Former Phoenix New Times editor sentenced to prison in Backpage trial that centered on prostitution

Michael Lacey, the former top editor of the New Times tabloid, was sentenced to five years in federal prison Wednesday for laundering proceeds from the sale of Backpage.com, the website he co-founded and that prosecutors said became an online brothel.

That financial crime was the only guilty verdict for Lacey returned by a federal jury in November. It followed weeks of testimony at the federal courthouse in Phoenix that laid out the government's theory on how Backpage worked with prostitutes and pimps to post thinly-veiled ads for prostitution.

The jury found Lacey guilty of a single charge for setting up a trust in Hungary to benefit his sons. Prosecutors said Lacey did so to conceal the source of the funds. Trial testimony showed Lacey had intended to shield the money from seizure by the government.

In addition to the prison sentence, Lacey was fined $3 million.

Prosecutors had argued for a prison sentence of 20 years. They also asked that Lacey be placed in custody immediately.

Lacey, 76, asked for probation.

Also sentenced Wednesday were Scott Spear and Jon Brunst, former executives who ran Backpage. The government sought 20 year prison sentences for those men, too. They were convicted on many more charges and were each sentenced to 10 years in prison. Neither was fined.

All three men were ordered to turn themselves in to the U.S. Marshals Service by Sept. 11 at noon. They were ordered confined to their homes and to have ankle monitors affixed before they left the courthouse Wednesday

In a statement released ahead of the two-day sentencing hearing Tuesday, Lacey said he had little to do with the operations of Backpage.

"It was a business and I did not work in business," he wrote. "I ran the journalists and editors."

During the sentencing, Judge Diane Humetewa said Lacey was put on notice that the funds earned from Backpage came from illegal prostitution ads, including for underage girls.

She said it was ironic that she received letters in defense of his character from former New Times reporters that praised Lacey's journalism for defending the voiceless and powerless.

"The powerless were those many, many individuals who were posted on Backpage.com," Humetewa said. The judge said Lacey showed "an inability to at least acknowledge what this was all about."

Lacey was a college student when he founded New Times, an alternative weekly whose mission was to cure injustice and celebrate the arts through long-form journalism.

Decades later, after leading a chain of alternative newspapers nationwide, Lacey co-founded Backpage to compete with the online classified website, Craigslist. That website had upended a lucrative and reliable revenue source for the print newspapers Lacey owned and cherished.

In 2010, Craigslist shut down its adult section, which had ads for escorts and massages that law enforcement and advocates said were used for prostitution.

Backpage made a concerted effort to be the new home for those ads, prosecutors said. Internal emails released to a U.S. Senate subcommittee under subpoena showed what prosecutors said was collusion among pimps, prostitutes and Backpage executives.

That included editing ads and images to help disguise what prosecutors said was the true intent.

The site generated $150 million annually by 2013, according to trial testimony. More than 90% of the site's revenue came what prosecutors contended were barely-disguised prostitution ads.

The former chief executive officer of Backpage, Carl Ferrer, pleaded guilty to prostitution-related crimes on behalf of himself and the website. The government seized and shut down the website in March 2018, the day it arrested Lacey at his home.

Besides Lacey's sole financial crime conviction, the jury in November also found the two other Backpage executives, Spear and Brunst, guilty of conspiracy to facilitate prostitution through the ads. It also found both men guilty on several counts of money laundering.

Spear also was found guilty on 17 charges related to specific ads the government said were for prostitution.

'I understand their grief and I pray for their healing'

On Tuesday, Brunst told the court that his role as chief financial officer was limited to accounting and did not include decisions of how the company was run. "I would never take part in a conspiracy," he said.

Brunst expressed remorse that Backpage was misused and caused harm to some women who were advertised on the website. "I understand their grief," he said, "and I pray for their healing."

An attorney for Spear, Bruce Feder, said the federal prison system was overcrowded and not designed to deal with three men in their 70s with health issues. He likened it to a death sentence.

"These are men who had a business that sold ads for $5," Feder said. The ads served to facilitate possible bad acts by others, he said, but the website and these men did not cause direct harm.

Spear refused to address the court.

Lacey also refused to speak. Although a question from the judge asking if he wished to address the court produced some hushed conversation among Lacey and his attorneys.

The jury in November could not reach a verdict on the charges accusing Lacey of aiding sex trafficking through the website. It also couldn't reach a verdict on more than 30 charges of money laundering.

But it did return a guilty verdict on a charge related to a single transaction at a bank in Hungary.

That transaction started when Lacey, along with Spear and Brunst, sold Backpage to Ferrer for some $600 million. Of that, Lacey received $115 million, court testimony showed.

That money flowed through two companies that prosecutors described as shells before being sent to Lacey, who then placed it in five separate accounts, court documents show.

In January 2017, Lacey arranged to have $16.5 million put into an account in Hungary, intending it as a trust for his sons.

In a letter to his attorney quoted in a judge's ruling, Lacey said he was doing so not to evade taxation but so that "litigious parties, including government parties, cannot access my accounts."

Humetewa, in a previous ruling upholding the guilty verdict, said there was enough evidence to show Lacey made the transfer in part "to conceal that the true source of the funds stemmed from the sales of Backpage prostitution ads."

The judge dismissed several of the sex trafficking and prostitution charges against Lacey in April, citing lack of evidence at trial.

Prosecutors have told the court they intend to put Lacey on trial again on the charges that remain.

'They made so many errors and so much money'

Lacey, along with James Larkin, partnered to make New Times a groundbreaking tabloid in Phoenix. The brand franchised to other cities, eventually taking over the Village Voice in New York.

The pair were arrested in March 2018. The case initially went to trial in 2021, but a judge declared a mistrial after a few days of testimony.

Larkin died by suicide in August 2023, days before the second trial was to begin.

According to a memo Lacey's attorneys filed with the court ahead of sentencing, Larkin and Lacey had a phone conversation the day before he died. In that call, according to the filing, Larkin told Lacey: "Mike, you'll be OK. You didn't have anything to do with Backpage."

Lacey argued through the proceedings that he was removed from Backpage, concentrating on the journalism. Prosecutors pointed out that Lacey had no newspapers to edit after selling them in 2012, but he still maintained control of Backpage.

Lacey, in a draft of an opinion column quoted in the indictment, wrote that Backpage's existence meant that "for the very first time, the oldest profession in the world has transparency, record keeping and safeguards."

Larkin, according to prosecutors, flagged that paragraph and asked it to be removed.

On Tuesday, some women who were advertised for sex work on Backpage testified. Destinee Ortiz, who is now 27 and said she was advertised on the site from ages 14 to 20, stayed at the hearing through the rest of the day to hear Lacey's defense attorneys argue for leniency. She was not swayed.

"They made so many errors," she said following Tuesday's testimony. "And so much money."

Republic reporter Jimmy Jenkins contributed to this .