Prosecutors are ignoring the Constitution and legal precedent in their zeal to punish the founders and former staff of Backpage, by seizing money and other assets that stem from protected speech and legal activity.
In general, as the Supreme Court held in Fort Wayne Books, Inc. v. Indiana (1989), the Fourth Amendment says that "any and all contraband, instrumentalities, and evidence of crimes may be seized upon probable cause." But this changes "when materials presumptively protected by the First Amendment are involved."
Nonetheless, federal prosecutors are arguing that they're entitled to all money made by Backpage, even proceeds derived from unquestionably legal ads, and that decades worth of earnings made by former Backpage leaders before the website even existed are also tainted.
Since the defendants' arrests in April 2018, prosecutors "have created constant interference with the Defendants' ability to defend this case," states a January 2019 status report filed by their lawyers. "Virtually all of the Defendants' assets have been seized, virtually all of the money in their attorneys' trust accounts designated to fund the defense has been been seized or is effectively frozen," and defense lawyers "may expose themselves to criminal liability if they use those funds to pay fees" from the case.
Last week, the Cato Institute, DKT Liberty Project, and the Reason Foundation (the nonprofit that publishes Reason magazine) filed a brief in support of the defendants on this matter. The groups say they want "to amplify the danger that the government's use of civil forfeiture to seize the assets and proceeds of expressive material poses to free expression."
"The government has shut down a major internet site and confiscated millions of dollars of assets and proceeds not only from that site, but also from defendants' numerous other publishing venues—ventures completely unrelated to the alleged criminality of the site and indisputably protected by the First Amendment," the February 13 amicus brief states.
Backpage founders Michael Lacey and James Larkin, who sold the company in 2015, also published alt-weekly newspapers around the country for more than four decades before selling Village Voice Media (the papers' parent company) in 2012.
"Expressive materials—such as newspapers, books, and their internet analogs—are presumptively protected by the First Amendment," explains the Cato, DKT Liberty, and Reason brief. "And this presumptive protection extends to the assets for producing such materials, as well as the proceeds from their dissemination." That means they can only be confiscated if the government demonstrates in an adversarial court proceeding that the material is not protected speech.
"Unfortunately," they continue, "the government's conduct here is not new. The history of government efforts to suppress and censor disfavored speakers, particularly speakers who offer sexually explicit materials, is long," and it has "involved tactics similar to those employed here, designed to bankrupt speakers by forcing them to litigate on multiple fronts to prove that their speech is protected by the First Amendment."
In this case, much of the asset-producing content in question had nothing to do with sex.
"Lacey accumulated substantial wealth prior to the creation of Backpage," note his lawyers in one motion filed last November. Yet "in its scorched-earth approach to this case, the government has seized all of Mr. Lacey's financial accounts and real estate holdings, including considerable assets unrelated to Backpage."
Even when it comes to proceeds derived from Backpage, the First Amendment comes into play. "There's no doubt, number one, that this is a First Amendment case," said Paul Cambria, an attorney for Lacey, in a November 2018 court hearing. "These are publishing activities. We have had case after case of litigation, both state and federal, indicating that these are First Amendment activities."
Because of these First Amendment issues, this is not a typical case, suggested lawyer Ariel Neuman at that November hearing. "But beyond that, it's not typical in the way that the government has treated the defendants. It is not typical in the way that the government has essentially tried to financially strangle these defendants at every turn," she said.
Newman's client Jed Brunst, former chief financial officer at Backpage, "had an account seized where there was literally maybe 10, 20 dollars that could be traced back to Backpage-derived proceeds," she told the court. "We're talking millions of dollars seized. Our client is unable essentially to fund his life."