Michael Lacey, a founder of the classified advertising website Backpage.com, was sentenced on Aug. 28 to five years in prison for money laundering in a case involving allegations of a scheme to promote and profit from prostitution through the now-shuttered website.
The 76-year-old, who’s also a former Phoenix New Times executive editor, was also fined $3 million.
Lacey was convicted by a jury in November last year on one count of international concealment money laundering. The same jury deadlocked on the other 84 prostitution facilitation and money laundering charges.
Judge Diane Humetewa of the U.S. District Court for the District of Arizona later acquitted Lacey of dozens of charges due to insufficient evidence, but the businessman still faces around 30 prostitution facilitation and money laundering charges.
Backpage.com launched in Phoenix in 2004 as a competitor to Craigslist, offering classified ads for various goods and services.
The website was founded by Lacey and James Larkin. Larkin, 73, died in July last year before the trial began, prosecutors said.
Scott Spear, who previously served as the executive vice president of one of Backpage’s parent companies, and John Brunst, who served as the chief financial officer of Backpage and several of its parent companies, were also convicted last year.
Both were convicted of a conspiracy to violate the Travel Act by facilitating prostitution, along with a conspiracy to commit money laundering and multiple separate money laundering violations.
They were each sentenced on Aug. 28 to 10 years in prison followed by three years’ probation.
Site Became ‘Leading Source of Prostitution Ads’
In a superseding indictment, prosecutors said the website became notorious for being the internet’s “leading source of prostitution advertisements” and that the site derived the “overwhelming majority” of its revenue from such ads.This included paying employees bonuses for successfully identifying prostitutes posting advertisements on rival websites and creating free ads on Backpage for them, according to prosecutors.
The company would then use the resulting Backpage ads to secure the prostitute’s business, they said.
Prosecutors also said Backpage had a business arrangement with another website and would place ads on that site, which allowed customers to post reviews of their experiences with prostitutes.
Prosecutors further accused Lacey, Spear, and Brunst of laundering the money they made through Backpage through numerous shell companies they created in multiple foreign countries.
Principal Deputy Assistant Attorney General Nicole M. Argentieri said, “The defendants thought they could hide their illicit proceeds ... but they were wrong.”
Attorneys for Lacey said their client was focused on running an alternative newspaper chain and wasn’t involved in the day-to-day operations of Backpage.
Humetewa told Lacey during his sentencing that the businessman knew of the allegations about the website but did nothing.
“In the face of all this, you held fast,” the judge said. “You didn’t do a thing.”
Humetewa ordered Lacey and the two executives to report to the U.S. Marshals Service in two weeks to begin serving their sentences.
It is not clear if the men plan to appeal their sentences.
