CEO charged with pimping in California

The top executive of the online classified portal and two of the company’s controlling shareholders were charged on Thursday with felony pimping charges in the state of California as authorities alleged the web site operators were effectively running an “online brothel.”

Carl Ferrer, the CEO of Backpage, which runs its operations out of Dallas and Amsterdam, was arrested after arriving in Houston from a flight from the Netherlands.

Texas Attorney General Ken Paxton and California Attorney General Kamala Harris said that a three-year-long joint investigation revealed that adult and child sex trafficking victims were forced into prostitution through escort ads that appear on the web site. They also alleged that Ferrer and shareholders Michael Lacey and James Larkin made millions of dollars from illegal sex trade.

Ferrer faces charges of pimping a minor, pimping, and conspiracy to commit pimping, while Lacey and Larkin face conspiracy to commit pimping charges. Lacey and Larkin were not in custody on Thursday, and it was not immediately clear when Ferrer would make his first court appearance.

Undercover officers in California posted escort ads online that led them to johns who used Backpage, and authorities interviewed more than a half dozen sex trafficking victims who confirmed they paid Backpage to post ads on the web site promoting prostitution.

“Raking in millions of dollars from the trafficking and exploitation of vulnerable victims is outrageous, despicable and illegal,” Harris said in a statement. “Backpage and its executives purposefully and unlawfully designed Backpage to be the world’s top online brothel.”

The web site, which is similar to Craigslist, has been under pressure from lawmakers and law enforcement for years to end adult services advertisements. Craigslist ceased posting adult and erotic service ads in 2010.

In a statement issued Friday, Backpage called the charges an "election-year stunt." Harris, a Democrat, is running for a U.S. senate seat. The company said that prostitution ads violate Backpage's policies and that the company has removed questionable ads when contacted by law enforcement.

Backpage has successfully fought federal lawsuits alleging that the company's web site was designed to facilitate sex trafficking. The company' and digital rights groups have argued that under federal law Web service companies are immune from liability for crimes by users.

"The actions of the California and Texas Attorneys General are flatly illegal," the company said in its statement. "They ignore the holdings of numerous federal courts that the First Amendment protects the ads on "

Backpage has been at center of Senate hearings into its classified ads. Last month, the Supreme Court declined to block a Senate subpoena seeking information on how Backpage screens its ads.

In addition to its adult services ads, Backpage also publishes advertising from people renting apartments, selling a car or advertising a job opening.

But the company’s internal revenue reports show that from January 2013 to March 2015, nearly 99% of Backpage’s worldwide income was generated from the web site's “adult” section, according to charging documents filed in California. The company collected over $51 million revenue in California during that period.

During that period, Backpage’s internal documents showed that gross monthly income in California was $2.5 million per month.

At one point in May 2015, Ferrer asked in an e-mail to one of the company's credit card processing partners whether they should not disclose the e-mail addresses of some customers, which had handles such as "sexygirl69," "porn_star" and "Naked_goddess."

“Do the banks see these email addresses when we send the transaction to the processor?” Ferrer wrote in the email, according to the charging documents. “We think for example Chase might block transactions for their card holders based on overtly sexy email address names.”

As part of their investigation, California law enforcement officials said they interviewed several sex trafficking victims, including one who was only 13, who said they posted an ads on Backpage.

“Backpage’s escort service section essentially operates as an online brothel,” authorities said in the arrest warrant. “Transactions consist of a user paying a fee to Backpage. In exchange for the fee, Backpage advertises on behalf of and solicits clients for prostitution services. The ads unequivocally sell sexual services, featuring extremely provocative pictures and lightly veiled or coded sexual terminology.”

Since 2012, the National Center for Missing and Exploited Children has worked on more than 400 cases involving children sold for sex via Backpage, and reported 2,900 instances of suspected child sex trafficking to California law enforcement officials, according to the state’s attorney general’s office.

Last year, Cook County, Ill. Sheriff Tom Dart successfully pressed Visa and MasterCard to stop processing payments for Backpage, several months after American Express cut off the web site on its own volition.

Backpage sued Dart, whose jurisdiction includes Chicago, alleging that Dart violated their free speech and equal protection rights. The website later won a restraining order against Dart to stop his campaign as their lawsuit proceeds.

Dart appealed to the U.S. Supreme Court to block the restraining order, but the high court earlier this week announced that it would not hear the sheriff’s appeal.

Nearly three dozen members of the Texas Attorney General’s Law Enforcement Unit participated in Ferrer’s arrest and the execution of a search warrant on the Dallas headquarters of Backpage.

“Initially he’ll face charges in California for pimping and other associated crimes, but Texas will have its own investigation,” Paxton said. “Making money off the backs of innocent human beings by allowing them to be exploited for modern-day slavery is not acceptable in Texas.”

Follow USA TODAY Chicago correspondent Aamer Madhani on Twitter: @AamerISmad

Copyright 2016 WFAA


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