that shows that this woman did 

 12 anything other than try to follow the law in a very imperfect 

 13 situation, and that's underscored by the fact that the 

 14 evidence also shows she was helping law enforcement, and there 

12:07p 15 is no evidence that shows she did anything in the vein of 

 16 plausible deniability. 

 17 She shows up and is helping law enforcement because 

 18 she thinks she is helping to fight crime, she's helping to 

 19 fight prostitution and it's more dastardly subsections.

12:07p 20 Ms. Vaught should not be here. The Government's 

 21 evidence fails and supports this Court saying to Ms. Vaught, 

 22 "Today you can go home," and it doesn't mean that this Court 

 23 has to find anything other than the Government's case in chief 

 24 lacks the evidence to show beyond a reasonable doubt that this 

12:08p 25 one woman, doing an impossible job, had anything but the 

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 1 intention to follow the law. Thank you.

 2 THE COURT: Thank you. 

 3 Mr. Feder.

 4 MR. FEDER: Two quick points, Your Honor. 

12:08p 5 No. 1, in Document 699 there's a response to the 

 6 Government's prior assertion about this Silk Road issue. 

 7 Silk Road was a overt sales of cocaine that are not 

 8 protected by the First Amendment versus what happened in this 

 9 case, which is that there are no overt sex act ads, and it's 

12:09p 10 the inverse and the argument by the Government just is apples 

 11 and oranges. That's No. 1.

 12 No. 2, while potentially unwelcome, the Government's 

 13 entire argument about moderation is in violation of Section 

 14 230 of the Communications Decency Act. It's the entire 

12:09p 15 purpose of that law as demonstrated by the -- Congress' 

 16 passing of SESTA and FOSTA, which at some point were 

 17 characterized as the anti-Backpage cases demonstrating that 

 18 the Travel Act does not apply to Backpage pre-SESTA and FOSTA 

 19 because you can't have general -- I mean, the Government wants 

12:10p 20 this to be a general intent crime. That's what they've been 

 21 doing since the inception of this prosecution, and it just 

 22 doesn't work. It's not what the Travel Act is for.

 23 THE COURT: Mr. Eisenberg.

 24 MR. EISENBERG: Your Honor, this is what the 

12:10p 25 Government's case consists of with respect to my client, 

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 1 Mr. Padilla, a series of e-mails. 

 2 The e-mails themselves never say anything about 

 3 acknowledging prostitution, whether they are coming from 

 4 Mr. Ferrer or from my client. What they say and what they 

12:10p 5 address are standards. No witnesses come before the Court to 

 6 say that in any particular e-mail it was discussed with 

 7 Mr. Padilla that what he was doing was covering up for 

 8 prostitution. 

 9 We don't have that evidence. So we're left with the 

12:11p 10 inference, if you will, from an e-mail about trying to clean 

 11 up a site that what was the problem is that the site was for 

 12 facilitating the business of promoting prostitution, and there 

 13 hasn't been any acknowledgment by a moderator. There hasn't 

 14 been any acknowledgment by any other witness in this entire 

12:11p 15 case that what was discussed in these e-mails was designed to 

 16 cover up prostitution.

 17 The bottom line here is that my client was given

 18 certain rules, regulations, if you will, standards, and those 

 19 are the ones that he is to apply in order to do his job. So 

12:11p 20 what are we left with? No particular ad was ever associated 

 21 with any of these e-mails, and the only ads that we really 

 22 have in this case is no proof he's ever seen them before. No 

 23 proof he had anything to do with them. 

 24 And if you put this in the context of trying to 

12:12p 25 reject ads, delete pictures, take out bad words, that seems to 

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 1 be, Your Honor, inconsistent with the idea that what he's 

 2 trying to do is to promote prostitution. What he's trying to 

 3 do is take the concepts of standards and apply them as he is 

 4 told what those standards are. He doesn't make those up. 

12:12p 5 Those are somebody else's standards. 

 6 So now we're saying with an ad we don't ever see, 

 7 because none of these e-mails relate to any specific ad that 

 8 we can find actually posted, he's contributing to facilitating 

 9 a prostitution. We just don't -- you can't relate an e-mail 

12:13p 10 to anything specific in terms of an end result. So you've got 

 11 e-mails going within the organization, but nothing actually 

 12 posted. 

 13 So even at its worst connotation if two individuals 

 14 or a group of moderators are being addressed with respect to 

12:13p 15 "These are the changes that we have to do," so even at its 

 16 worst concept doesn't ever -- doesn't actually result in 

 17 anything that the Government is able to show this is the 

 18 product of that discussion. This is -- in other words, an ad 

 19 actually got published with respect to the new criteria. 

12:13p 20 My argument is, even if they could show that an ad 

 21 had been published, the intent of Mr. Padilla is the one -- 

 22 the thing that is at issue; and if we're gonna be saying that 

 23 he can just disregard these standards or the standards mean 

 24 nothing to him, the rules mean nothing to him, he's just like 

12:14p 25 anybody else who would be viewing this, then we've got a 

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 1 discussion of -- it's just, "Well, I'm trying to follow what 

 2 I've been told to do and am I wrong? Here's my boss telling 

 3 me this is what I'm supposed to do and this is what I'm 

 4 supposed to apply." What's the man to do?

12:14p 5 Thank you, Your Honor.

 6 THE COURT: Thank you, Mr. Eisenberg. 

 7 Well, counsel have given me a number of arguments, 

 8 cited cases, statutes. We've been through about four weeks of 

 9 trial testimony and hundreds of exhibits, some of which were 

12:15p 10 referenced in argument. I'm going to take a look at those 

 11 arguments, the prior Court's orders that were referenced as 

 12 well and I will be reviewing those carefully, and so I'll take 

 13 the matter under advisement.

 14 At this point I'd like to use the rest of our time, 

12:15p 15 and depending how long you think it will go, I just want to 

 16 ask both sides whether or not you've had an opportunity to at 

 17 least review the proposed verdict forms. 

 18 Has the Government looked at the defendants' 

 19 proposed verdict form? 

12:15p 20 MR. STONE: Yes, your Honor.

 21 THE COURT: Have the defendants looked at the 

 22 Government's proposed verdict form? 

 23 MR. LINCENBERG: Yes, your Honor.

 24 THE COURT: I'm sorry?

12:16p 25 MR. LINCENBERG: Yes, Your Honor.

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 1 THE COURT: All right. So let me ask from the 

 2 defendants' perspective what, if any, objections do you have 

 3 to the Government's proposed form of verdict? 

 4 MR. LINCENBERG: Your Honor, I would crystallize the 

12:16p 5 differences into four quick points for the Court's 

 6 consideration. 

 7 First is that the Government's proposed verdict form 

 8 with regard to the Travel Act counts are somewhat 

 9 argumentative in the sense of trying to highlight the language 

12:16p 10 that is the title of the ads and so forth. 

 11 The jury will be going through the counts. I think 

 12 the defendants' proposed verdict form, which notes that the 

 13 exhibit relating to that count is specified, so the jury can 

 14 then look at -- if they're going through it one by one they 

12:17p 15 can say, all right, Count 20, this is this ad, let's not take 

 16 one point out of the entirety of it and decide. So we believe 

 17 ours is less argumentative and better.

 18 The second point is the Government's -- in lining up 

 19 whether to find a defendant guilty or not guilty, the Court 

12:17p 20 may notice that we put first not guilty and guilty second. 

 21 The Government puts guilty first and not guilty second. 

 22 We ask the Court to adopt ours because one is 

 23 presumed not guilty unless proven otherwise, and so that 

 24 should be the first point.

12:17p 25 The third is -- well, the third I actually covered 

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 1 about the defendant's tying things to exhibit numbers. So 

 2 it's really part of the first.

 3 The third big point would then be we believe our

 4 instructions better guard against an improper verdict. For 

12:18p 5 example, with regard to the money laundering counts where we 

 6 note that -- if you take as an example, picking any of them, 

 7 Count 58, we the jury unanimously find defendant either not 

 8 guilty or guilty of committing concealment money laundering in 

 9 connection with the June 30, 2016, transfer of three million 

12:18p 10 dollars from Website Technologies to Cereus Properties, we 

 11 think it's a simple straightforward statement of the offense 

 12 and that's what it should be in the verdict form.

 13 THE COURT: Well, let me -- and this is one of the 

 14 things that I considered in asking you to revisit the verdict 

12:19p 15 form. I mean, in a -- in a case where you don't have a 

 16 speaking indictment that is over 100 pages or close to it, 

 17 normally I would have read the indictment to the jury at the 

 18 outset of the case, and in so doing then the Court would have 

 19 necessarily read the counts as they are listed and those 

12:19p 20 counts, as they are listed, include the description of the 

 21 alleged ad. 

 22 And so the concern was here that the count in the 

 23 verdict form match the allegation. So I understand that we 

 24 should not interfere with the fact-finding process of the jury 

12:19p 25 and, you know, it is part of their responsibility to sift 

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 1 through the, you know, thousands of exhibits; but given that, 

 2 what is -- is there any concern about adding the description, 

 3 at least part of it that is alleged in the indictment?

 4 MR. LINCENBERG: Yes. Well, the concern is really 

12:20p 5 what I just indicated, that it's somewhat argumentative. The 

 6 fact that the indictment states it in an argumentative manner 

 7 and the parties will be arguing these points is one thing, but 

 8 a verdict form should be -- should guard against doing that 

 9 and the jury will have a sufficient relationship between the 

12:20p 10 count number and the ad by the exhibit number and that way 

 11 they're voting based upon that ad if they -- if the Court -- 

 12 depending upon if we get to these ads after Rule 29, and I 

 13 think that's a more straightforward way to do it.

 14 THE COURT: So let me ask you this question then: 

12:21p 15 If I adopted your form of verdict as to the Travel Act, then 

 16 shouldn't I at least provide to the jury, at least in some 

 17 fashion, maybe Paragraph 201 through the remainder of the 

 18 listing of the Travel Act charge in the indictment? 

 19 So, for example, Page 50. Because, otherwise, I

12:21p 20 think it becomes a very tedious task for the jury to 

 21 understand the charge, what they're asking to review if you 

 22 don't give them some context.

 23 MR. LINCENBERG: Well, the Court could do it that 

 24 way. I think some Courts would do it that way. I don't think 

12:21p 25 there would be anything erroneous with doing it that way. I 

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 1 think that if the Court alternatively said, "Ladies and 

 2 Gentlemen, there's fifty Travel Act counts, 2 through 51, and 

 3 Count 2, for example, relates to an Exhibit 120, Count 3 

 4 relates to this and so forth," I think that encourages the 

12:22p 5 jury to consider the ad that is at issue as opposed to 

 6 focusing on what the Government has chosen to include in the 

 7 Indictment in terms of the title of the ad.

 8 THE COURT: Okay. I guess I -- maybe I'm just not 

 9 understanding the way that you're presenting it to me. 

12:22p 10 So you would not have an objection, for example, if

 11 I put forward to them in some modified fashion just in terms 

 12 of the volume of pages in the Indictment beginning at 

 13 Paragraph 201 of the Indictment, which are the alleged charges 

 14 relating to Travel Act. They outline the count, the date and 

12:23p 15 the description and giving that to them in addition to all of 

 16 the exhibits that are before them?

 17 MR. LINCENBERG: If what Your Honor is saying by

 18 "giving it to them," in other words, reading that portion of 

 19 the indictment, is that what the Court is suggesting?

12:23p 20 THE COURT: Well, no, I'm -- well, I guess we could

 21 do it in that way. I thought about just giving them that page 

 22 -- those pages related to the Travel Act, because it's 

 23 voluminous. I guess my concern is it's voluminous. 

 24 It's -- each ad is very distinct as to date and so, 

12:24p 25 I mean, I -- so what's your position with regard to that?

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 1 MR. LINCENBERG: Well, I think the preferable thing 

 2 to do would be to simply note the exhibit number that relates 

 3 to each count. 

 4 If the Court decides that the Court wants to give 

12:24p 5 more, it should be done either in the form of the Court 

 6 reading those counts or the Court's suggestion about giving 

 7 those pages of the Indictment. That's not our preference. We 

 8 don't think it's the best; but, in any event, it shouldn't -- 

 9 it shouldn't be in the verdict form. The verdict form should 

12:24p 10 simply relate the exhibit to the count.

 11 THE COURT: Okay. Then -- then in looking at the 

 12 Government's form of verdict, you have no objection to the 

 13 iteration of the date, the exhibit number? Your objection is 

 14 with the ad title --

12:25p 15 MR. LINCENBERG: Yes.

 16 THE COURT: -- being included? 

 17 What about the state? 

 18 MR. LINCENBERG: No objection to the state.

 19 THE COURT: All right. And then you wanted to 

12:25p 20 address the specific money laundering counts with regard to 

 21 the jury's -- excuse me, the Government's description? 

 22 MR. LINCENBERG: Right, and my argument was -- was 

 23 brief. The Government has -- the Government's proposed counts 

 24 are fairly vanilla. It's not -- it's not objectionable. We 

12:25p 25 had suggested adding in a little more, in part because we have 

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 1 these three different types of money laundering. So ours had 

 2 a heading. 

 3 For example, when you got to international 

 4 promotional money laundering at Count 63, put a little 

12:26p 5 heading, and we just put we the jury unanimously find 

 6 defendant so and so not guilty or guilty and we put of 

 7 committing international promotional money laundering in 

 8 connection with the March 4 transfer of, you know, such and 

 9 such money from US Bank to such and such.

12:26p 10 THE COURT: Okay. All right, thank you. 

 11 From the Government, yes. 

 12 MR. STONE: Let's start with the easy part. We 

 13 don't object if not guilty goes before guilty. So consensus, 

 14 it's good to give.

12:26p 15 The issue with the Travel Act counts as defense has

 16 them is that we need -- the jury would need something to 

 17 understand what ad is being referred to. I mean, we have the 

 18 exhibit number, but there needs to be something, as Your Honor 

 19 I think understands, so that they know that that exhibit 

12:27p 20 number for that ad goes to that particular count; and what we 

 21 suggested in our verdict form is to eliminate some of the 

 22 other language that's in the Indictment that I thought was 

 23 objectionable to the defense, which Your Honor is now 

 24 suggesting would go back with the jury, and just include the 

12:27p 25 title of the ad. 

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 1 I'm not sure Mr. Lincenberg had taken a look at the 

 2 Paragraph 201 and all the information that's included in those 

 3 ads. If it goes back, that's fine with us but we thought that 

 4 that was objectionable; and so it would make more sense and 

12:27p 5 certainly be easier for the jury when they go through this 

 6 verdict form just to have the ad title there, along with the 

 7 state and exhibit number, and they will be able to pull it up 

 8 and review it during their deliberations.

 9 So no objection to the paragraph -- or the 

12:27p 10 Superseding Indictment with Paragraph 201 going back, but I 

 11 really think it should be part of the verdict form so it's 

 12 easier for the jury. We're trying to make it easier, not more 

 13 difficult. They're already going to have to sift through 

 14 hundreds of exhibits. So why would we make them have two 

12:28p 15 separate documents that they need to refer to when they're 

 16 looking at -- when they're looking at verdict form and 

 17 deliberating. 

 18 The other, I think main issue, with the defendants' 

 19 proposed verdict form on the Travel Act counts is they give 

12:28p 20 sort of like a partial jury instruction on each count where 

 21 they talk about violating the Travel Act, fine, in connection 

 22 with the advertisement found at exhibit blank on a certain 

 23 date, that's fine; but then they say by specifically intending 

 24 to promote or facilitate the promotion of a business 

12:28p 25 enterprise involved in prostitution offenses.

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 1 There's gonna be lots of jury instructions that they 

 2 need to refer to. We shouldn't -- that's confusing to include 

 3 a partial jury instruction within the verdict form. That 

 4 certainly should not remain. I think other than that, we're 

12:29p 5 fairly close.

 6 The money laundering counts, I think we're even 

 7 closer. Again, theirs is just wordier and I don't think we 

 8 need it. They talk about on each count the fact that it's 

 9 committing concealment money laundering in connection with the 

12:29p 10 transfer. We have the headings -- the concealment money 

 11 laundering, for example, for Counts 53 through 62 and then 

 12 don't include the extra words on each count. 

 13 It's really not that big a deal, though. I mean, I 

 14 think we're pretty close on the money laundering counts. I 

12:29p 15 just think ours esthetically looks a little better and that's 

 16 always helpful for the jury.

 17 THE COURT: Yes, I want to -- I want to point out -- 

 18 let me have you look at the -- the actual description of the 

 19 allegation in each count includes wording that is now taken 

12:30p 20 out by the Government.

 21 So, for example, if you look at Count 2, it says

 22 published ad depicting victim five. And so the form of 

 23 verdict that they've proposed removes that type of language 

 24 and then -- but will give the jury what it is that they're 

12:30p 25 examining as the allegation.

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 1 So is there an objection to it in it that form? 

 2 MR. LINCENBERG: Well, first, I appreciate counsel's 

 3 professionalism because I didn't have the Indictment up here 

 4 with me when the Court was asking me about it; and he is 

12:30p 5 correct, it would be something we would object to having the 

 6 Indictment read or going back, particularly because it's 

 7 discussing, quote, "victim," this person is a victim, so 

 8 forth.

 9 With regard to -- so let me now answer the Court's 

12:30p 10 question directly. With regard to the caption that they put 

 11 in, you know, my problem is -- well, let me take a step back. 

 12 I think it's being proposed this way because there's so many 

 13 ads and, obviously, we aren't the ones who brought the 

 14 indictment that makes this problematic because there's so many 

12:31p 15 different ads. At the same time each count is something 

 16 that's important to each defendant and what the defendant is 

 17 -- what the jury is deciding on, if they do a count-by-count 

 18 review, is that ad and then whether the elements are made.

 19 There's one other alternative that the Court could 

12:31p 20 do, if the Court goes with our verdict form, would be to send 

 21 a hard copy back of the fifty exhibits so that if the Court's 

 22 concerned about their inability or difficulty of matching 

 23 things --

 24 THE COURT: They are going to have those exhibits 

12:31p 25 that were introduced in hard copy -- 

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 1 MR. LINCENBERG: They are going to have hard copies 

 2 of them? 

 3 THE COURT: -- and digital.

 4 MR. LINCENBERG: Okay, sorry. So just to be clear, 

12:32p 5 you have no objection to at least the exhibit number being 

 6 referenced? 

 7 MR. LINCENBERG: Right.

 8 THE COURT: And you have no objection to the state 

 9 allegation? 

12:32p 10 MR. LINCENBERG: Right.

 11 THE COURT: You just have an objection to the 

 12 description even as modified from the Indictment? 

 13 MR. LINCENBERG: Yes, your Honor.

 14 THE COURT: All right. 

12:32p 15 All right. Anything further, Mr. Stone? 

 16 MR. STONE: Just that description is just the title. 

 17 I mean, we took just the title and we didn't even include -- 

 18 sometimes there's little characters in the title. We just did 

 19 the words in the title, something so that the jury understands 

12:32p 20 when they're looking at the exhibit that this is the ad that 

 21 is Count 2, for example.

 22 THE COURT: Yes.

 23 MR. STONE: That's it.

 24 THE COURT: No, I understand.

12:32p 25 Is there -- well, I think what I'm inclined to do is 

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 1 see how we go on Tuesday, how far we get, and then at that 

 2 point try to get a read from all parties as to a point in time 

 3 to finalize those final jury instructions.

 4 I think we've circulated and I think my law clerk 

12:33p 5 has circulated to you a Word version of the -- what we have 

 6 determined are the final proposed instructions and that should 

 7 have gone out today or, if not, it will. 

 8 And, again, here I don't want to re-examine anything 

 9 that I've already settled upon unless you can point to some 

12:33p 10 reason that they should be changed. If there's some legal 

 11 reason or evidence that was or was not presented that makes 

 12 you conclude that there should be a change in those 

 13 instructions, and that's how we should proceed. 

 14 You're standing there, Mr. Lincenberg. Do you wish 

12:34p 15 to be heard on something? 

 16 MR. LINCENBERG: Yes. Well, first, briefly, we'll 

 17 look at the Court's jury instructions. My sense from talking 

 18 to defense counsel is we'll probably want to argue on about a 

 19 half a dozen, and we're going to submit a theory of the 

12:34p 20 defense instruction for the Court's consideration as well.

 21 I also wanted to just briefly note -- and I was 

 22 speaking with Government counsel at the break in terms of some 

 23 scheduling issues. 

 24 So the Court saw that we filed a brief this morning 

12:34p 25 in connection with our client potentially testifying, and 

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 1 government counsel wants to respond to that. The Court -- the 

 2 Court set a time for them to respond by the close of business 

 3 on Monday.

 4 THE COURT: Yes.

12:34p 5 MR. LINCENBERG: So first, I'd request that that be

 6 close of business on Sunday so that we have a chance to review 

 7 that and potentially argue the point if the Court wants 

 8 argument on Tuesday; and part of the reason why I raise this 

 9 and part of the reason why we filed the brief is how the Court 

12:35p 10 rules on what we've submitted is going to have a huge impact 

 11 on whether the trial continues with one or two days more of 

 12 testimony or two or three weeks more of testimony. 

 13 We submitted that brief. Consultation with other 

 14 counsel, I know that that they're going through similar 

12:35p 15 questions, for example, as to whether or not their clients may 

 16 testify and the like. 

 17 So if, for example, the Court rules against us and 

 18 says, "Mr. Lincenberg, you've raised this and I've decided I'm 

 19 not changing my ruling," we could be getting to argument -- I 

12:36p 20 don't want to speak out of turn. I know counsel are still 

 21 considering different witnesses and so forth, but we could be 

 22 getting to argument fairly quickly; and if not, the defense 

 23 may be scrambling in terms of all sorts of witnesses who may 

 24 have to then be brought into court or things like that. 

12:36p 25 So there's an interest, I think on both sides, in 

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 1 trying to address this sooner rather than later. We 

 2 understand it can't be addressed Monday, the Court has a full 

 3 calendar; but even in terms of the briefing or getting a sense 

 4 from the Court, it's really going to make a big difference in 

12:36p 5 scheduling.

 6 THE COURT: Well, why don't I do this: Let me -- I 

 7 haven't looked at the motion so I don't know how detailed it 

 8 is. I'm going to give the Government until 10:00 a.m. on 

 9 Monday to file its response, no reply. 

12:37p 10 So disregard if my diligent courtroom deputy has 

 11 already sent out a directive. So you'll have until 10:00 a.m. 

 12 on Monday to submit your response. 

 13 I would propose what we do then is we'll have our 

 14 jury administrator alert our jurors not to report until 

12:37p 15 10:00 a.m. on Tuesday, and I'll expect you here at 9:00 a.m. 

 16 so we can address any of those legal issues because you ask 

 17 for five minutes and I find that usually turns in to 15 or 20 

 18 and I don't want to bring our jury in if we're going to do 

 19 that.

12:37p 20 So I'll have our jury administrator today reach out

 21 to those jurors and tell them to report to be here by 

 22 10:00 a.m. We'll take any argument related to that motion up 

 23 on Tuesday morning.

 24 Now, because of the schedule as you've proposed, I 

12:38p 25 would ask that you provide to the Court whatever your proposed 

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 1 changes or new jury instructions or defense theory instruction 

 2 may be by close -- well, by the end of the day on Tuesday. 

 3 So I'll start looking at those and that way we're 

 4 not losing time. If, in fact, it ends up being a shorter 

12:38p 5 week, then I'll have some time to review those changes, 

 6 consider them and hear argument and set some time for 

 7 argument. 

 8 All right, so Mr. Rapp.

 9 MR. RAPP: Yes, just briefly, Judge. Just to 

12:38p 10 maximize the jury's time, we have assessed the defense 

 11 witnesses and we do not believe that those witnesses, at least 

 12 the ones slated for Tuesday, are going to take very long. 

 13 To put it mildly, we don't view them as -- some of 

 14 them -- we don't view them as defense witnesses and some we 

12:39p 15 feel are irrelevant and likely would not be allowed to 

 16 testify.

 17 That being the case, that Tuesday could be a very 

 18 abbreviated day for the jury; and so I'm just wondering since 

 19 we are possibly resolving jury instructions in the morning and 

12:39p 20 let's say --

 21 THE COURT: Well, I'm not -- I'm not resolving jury 

 22 instructions in the morning on Tuesday. I'm resolving the 

 23 pending motion that was filed last night or this morning --

 24 MR. RAPP: This morning.

12:40p 25 THE COURT: -- and my decision on that on Tuesday 

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 1 morning is going to determine, I guess, what the ultimate 

 2 defense witnesses will look like for the remainder of the day. 

 3 That's -- so that's my understanding. Am I 

 4 incorrect on that, Mr. Lincenberg? 

12:40p 5 MR. LINCENBERG: I don't know that it will affect 

 6 the remainder of the day. The proposed witnesses on Tuesday 

 7 are not our witnesses so I can't speak to that, but it will 

 8 affect the trial.

 9 MR. RAPP: Okay. I -- I was only -- I was 

12:40p 10 suggesting that if we could resolve the jury instructions in 

 11 addition to that motion and let's say it's a very abbreviated 

 12 defense case in light of the Court's possible ruling on that 

 13 motion, and we have our own opinions on the defense witnesses 

 14 that have been proposed, it is possible that we could use -- 

12:40p 15 maximize the jury time and even start -- you know, I don't 

 16 want to be presumptuous about the Rule 29 motion, but we could 

 17 start closing arguments on Tuesday afternoon.

 18 THE COURT: Well, how -- how close are you at 

 19 sending to my chambers your proposed jury instructions? I 

12:41p 20 guess that's -- that's the question.

 21 MR. LINCENBERG: Well, I guess I'll speak. I have 

 22 to talk to counsel, Your Honor, but the Court had indicated 

 23 asking us by the close of Tuesday. We could probably get 

 24 something by the close of Monday.

12:41p 25 THE COURT: Okay, why don't we do that. Let's go by 

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 1 the close of Monday. 

 2 Any objection to having the jury appear at 1:00?

 3 MR. RAPP: Not from the United States.

 4 MR. LINCENBERG: No objection.

12:41p 5 MR. RAPP: On Tuesday? 

 6 THE COURT: On Tuesday.

 7 I mean, I think at that point it will give me 

 8 sufficient time then to resolve the pending motion and then 

 9 give me time to also hear abbreviated argument on jury 

12:42p 10 instructions, especially if we've already entertained those 

 11 arguments before; and I want you to be very concise as to why 

 12 I should revisit any ruling in any prior decision I have made, 

 13 although tentatively with regard to final instructions, 

 14 because then what I anticipate would happen, then, is that the 

12:42p 15 jury would come in, take their seats at 1:00. We would go 

 16 until 4:30; and depending on whatever the decisions are that 

 17 the defendants and their counsel make, then my sense is we 

 18 would push through then Wednesday and at least be at a point 

 19 where we have the ability to only take maybe a couple of 

12:43p 20 breaks and finish up whatever the case may be.

 21 You know, I -- I just -- I appreciate the fact that 

 22 I don't like to waste the time of the jury in them waiting 

 23 around and -- because we don't have our work done. So that's 

 24 how we will proceed, unless there's any objection.

12:43p 25 MR. PANCHAPAKESAN: Your Honor, I just had a quick 

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 1 question. The jury instructions we have, I think Christine 

 2 Ritland sent them Wednesday. I didn't know if there is 

 3 something else we should be looking at in terms of final 

 4 instructions? 

12:43p 5 THE COURT: Oh, no, she's going to send you a Word 

 6 version of those. Those were in PDF form. So she'll send you 

 7 a Word version of those.

 8 MR. LINCENBERG: The only other comment, with regard 

 9 to the Court's consideration of the Rule 29, I mean, the Court 

12:44p 10 took in a lot today; and if the Court wants any further 

 11 briefing on a specific point, we can try to turn that around 

 12 as soon as possible if the Court lets us know.

 13 THE COURT: I don't think further briefing at this 

 14 juncture's necessary. You've given me a lot already and so -- 

12:44p 15 I appreciate the offer, though. 

 16 Mr. Rapp.

 17 MR. RAPP: Just a couple more points.

 18 THE COURT: Yes.

 19 MR. RAPP: One is, we do have five witnesses noticed 

12:44p 20 by the defense for Tuesday. We appreciate that. 

 21 If there are going to be additional witnesses for 

 22 Wednesday, we would like to get that by Sunday with their 

 23 corresponding exhibits. 

 24 The one witness that still is under subpoena and has 

12:44p 25 not been excused is Carl Ferrer. That is not one of the 

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 1 witnesses they have noticed us for Tuesday. I just want to 

 2 know what's going on with that. He does have a lawyer, but he 

 3 is under a cooperation plea. I don't want there to be a 

 4 delay. I don't want to look up on Tuesday and the defense 

12:45p 5 starts saying, "Hey, we want this witness back here," and we 

 6 have to -- we have some obligation, I suppose, and we don't 

 7 want to be scrambling to secure that witness for the defense. 

 8 So I would like --

 9 THE COURT: Well, because of the decisions that need 

12:45p 10 to be made, I'll give them until Tuesday morning to make that 

 11 determination and let you know about Mr. Ferrer.

 12 MR. RAPP: All right. Very well, thank you.

 13 THE COURT: Anything further, Mr. Rapp? 

 14 MR. RAPP: No, thank you.

12:45p 15 THE COURT: Mr. Cambria? 

 16 MR. CAMBRIA: No.

 17 THE COURT: Ms. Bertrand? 

 18 MS. BERTRAND: No, thank you.

 19 THE COURT: Mr. Lincenberg? 

12:45p 20 MR. LINCENBERG: No, Your Honor.

 21 THE COURT: Mr. Feder? 

 22 MR. FEDER: No.

 23 THE COURT: Mr. Eisenberg? 

 24 MR. EISENBERG: No, Your Honor.

12:45p 25 THE COURT: All right. Thank you, counsel. 

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 1 We will stand in adjournment.

 2 COURTROOM DEPUTY: All rise.

 3 (Whereupon the proceedings concluded at 12:45 p.m.)

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 1 REPORTER'S CERTIFICATION

 2

 3 I, TERI VERES, do hereby certify that I am duly 

 4 appointed and qualified to act as Official Court Reporter for 

 5 the United States District Court for the District of Arizona.

 6 I FURTHER CERTIFY that the foregoing pages 

 7 constitute a full, true, and accurate transcript of all of 

 8 that portion of the proceedings contained herein, had in the 

 9 above-entitled cause on the date specified therein, and that 

 10 said transcript was prepared under my direction and control.

 11 DATED at Phoenix, Arizona, this 20th of 

 12 October, 2023.

 13

s/Teri Veres

 14 TERI VERES, RMR, CRR 

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