Feds Want $97 Million in Cash Forfeited By Ex-Backpage.com Owners

Mugged: Lacey and Larkin

Six months after obtaining a 93-count federal indictment against two Arizona businessmen who once owned a national media empire that included OC Weekly and the Village Voice, the U.S. Department of Justice is seeking permanent forfeiture of more than $100 million in cash and real estate that belonged to the men and members of their management team.

Inside U.S. District Court in Los Angeles, prosecutors claimed the seized assets derived from the illegal conduct of Michael Lacey, 70, and Jim Larkin, 69, while they operated the adult-services website Backpage.com.

The April indictments, part of a multiyear onslaught by government officials to destroy that highly profitable business, claim Lacey and Larkin conspired to facilitate prostitution across state lines and committed money laundering.

If convicted after a potential Jan. 2020 trial, the business partners could spend the rest of their lives in prison.

Law enforcement’s pursuit of Lacey and Larkin delighted the likes of Attorney General Jeff Sessions, who called the men “criminals,” but worried free-speech advocates as well as the libertarian community because neither defendant personally engaged in any sex-trade transaction and, for the majority of Backpage’s existence, federal law (namely, the Communications Decency Act) held websites legally harmless for content added by a site’s users.

While aiming for a U.S. Senate seat, California Attorney General Kamala Harris twice used Backpage as a political prop by attempting to convict Lacey and Larkin on pimping counts; each time, state judges dismissed the charges as baseless.

But federal officials—including members of the FBI, IRS Criminal Division and U.S. Postal Service—are trying a different angle, focusing largely on finances. They also label Backpage as once being the internet’s “leading forum for prostitution ads.”

Along with the April criminal indictments, the government seized the site and shut it down.

Lacey and Larkin founded the New Times media empire in the 1970s, bought the rival Village Voice Media newspapers in 2005, and eventually sold their newspaper holdings in places such as New York, Miami, Phoenix, Dallas, Houston, Los Angeles, Denver and Orange County.

They launched Backpage 14 years ago to compete against Craigslist, which at the time dominated online classified advertising that severely undercut daily and weekly newspaper ad revenues.

A 2017 report by a U.S. Senate Committee chaired by Rob Portman (R-Ohio) published three major accusations: company officials “knowingly concealed evidence of criminality by systematically editing” its adult ads “to conceal the true nature of the underlying transaction”; facilitated “prostitution and child sex trafficking”; and completed a $600 million fake shell-company transaction overseas in 2014 to mask Lacey and Larkin’s continued ownership of Backpage.

The committee reported that the company earned more than $500 million in revenue, including $135 million in 2014 alone.

Based on their Oct. 11 court filings, prosecutors in the DOJ’s Los Angeles asset-forfeiture division are aggressively trying to deplete resources belonging to Lacey and Larkin. They’ve gotten the law firm of Davis Wright Tremaine to surrender $3.7 million in alleged Backpage-related funds. They’ve seized more than $97 million in cash from bank accounts around the world, including in the Czech Republic and Netherlands. They’ve also sought permission to gain permanent control of the company’s domain names as well as the duo’s California properties in San Francisco, Saint Helena and Sebastopol; Arizona properties in Paradise Valley and Sedona; and one property in Chicago.

As an Aug. 21 article in Reason notes, law-enforcement officials—even onetime FBI director James Comey—have “over the years consistently applauded Backpage for its help making cases against predators and locating runaway teens.”

Elizabeth Nolan Brown, the author of that story, isn’t impressed with the prosecutors’ case.

“The story of their arrest is better understood as one of near-religious fervor, government greed and political retribution, in which an escalating panic over commercial sex coincided with a booming online-publishing platform,” Brown wrote.

Lacey and Larkin—longtime, vocal critics of corrupt politicians and cops—believe they are being targeted for revenge.

In coming weeks, judges will consider the duo’s opposition to the government’s forfeiture moves.

R. Scott Moxley’s award-winning investigative journalism has touched nerves for two decades. An angry congressman threatened to break Moxley’s knee caps. A dirty sheriff promised his critical reporting was irrelevant and then landed in prison. The U.S. House of Representatives debated his work. Federal prosecutors credited his stories for the arrest of a doctor who sold fake medicine to dying patients. Moxley has won Journalist of the Year honors at the Los Angeles Press Club; been named Distinguished Journalist of the Year by the LA Society of Professional Journalists; and hailed by two New York Times Magazine writers for his “herculean job” exposing Southern California law enforcement corruption.

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