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ELIZABETH A. STRANGE

First Assistant United States Attorney

District of Arizona

KEVIN M. RAPP (Ariz. Bar No. 014249, kevin.rapp@usdoj.gov)

MARGARET PERLMETER (Ariz. Bar No. 024805, margaret.perlmeter@usdoj.gov)

PETER S. KOZINETS (Ariz. Bar No. 019856, peter.kozinets@usdoj.gov) 

ANDREW C. STONE (Ariz. Bar No. 026543, andrew.stone@usdoj.gov)

JOHN J. KUCERA (Cal. Bar No. 274184, john.kucera@usdoj.gov) 

Assistant U.S. Attorneys

40 N. Central Avenue, Suite 1800

Phoenix, Arizona 85004-4408

Telephone (602) 514-7500

BRIAN BENCZKOWSKI 

Assistant Attorney General

Criminal Division, U.S. Department of Justice

REGINALD E. JONES (Miss. Bar No. 102806, reginald.jones4@usdoj.gov) 

Senior Trial Attorney, U.S. Department of Justice Child Exploitation and Obscenity Section 

950 Pennsylvania Ave N.W., Room 2116

Washington, D.C. 20530

Telephone (202) 616-2807 

Attorneys for Plaintiff

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United States of America,

Plaintiff, 

v. 

Michael Lacey, et al.,

Defendants.

CR-18-422-PHX-SPL (BSB) 

UNITED STATES’ RESPONSE TO 

DEFENDANTS’ JOINT STATUS 

REPORT (CR 443)

[Status Conference set for

January 25, 2019, 9:30 a.m.]

Preliminary Statement

Asserting without any support that “[v]irtually all of the Defendants are without 

funds to pay for their defense”—and without first conferring with the government about 

the case schedule—Defendants filed a “Joint Status Report” on January 18, 2019 that seeks

a four-month delay of their Scheduling Order deadlines. (CR 443 at 1.) In reality, the 

“Joint Status Report” is a mislabeled motion for a continuance. For several reasons, that 

motion should be denied.

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First, Defendants’ motion contains no showing that Defendants lack sufficient 

untainted funds to continue with their current counsel. As explained below, if they believe 

they are entitled to relief based on a claim of inability to pay counsel, Defendants’ remedy 

is to seek a hearing pursuant to United States v. Monsanto, 491 U.S. 600 (1989), provided 

that they can first establish—with specific, particularized facts—they have no other funds 

for attorneys’ fees. The government has even repeatedly offered to release funds for 

attorneys’ fees without the need for a hearing if Defendants provide sufficient supporting 

evidence. Not a single Defendant has availed themselves of that invitation or otherwise 

sought a Monsanto hearing, and the requested delay should be denied for this threshold 

reason.

Second, Defendants’ motion should be denied because the timeline for resolving 

their litigation in the Central District of California (CDCA) and the Ninth Circuit regarding

the government’s pretrial seizures of assets linked to Backpage.com, LLC (Backpage) is 

unknowable. Without engaging in detailed rebuttal of Defendants’ account of the CDCA 

litigation, the government notes that a district court judge in the CDCA has stayed several 

of Defendants’ challenges to the government’s seizures. While Defendants have appealed 

the stay order, the Ninth Circuit has questioned whether it has jurisdiction over that 

appeal—and only recently permitted the appeal to proceed. (See In re: Any and All Funds 

Held in Republic Bank of Arizona Accounts XXXX1889, XXXX2592, XXXX1938, 

XXXX2912, AND XXXX2500, 9th Cir. No. 18-56455, DktEntries 2, 27.) Defendants have 

other asset-seizure objections pending before a magistrate judge in the CDCA. Simply put,

the timeframe for resolving all of Defendants’ various challenges in the CDCA is unknown

(even after a Ninth Circuit appeal, there likely would be follow-on proceedings in the 

CDCA)—and Defendants should not be permitted to use the CDCA litigation as a

mechanism for delaying their criminal trial in this District.

Third, the government vigorously disagrees with Defendants’ “belie[f]” that they 

will be successful in the CDCA and/or Ninth Circuit. (CR 443 at 7.) As explained below, 

the cases Defendants cite are wholly inapposite. Moreover, despite the government’s 

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invitation (see Ex. A), Defendants have failed to address numerous business practices (e.g., 

moderation, the reciprocal-link program, aggregation/pre-boarding, financial relationships 

with “super pimps,” concealment money laundering) engaged in by Backpage principals 

to increase Backpage’s volume of prostitution ads and conceal its activities from law 

enforcement. Backpage was a criminal enterprise engaged in an array of practices designed 

to increase revenue from prostitution—activities in no way protected by the First 

Amendment. 

For these and other reasons, the requested continuance should be denied. 

Discussion

I. Defendants Have Failed to Show They Cannot Pay Their Attorneys.

The requested continuance should be denied because the “Joint Status Report” is 

not supported by any definite, particularized showing that “[v]irtually all of the Defendants 

are without funds to pay for their defense.” (CR 443 at 1.) Where a defendant produces

sufficient evidence to show that seized assets are needed to pay for counsel of choice, the 

Fifth and Sixth Amendments require that the Court conduct a post-seizure, adversary

“Monsanto hearing.” United States v. Westelaar, 2013 WL 8206582, *19-20 (D. Nev. 

2013). To obtain such a hearing, however, the defendant must make a preliminary showing 

that he is unable to retain his choice of counsel without the seized assets—in other words, 

that he has no other funds for attorney fees. Id. 

Under the so-called “Jones–Farmer Rule,” a pretrial hearing on a defendant’s 

motion to release assets is required only if the defendant: (1) demonstrates to the court’s 

satisfaction that he has no assets, other than those restrained, with which to retain private 

counsel; and (2) makes a prima facie showing that the restrained assets are not forfeitable. 

United States v. All Funds on Deposit, No. CV–05–3971(SJF), 2007 WL 3076952, at *7 

(E.D.N.Y. Oct.17, 2007) (citing United States v. Jones, 160 F.3d 641, 647 (10th Cir.

1998)). As the court held in Farmer, “[t]he defendant has the burden of showing that he 

lacks other funds with which to retain counsel; a bare-bones allegation that he has limited 

cash on hand and no income is not sufficient.” United States v. Farmer, 274 F.3d 800, 

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804–05 (4th Cir. 2001); see also United States v. Marshall, 2015 WL 4139368, at *5 

(N.D.W. VA. July 9, 2015) (“The defendant must disclose his assets, liabilities, and sources 

of income and say how much he has already paid counsel and how much more he needs. 

He must also show that he does not have access to funds from third parties, such as friends 

or family members.”); United States v. Varner, 2005 WL 2206083, at *2 (W.D.Va. Sept. 

9, 2005 (“Varner’s affidavit does not detail his assets and liabilities or provide a meaningful 

basis for the court to independently judge his assertion that he lacks the ability to retain 

counsel. Therefore, the court denies Varner’s request for a hearing.”).

The Ninth Circuit has neither explicitly embraced the Jones-Farmer Rule nor 

clearly stated what type of proof is required for this preliminary showing, but one case is 

illuminating. In United States v. Unimex, Inc., 991 F.2d 546, 551 (9th Cir. 1993), citing 

Cohen v. United States, 378 F.2d 751, 761 (9th Cir. 1967), the court found that to determine 

whether a hearing is required, “the court must decide whether the moving papers filed, 

including affidavits, are sufficiently definite, specific, detailed, and nonconjectural, to 

enable the court to conclude that a substantial claim is presented. If the allegations are 

sufficient, and factual issues are raised, a hearing is required.” 

Here, Defendants have failed to support their request for a continuance with any 

such evidence. To the contrary, in response to a Defendant’s claim of insufficient funds, 

the government offered to consider returning funds without the need for a Monsanto

hearing to any Defendant who provided financial information that sufficiently established 

that he/she has no other assets with which to retain private counsel.

1

 Defendant Larkin 

represented, through his counsel, that he would provide financial statements to establish 

his “need”; no such financial statements were ever provided to the government. 

 

1 See, e.g., Ex. K, Nov. 7, 2018 email from the government to M. Piccarreta, counsel for Defendant Padilla (explaining that, “[s]hould [your client] wish to make a Monsanto claim, 

we offer every defendant the opportunity to show that they are financially unable to pay 

for their defense without the funds we are seizing....[I]f you can make a showing that your client has no other funds with which to pay for his defense, we are happy to review those materials and consider releasing some amount back to pay legal fees.”).

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Defendants Padilla and Vaught never responded to the government’s offer. None of the 

Defendants requested a Monsanto hearing from this Court prior to filing the Joint Status 

Report. This is likely due to the fact that, as the government understands (upon information 

and belief), nearly all Defendants have more than sufficient untainted funds available for 

their defense. The motion should be denied for these threshold reasons.

2

 

II. The CDCA/Ninth Circuit Proceedings Do Not Warrant a Continuance.

As described above, the parties have no way of knowing when Defendants’ various 

CDCA challenges to the government’s pretrial seizure of assets will be fully resolved. 

Particularly absent any showing by Defendants to support the assertion they are unable to 

pay their attorneys, Defendants cannot use the CDCA/Ninth Circuit litigation as a reason 

to delay this case until all such litigation concludes. 

Moreover, the cases Defendants cite in their Joint Status Report are inapposite. 

Pointing to Fort Wayne Books, Inc. v. Indiana, 489 U.S. 46 (1989), and Adult Video Ass’n 

v. Barr, 960 F.2d 781 (9th Cir. 1992) (readopted in Adult Video Ass’n v. Reno,41 F.3d 503 

(9th Cir. 1994)), Defendants assert the government’s pretrial seizures of assets linked to 

Backpage violated the First Amendment. (CR 443 at 7-8.) Defendants nevertheless 

concede, as they must, that Fort Wayne Books and Barr dealt only with the pretrial seizure 

and removal from circulation of expressive materials (CR 443 at 8). Indeed, those cases 

only directly addressed the pretrial seizure of books, films and videos the government 

alleged were “obscene” under Miller v. California, 413 U.S. 15 (1973). They did not 

invalidate the pretrial seizure of non-expressive assets (e.g., bank accounts, real estate, 

etc.). 

In Fort Wayne Books, for example, the Supreme Court held that the pretrial seizure 

 

2 Defendants also assert “the government assured counsel for two defendants that the 

government was not seeking attorney trust funds.” (CR 443 at 4.) Defendants never 

identify who made that representation, when and to whom it was made, and under what 

circumstances. Without more, it is difficult to respond. In any event, the government would have never agreed (and does not agree) to an attorney’s use of tainted funds for legal fees, unless a defendant could demonstrate that he or she has no other source of legitimate funds.

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of thousands of allegedly obscene books and films, based merely on a probable cause 

finding, constituted a prior restraint on speech prohibited by the First Amendment. 

Because the seizure “interrupt[ed] the flow of expressive materials” by removing them 

from sale or circulation, it triggered unique First Amendment concerns that otherwise do 

not generally apply to pretrial seizures. 489 U.S. at 63-57. The parties did not litigate, and 

the Court expressly did “not hold” “that the pretrial seizure of petitioner’s nonexpressive

property was invalid.” Id. at 67 n.12.

Three years after Fort Wayne Books, in Barr, the Ninth Circuit invalidated a portion 

of the federal RICO statute (18 U.S.C. § 1963(d)) that permitted pretrial seizures of 

allegedly obscene films or videotapes without a hearing. The Ninth Circuit held that Fort 

Wayne Books required invalidation of pretrial seizures of obscene materials based merely 

on probable cause. Barr, 960 F.2d at 788. However, the court “uph[e]ld § 1963(d)’s 

provision for the pre-trial preservation of assets.” Id. at 792. See also id. at 792 (“Only 

that part of section 1963(d) that authorizes pre-trial seizures of obscene materials on the 

basis of probable cause is unconstitutional.”). Like Fort Wayne Books, Barr is inapposite. 

Nor does Simon & Schuster, Inc. v. Members of the N.Y. State Crime Bd., 502 U.S. 

105 (1991), apply here. (See CR 443 at 8-10.) Simon & Schuster is not a pretrial seizure 

case; rather, it concerned New York’s “Son of Sam” statute, which effectively authorized 

a tax on income from works that a “criminal” authored “on any subject, provided that they 

express the author’s thoughts or recollections about his crime, however tangentially or 

incidentally.” 502 U.S. at 121. The statute’s definition of a “criminal” included “any 

person who has voluntarily and intelligently admitted the commission of a crime for which 

such person is not prosecuted.” Id. at 110. As the Court observed, a person never accused 

of a crime, “but who admits in a book or other work to having committed a crime, is within 

the statute’s coverage.” Id. Had the statute been in effect at an earlier time and place, it 

would have applied to The Autobiography of Malcom X, Thoreau’s Civil Disobedience, 

and the publications of Martin Luther King, Jr. Id. at 122. The Court invalidated the Son 

of Sam statute as impermissibly overbroad, and expressly confined its holding to that

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statute. Id. at 122-23. The Ninth Circuit did not cite Simon & Schuster in its subsequent 

Barr decision, and it has no application here. 

Defendants’ remaining authorities (CR 443 at 9-10) are inapposite. The portion of 

Citizens United v. FEC, 558 U.S. 310, 336-337 (2010), cited by Defendants refers back to 

Simon & Schuster. United States v. Natl. Treas. Employees Union, 513 U.S. 454, 468-69 

(1995), invalidated a 1989 law that prohibited federal employees from accepting 

compensation for speeches or articles regardless of any connection between such works

and the employee’s official duties. The statute erected a “wholesale deterrent to a broad 

category of expression by a massive number of potential speakers,” 513 U.S. at 467; it had 

nothing to do with the seizure or forfeiture of assets involving criminal conduct. United 

States v. Playboy Ent. Group, Inc., 529 U.S. 803, 812 (2000), concerned the 

Telecommunications Act’s “signal bleed” provision that required cable operators to 

scramble sexually explicit channels in full or limit such programming to certain hours. It, 

too, had nothing to do with speech integral to illegal conduct, let alone civil seizure or 

criminal forfeiture issues. Am. Lib. Ass’n v. Thornburgh, 713 F. Supp. 469, 484 n.19 

(D.D.C. 1989), vacated sub nom. Am. Lib. Ass’n v. Barr, 956 F.2d 1178 (D.C. Cir. 1992), 

invalidated the pretrial seizure of non-expressive assets—but only on the rationale that the 

seizure of those assets threatened the viability of an ongoing publishing business: 

Because the Court in the instant case concludes that the seizure of non- expressive assets—such as printing presses, bank accounts, etc.—of a 

business engaged in distributing expressive material may determine whether the business is able to continue functioning or not, the Court 

concludes that pre-trial seizure of non-expressive material ex parte from a 

business engaged in distributing expressive material...is unconstitutional.

713 F. Supp. at 484 n.19 (emphasis added). Defendants have not identified any ongoing 

publishing business that may be jeopardized if the accounts at issue (including IOLTA 

accounts) are subject to seizure.3

 

 

3 In early April 2018, Backpage and its CEO pleaded guilty and admitted that Backpage was involved in knowingly facilitating prostitution. Backpage ceased its operations and agreed to forfeit the assets at issue. (See, e.g., United States v. Backpage.com, LLC, D. 

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As the Supreme Court has long recognized, speech facilitating criminal conduct—

including adult and underage prostitution—is categorically excluded from First 

Amendment protection. See, e.g., Pittsburgh Press Co. v. Human Relations Comm’n, 413 

U.S. 376, 388 (1973) (“We have no doubt that a newspaper constitutionally could be 

forbidden to publish a want ad...soliciting prostitutes.”); United States v. Stevens, 559 U.S. 

460, 468-69 (2010) (“From 1791 to the present...the First Amendment has permitted 

restrictions upon the content of speech in a few limited areas” including “speech integral 

to criminal conduct....”); Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 

447 U.S. 557, 563-64 (1980) (the First Amendment is inapplicable to speech proposing an 

illegal transaction). 

Nevertheless, citing three cases that involved Backpage, Defendants assert that 

“numerous courts have recognized that the publication of classified advertisements, even 

advertisements for adult services, are protected expression.” (CR 443 at 10.) Yet 

Defendants’ cited cases were all decided before Backpage and its CEO pleaded guilty and 

admitted that, during its 14 years of existence, Backpage “derived the great majority of its 

revenue from fees charged in return for publishing advertisements for ‘adult’ and ‘escort’ 

services,” and “the great majority of these advertisements are, in fact, advertisements for 

prostitution services....” (United States v. Ferrer, D. Ariz. CR-18-464-PHX-SPL, Doc. 7-

2 (Ferrer Plea Agreement at 12-13); United States v. Backpage.com, LLC, D. Ariz. CR-18-

465-PHX-SPL, Doc. 8-2 (Backpage Plea Agreement at 11).)4

One of Defendants’ cited cases, Backpage v. Dart, was dismissed as moot as a result 

of these guilty pleas; the only remaining issue in that case is whether Backpage’s former 

lawyers (Davis Wright Tremaine) should be sanctioned for perpetuating a fraud on the 

court. (See Ex. B (Backpage.com, LLC v. Dart, Civil No. 1:15-cv-06340 (N.D. Ill.), CR 

 Ariz. CR-18-465-PHX-SPL, Dkt. 8-2 at 11-12; United States v. Ferrer, D. Ariz. CR-18- 464-PHX-SPL, Dkt. 7-2 at 12-14).)

4 On August 17, 2018, Backpage Sales and Marketing Director Dan Hyer pleaded guilty to 

an information charging him with a violation conspiracy, under 18 U.S.C. § 371, to commit 

one or more crimes in violation of § 1952 (Travel Act) and § 1956 (money laundering). (United States v. Hyer, D. Ariz. CR-18-422-5-SPL, Doc. 271 (“Hyer Plea Agreement”).) 

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244 (Order Dismissing Case); Ex. C (CR 226, Sheriff Dart’s Motion for Sanctions).) 

Moreover, Defendants’ cases were decided long before the emergence of voluminous 

evidence, outlined in the Superseding Indictment and partially summarized below, 

demonstrating that Backpage was a criminal enterprise that knowingly hosted 

advertisements for adult and underage prostitution. 

III. Defendants Engaged in an Array of Business Practices Calculated to Increase 

Revenue by Increasing the Volume of Prostitution (Including Child Sex Trafficking) Ads on Backpage.

In an exchange with Senior Judge David Campbell during the grand jury subpoena 

litigation that preceded this prosecution, then-counsel for Backpage and Ferrer (and current 

counsel for Defendants Lacey and Larkin) acknowledged that Defendants can be criminally 

liable for hosting third-party content they knew was illegal:

THE COURT: If a website operator republishes an advertisement knowing, completely knowing and understanding that the advertisement is for 

underage prostitution, meeting the scienter requirement that was addressed in the briefing, is it Backpage’s position that that -- either that is not a crime 

or, if it could be characterized as a crime, it can’t be prosecuted because it’s 

committed in a First Amendment context?

MR. GRANT: To take the Court’s question, I’m assuming they have knowledge not simply because somebody submitted an ad, but they know 

something?

THE COURT: Yeah, they know something more –

MR. GRANT: Actual mens rea, actual knowledge?

THE COURT: Right. That’s my hypothetical.

MR. GRANT: So the situation of the hypothetical is if there is actual 

knowledge, say through participation in a venture, you’re conspiring with somebody, you know they posted an ad, you know the person involved is 

underaged, that’s a prosecutable crime, Your Honor.

(Ex. D.) Against this backdrop, and the following are business practices committed with 

full knowledge by Defendants that Backpage was facilitating prostitution, including child 

sex trafficking:

i. Moderation

Defendants’ cases discussing Backpage (CR 443 at 10) were all decided prior to the 

release of the U.S. Senate’s Permanent Subcommittee on Investigations (PSI) Report in 

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2017. That 50-page report, entitled Backpage.com’s Knowing Facilitation of Online Sex 

Trafficking, addressed a trove of internal Backpage documents not previously available.5

 

The report was accompanied by an 840-page appendix largely consisting of incriminating 

Backpage documents.6

 As set forth in the report, and further outlined in the Indictment 

and Superseding Indictment in this case, Backpage engaged in a practice of content 

“moderation” that involved removing terms and pictures that were particularly indicative 

of prostitution, including child sex trafficking, and then publishing a revised version of the 

ad. (See, e.g., CR 230, ¶¶ 11, 34, 68-152.) 

Backpage CEO Carl Ferrer described the moderation process as follows in the 

factual basis of his guilty plea: 

I have long been aware that the great majority of these advertisements are, in 

fact, advertisements for prostitution services (which are not protected by the 

First Amendment and which are illegal in 49 states and in much of Nevada). 

Acting with this knowledge, I conspired with other Backpage principals (including but not limited to M.L, J.L, S.S., D.H., A.P, and J.V.) to find ways 

to knowingly facilitate the state-law prostitution crimes being committed by Backpage’s customers. For example, I worked with my co-conspirators to create “moderation” processes through which Backpage would remove terms 

and pictures that were particularly indicative of prostitution and then publish 

a revised version of the ad. Such editing did not, of course, change the essential nature of the illegal service being offered in the ad—it was merely intended to create a veneer of deniability for Backpage. These editing practices were only one component of an overall, company-wide culture and 

policy of concealing and refusing to officially acknowledge the true nature of the services being offered in Backpage’s “escort” and “adult” ads.

(United States v. Ferrer, CR 18-464-PHX-SPL, CR 7-2, Ferrer Plea Agreement at 13.)

Backpage Sales and Marketing Director Daniel Hyer corroborated Ferrer’s account

and described the moderation process in the factual basis of his guilty plea as follows:

Over time, I also became involved (along with Ferrer, Andrew Padilla, and 

Joye Vaught) in Backpage’s efforts to “moderate” the content of the 

website’s escort and adult ads. Once again, I knew that the great majority of the ads being “moderated” were actually offering illegal prostitution 

services—our removal of explicit words and pictures did nothing to change 

 

5

https://www.hsgac.senate.gov/imo/media/doc/Backpage%20Report%202017.01.10%20F

INAL.pdf

6

https://www.hsgac.senate.gov/imo/media/doc/Final%20Appendix%202017.01.09.pdf

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the underlying nature of the services being offered. In fact, Padilla insisted that I and other Backpage employees use the term “models” in intra-company emails when referring to persons in Backpage ads who appeared to be 

underage. This was a code word intended to avoid looking bad in a lawsuit. 

(CR 271, Hyer Plea Agreement at 10.) In short, “moderation” involved the deliberate and 

knowing publication of prostitution ads. 

ii. Reciprocal Link: The Erotic Review 

In addition to facilitating prostitution through the moderation process, in 2007 

Backpage established a business relationship with a known prostitution website, The Erotic 

Review. The Erotic Review allowed “johns” to post reviews of prostitutes, including child 

sex trafficking victims, on their website. (See Ex. E; an example of a Backpage posting 

with a link to The Erotic Review.) Around 2007, Backpage recognized inserting links to 

The Erotic Review in Backpage postings would increase ad revenue. Backpage paid David 

Elms, The Erotic Review’s owner, as much as $10,000 per month for this reciprocal link 

relationship. (See, e.g., Ex. F; invoice to Elms). Backpage insisted that Elms disguise the 

name of The Erotic Review as Elms Website Technologies in an effort to conceal the nature 

of The Erotic Review and Backpage’s financial relationship with The Erotic Review. 

Hyer described Backpage’s relationship with The Erotic Review in the factual basis 

of his guilty plea as follows: 

Among other things, the true nature of the ads was obvious and we sometimes

used ads appearing on The Erotic Review (a website where customers would 

post “reviews” of their encounters with prostitutes, including descriptions of 

prices charged for particular sex acts) as the source of the content for the new 

Backpage ads we were creating. 

(CR 271, Hyer Plea Agreement at 9.)

As early as 2007, the subject of The Erotic Review was raised at management 

meetings attended by Defendants Larkin and Spear. Two years after the establishment of 

the business relationship between TER and Backpage, Elms was arrested in 2009. The 

arrest was reported on by the alternative weekly newspaper The New Times (then owned 

by Defendants Lacey and Larkin) which characterized The Erotic Review as “the 

Amazon.com of prostitution.” (Ex. G.) Following Elms’ arrest, Larkin notified Spear and 

Ferrer by email about the arrest with a subject line of “johns accused of favorably rating 

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escorts on Erotic Review in exchange for discounts.” (Ex. H.) Backpage’s relationship 

with The Erotic Review continued after Elms’ arrest until approximately February 2011. 

(See Ex. I; email from Andrew Padilla.) By inserting The Erotic Review links in Backpage 

postings, Backpage was knowingly facilitating prostitution. 

On March 1, 2011, Larkin, Lacey, Ferrer, Spear and attorney Hemu Nigam met with 

representatives of the National Center for Missing and Exploited Children (“NCMEC”) in 

Alexandria, Virginia. During that meeting, NCMEC staff provided a PowerPoint that 

detailed how The Erotic Review links were inserted into Backpage ads that featured child 

sex trafficking victims. (See Ex. E.) The Backpage participants remained silent about their 

experience with The Erotic Review; at most, Larkin told NCMEC CEO Ernie Allen that 

[Backpage] “has nothing to do with Erotic Review.” (Ex. J; Mar. 1, 2011 email from Ernie 

Allen.) Nevertheless, Backpage’s approximately four-year reciprocal link business 

relationship with The Erotic Review further demonstrates that Backpage knowingly 

facilitated prostitution. (See also CR 230, ¶¶ 45-58.)

iii. Aggregation/Pre-boarding

Backpage also promoted illegal prostitution by engaging in a practice known within 

Backpage corporate offices as “aggregation” or “pre-boarding.” This was accomplished 

by identifying prostitutes advertising on other websites. Backpage would then post a free 

ad and contact the pimp or prostitute and solicit them to Backpage with the incentive of a 

free ad for six weeks (or a similar financial incentive). (See CR 230, ¶¶ 35-44.)

Hyer explained the process in the factual basis of his guilty plea as follows: 

In general, this process consisted of identifying so-called “escort” and 

“adult” ads on other websites and creating ads on Backpage for the women 

depicted in those ads in the hope of securing their future business. These 

aggregation efforts, which I discussed on multiple occasions with my bosses 

Carl Ferrer and Scott Spear, resulted in large revenue and traffic growth for 

Backpage. As a result, Ferrer and Spear authorized the expansion of the aggregation team I was supervising and authorized me to repeat the 

aggregation process (which was initially concentrated in Dallas) in other 

major U.S. markets. 

(CR 271, Hyer Plea Agreement at 9.)

In short, by copying (or aggregating) the ad from a competing prostitution website 

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and imposing the Backpage banner on the ad, and in some cases, inserting The Erotic 

Review link, Backpage was knowingly facilitating prostitution. 

iv. Affiliate Program

Backpage also engaged in another business practice by entering into a financial 

arrangement with “affiliates” or “super affiliates” like “Dollar Bill,” an individual who 

earned fees for knowingly arranging for prostitutes and pimps to post ads on Backpage. 

(See CR 230, ¶¶ 59-67.)

In sum, the business practices detailed above (moderation, reciprocal link, 

aggregation, and affiliate programs) clearly were ventures to facilitate prostitution.

v. Concealment Money Laundering

By 2015, the major credit card companies stopped processing payments for 

Backpage and some banks closed Backpage’s accounts out of concern they were being 

used for illegal purposes. (CR 230, ¶¶ 182-183.) In response, Defendants pursued an array 

of money laundering strategies. These included: (a) instructing customers to send checks 

and money orders to a particular Post Office box, depositing those payments in bank 

accounts held in the name of entities with no apparent connection to Backpage, and then 

giving customers a corresponding “credit” on Backpage to purchase new ads; (b) wiring 

the proceeds of Backpage’s business to bank accounts held in foreign countries and then 

redistributing the funds to certain Defendants (as compensation) or redepositing the funds 

in bank accounts held in the United States (to conceal the nature of those funds and promote 

Backpage’s ongoing operations); and (c) converting customer payments, and the proceeds 

of Backpage’s business, into cryptocurrencies. (CR 230, ¶¶ 184-194.)

Ferrer described the actions Defendants took to conceal from conventional banks 

the fact that transactions were being processed for payment to Backpage as follows:

In addition to conspiring to knowingly facilitate the state-law prostitution offenses being committed by Backpage’s customers, I also conspired with other Backpage principals (including but not limited to M.L, J.L, S.S., J.B., 

and D.H.) to engage in various money laundering offenses. Since 2004, 

Backpage has earned hundreds of millions of dollars in revenue from 

publishing “escort” and “adult” ads. Over time, many banks, credit card companies, and other financial institutions refused to do business with 

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Backpage due to the illegal nature of its business. In response, I worked with 

my co-conspirators to find ways to fool credit card companies into believing that Backpage-associated charges were being incurred on different websites, to route Backpage-related payments and proceeds through bank accounts held in the name of seemingly unconnected entities (including but not limited 

to Posting Solutions, Website Technologies, and Cereus Properties), and to 

use cryptocurrency-processing companies (including but not limited to CoinBase, GoCoin, Paxful, Kraken, and Crypto Capital) for similar 

purposes.

(United States v. Ferrer, CR 18-464-PHX-SPL, CR 7-2, Ferrer Plea Agreement at 13-14.)

The foregoing is not meant to provide a complete account of the evidence and legal 

theories that the government intends to present to the Court in any future proceedings, or 

at trial, in this case. Rather, the government offers the above summary to illustrate many 

of the reasons why Defendants’ case citations in the “Joint Status Report” are inapposite, 

and why Defendants’ request for a continuance lacks merit. 

IV. The Public and the Victims Have a Statutory Right to “Proceedings Free From 

Unreasonable Delay.” 

Defendants’ requested continuance should be denied for a further reason: The public 

and the victims have a right conferred by statute to “proceedings free from unreasonable 

delay.” 18 U.S.C. § 3771(a)(7) (the “Crime Victims’ Rights Act” or “CVRA”); see also

18 U.S.C. § 3161(h)(7)(A). The Superseding Indictment contains 17 select victim 

summaries. (CR 230, ¶¶ 160-176.) Of these victims, at least five were juveniles when they 

were trafficked on Backpage. (CR 230, ¶¶ 163, 164, 167, 169, 172.) Four of the victims 

were murdered or killed as a result of being trafficked on Backpage, and their surviving 

family members or lawful representatives stand in their shoes for purposes of the CVRA. 

18 U.S.C. § 3771(e)(2)(B). (CR 230, ¶¶ 165, 173, 174, 175.) The victims’ statutory 

rights—and their need for an expeditious resolution of this prosecution—strongly militates 

against further delay. 

Conclusion

The government incorporates by reference its January 18, 2019 Status Report (CR 

444), which summarizes early and extensive efforts to provide Defendants with discovery, 

including the production of more than seven million documents and detailed indices by 

May 2018, subsets of “hot documents” tailored to each Defendant, meetings with 

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prosecutors to review the government’s evidence, and access to DOJ e-discovery personnel 

to assist with technical questions regarding the government’s productions. 

For all of the foregoing reasons, Defendants’ request for a four-month continuance 

should be denied.

Respectfully submitted this 23rd day of January, 2019.

ELIZABETH A. STRANGE

First Assistant United States Attorney

District of Arizona

s/_Kevin M. Rapp

KEVIN M. RAPP

MARGARET PERLMETER

PETER S. KOZINETS

ANDREW C. STONE

JOHN J. KUCERA

Assistant U.S. Attorneys

BRIAN BENCZKOWSKI 

Assistant Attorney General

Criminal Division, U.S. Department of Justice

REGINALD E. JONES

Senior Trial Attorney

U.S. Department of Justice, Criminal Division Child Exploitation and Obscenity Section

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Certificate of Service

I hereby certify that on this date, January 23, 2019, I transmitted the foregoing under-seal 

document for filing to the Clerk of the United States District Court and sent a copy via electronic mail to: Paul J. Cambria Jr. Esq. and Erin e. McCambpell, Esq., Lipsitz Green 

Scime Cambria, LLC, 42 Deleware Ave, Suite 120, Buffalo, NY 14202, 

pcambria@lglaw.com and emccampbell@lglaw.com, Thomas H. Bienert, Jr., Esq., Anthony R. Bisconti, Esq., Kenneth M. Miller, Esq., and Whitney Bernstein, Esq., Bienart, 

Miller & Katzman, PLC, 903 Calle Amanecer, Suite 350, San Clemente, CA 92673, 

tbienert@bmkattorneys.com, tbisconti@bmkattorneys.com, kmiller@bmkattorneys.com, wbernstein@bmkattorneys.com; Mike Piccarreta, Esq., Piccarreta Davis Keenan Fidel, PC, 2 East Congress Street, Suite 1000, Tucson, AZ 85701, 

mlp@pdlaw.com; Jim Grant Esq., Davis Wright Termaine, LLP, 1201 Third Avenue, Suite 2200, Seattle, WA 98101, jimgrant@dwt.com; Michael D. Kimerer, Esq. and Rhonda Elaine Neff, Esq., 1313 E. Osborn Road, Suite 100, Phoenix, AZ 85014, 

MDK@kimerer.com and rneff@kimerer.com; Steve Weiss Esq., Karp & Weiss, PC, 3060 North Swan Rd., Tucson, AZ 85712, sweiss@karpweiss.com; Robert Corn-Revere 

Esq., Davis Wright Termaine, LLP, 1919 Pennsylvania Avenue N.W., Suite 800, 

Washington, D.C., 20006, bobcornrevere@dwt.com; Bruce Feder, Esq., 2930 East 

Camelback Road, Suite 160, Phoenix, AZ 85016, bf@federlawpa.com; Gary Linenberg, Esq., Ariel Neuman, Esq., Gopi K. Panchapakesan, Esq., Bird, Marella, Boxer, Wolpert, 

Nessim, Drooks, Lincenberg & Rhow, P.C., 1875 Century Park East, 23rd Floor, Los 

Angeles, CA 90067, glincenberg@birdmarella.com, aan@birdmarella.com, gkp@birdmarella.com.

s/ Angela Schuetta_____

Angela Schuetta

U.S. Attorney’s Office

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