You might have heard about New York Times op-ed columnist Nicholas Kristof's callout of the Village Voice and their connection with Backpage.com (I refuse to link) in January. He wrote about it on January 25th in a column titled "How Pimps Use the Web to Sell Girls".
The girl, whom I’ll call Baby Face because of her looks, frantically told police that a violent pimp was selling her for sex. He had taken her to the building and ordered her to go to an apartment where a customer was waiting, she said, and now he was waiting downstairs to make sure she did not escape.
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The episode also shines a spotlight on how the girl was marketed — in ads on Backpage.com, a major national Web site where people place ads to sell all kinds of things, including sex. It is a godsend to pimps, allowing customers to order a girl online as if she were a pizza.
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Lauren Hersh, the ace prosecutor in Brooklyn who leads the sex-trafficking unit there, says that of the 32 people she and her team have prosecuted in the last year and a half — typically involving victims aged 12 to 25 — a vast majority of the cases included girls marketed through Backpage ads.
Baby Face is 13-years old. And this is not uncommon.
After Craigslist stopped running these kinds of ads, pimps began to use a site called Backpage.com which is owned by Village Voice Media. Backpage has been under enormous pressure to get out of the business too, providing a forum for prostitution which they know involves children and sex trafficking. AIM Group says that they have 70% of the market for prostitution ads.
Attorneys general from 48 states have contacted them in writing calling for them to stop running the ads because they have become "a hub" in sex trafficking. Kristof and others have written articles. Now 19 senators have also contacted them asking them to stop. NYC city council members have submitted legislation to ask them to do away with the adult services section. Last week Village Voice was protested and a petition with over 220,000 signatures was delivered. Here is the change.org petition: Tell Village Voice Media to Stop Child Sex Trafficking on Backpage.com
But Backpage has refused to stop the ads and in fact has issued statements and rather nasty attacks on their critics, such as this one on Ashton Kutcher: Real Men Get Their Facts Straight.
When I read the paragraph below in Kristof's January op-ed, I guess I saw the word "greed", but oddly enough, Wall Street did not come to mind in this context.
Backpage suggests that it is battling censors and prudes. In fact, what drives it seems to be greed. In their letter, the attorneys general said that Backpage earns more than $22 million annually from prostitution advertising.
If I asked you, who is the greediest company in America, which one would you choose? Some of you might choose Goldman Sachs. I knew that Goldman Sachs had their hands in many different kinds of businesses in many different countries and I knew that Goldman Sachs was a greedy firm. But even I did not imagine that Goldman Sachs' greed was so strong and out of control that they would resort to making money from selling children in prostitution. I suppose this was a failure of imagination on my part.
Kristof did not stop in his battle against Backpage.com. He set out to find out who their owners were.
Financiers and Sex Trafficking
This emporium for girls and women — some under age or forced into prostitution — is in turn owned by an opaque private company called Village Voice Media. Until now it has been unclear who the ultimate owners are.
That mystery is solved. The owners turn out to include private equity financiers, including Goldman Sachs with a 16 percent stake.
Goldman Sachs was mortified when I began inquiring last week about its stake in America’s leading Web site for prostitution ads. It began working frantically to unload its shares, and on Friday afternoon it called to say that it had just signed an agreement to sell its stake to management.
So once they were found out, they rushed to get out of this business. They had a 16% stake, not a lot, but significant. So maybe Goldman just had these random shares which were a drop in the bucket of their portfolio? Well, not really.
The two biggest owners are Jim Larkin and Michael Lacey, the managers of the company, and they seem to own about half of the shares. The best known of the other owners is Goldman Sachs, which invested in the company in 2000 (before Backpage became a part of Village Voice Media in a 2006 merger).
A Goldman managing director, Scott L. Lebovitz, sat on the Village Voice Media board for many years. Goldman says he stepped down in early 2010.
From 2006 through 2012 they held a stake in Backpage and one of their managing directors was on the board of Village Voice Media, so presumably he knew that they owned Backpage. A Goldman Sachs spokesperson now says that they were "uncomfortable with the direction of the company" since 2010.
Goldman fund to exit company owning sex traffic site
GS Capital Partners III on Friday signed a deal to sell its 16 percent stake in Village Voice Media, which owns the website, called Backpage.com.
The fund began negotiations with Village Voice Media in March, after deciding in 2010 that it had grown "uncomfortable with the direction of the company," and Goldman's inability to influence its operations, said Andrea Raphael, a Goldman Sachs spokeswoman.
But they never moved to sell their stake until multiple op-ed columns were written by Kristof in the New York Times
, and in fact they really didn't move until Friday when they realized he had uncovered the names of the owners of Backpage. Until then the ownership identities had been cloaked in some kind of secrecy.
So how uncomfortable were they really?
It certainly looks like they only sold their stake because they were found out and because they did not want any more of their already abundant bad publicity. It doesn't sound like it had much to do with being uncomfortable with their profits resulting, in part, from sex trafficking at all.
Excerpt of the letter from the state attorneys general (PDF):
Re: Backpage.com’s ongoing failure to effectively limit prostitution and sexual trafficking activity on its website
This letter is in response to Backpage.com‟s assurances, both public and in private, concerning the company‟s facilitation of the sexual exploitation of children, and prostitution. As our state‟s chief law enforcement officers, we are increasingly concerned about human trafficking, especially the trafficking of minors. Backpage.com is a hub for such activity.
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We have tracked more than 50 instances, in 22 states over three years, of charges filed against those trafficking or attempting to traffic minors on Backpage.com. These are only the stories that made it into the news; many more instances likely exist. These cases often involve runaways ensnared by adults seeking to make money by sexually exploiting them. In some cases, minors are pictured in advertisements. In others, adults are pictured but minors are substituted at the “point of sale” in a grossly illegal transaction.
Nearly naked persons in provocative positions are pictured in nearly every adult services advertisement on Backpage.com and the site requires advertisements for escorts, and other similar “services,” to include hourly rates. It does not require forensic training to understand that these advertisements are for prostitution. This hub for illegal services has proven particularly enticing for those seeking to sexually exploit minors.
Excerpt from the letter from 19 senators (Scribd
Our founding fathers guaranteed the freedom of expression in the United States Constitution, and as U.S. Senators, we work hard to defend this fundamental American value. However, the First Amendment has clear limitations -- it does not extend to child pornography and it does not extend to the sexual exploitation of minors on the Internet.
Experts estimate that 300,000 children are at risk of commercial sexual exploitation in the United States and that girls and boys are forced into prostitution at the average ages of 12 to 14 and 11 to 13, respectively. A chilling report from the Bureau of Justice Statistics found that 40 percent of incidents investigated by federally funded task forces on human trafficking between 2008 and 2010 involved the sexual exploitation of a child. Unfortunately, these numbers only continue to rise.
We believe, as the leading U.S. website for prostitution advertising, Backpage.com can create a significant impact on this appalling industry by shutting off a major source of advertising for these practices -- the adult services section of the website.
We are greatly alarmed by the increasing news reports of pimps and traffickers using Backpage.com to advertise sexual services by minors. The National Association of Attorneys General (NAAG) found more than 50 instances nationwide of charges filed against people trafficking or attempting to traffic minors on Backpage.com.
Though Goldman says they were uncomfortable with the direction of the business since 2010, there is no evidence that they tried to exercise any influence over the business even though they had a Goldman managing director on the VVM board and they had a significant stake in ownership.
Kristof, in his blog:
I see no evidence that Goldman and other private equity investors ever uttered a whisper of protest internally, even as arrests were made in 22 states for trafficking of under-age girls who had been marketed on Backpage.
And in this weekend's op-ed, Kristof also got a statement from VVM's lawyer who said that she did not know of any "dissent" from any owners. So as far as we know, Goldman never objected to this business in any way.
Elizabeth McDougall, chief counsel for Village Voice Media, told me on Friday that she was ''unaware of any dissent'' from owners.