Business

Monday April 2, 2012

Financiers and sex trafficking


THE biggest forum for sex trafficking of under-age girls in the United States appears to be a website called Backpage.com.

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% stake.

Goldman Sachs was mortified when I began inquiring last week about its stake in America’s leading website 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.

“We had no influence over operations,” Andrea Raphael, a Goldman Sachs spokeswoman, told me.

Let’s back up for a moment. There’s no doubt that many escort ads on Backpage are placed by consenting adults. But it’s equally clear that Backpage plays a major role in the trafficking of minors or women who are coerced. In one recent case in New York City, prosecutors say that a 15-year-old girl was drugged, tied up, raped and sold to johns through Backpage and other sites.

Backpage has 70% of the market for prostitution ads, according to AIM Group, a trade organisation.

Village Voice Media makes some effort to screen out ads placed by traffickers and to alert authorities to abuses, but neither law enforcement officials nor anti-trafficking organisations are much impressed. As a result, pressure is growing on the company to drop escort ads.

After my last column on this issue, 19 US senators wrote the company, asking it to stop abetting traffickers. On Thursday, anti-trafficking campaigners protested outside the Village Voice newspaper (which is owned by Village Voice Media). A petition on Change.org criticising the company has gathered 220,000 signatures.

In Washington State, the governor signed a bill into law on Thursday that could expose Backpage to criminal sanctions if it advertises under-age girls for sex without verifying their ages. (There’s some uncertainty about the constitutionality of the law.)

Village Voice Media owners

Village Voice Media has been able to resist pressure partly because, as a private company, it doesn’t disclose its owners. But I’ve obtained documents that, with some digging, shed light on who’s behind it.

The two biggest owners are Jim Larkin and Michael Lacey, the managers of the company, and they seem to own about half 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.

Let’s be clear: this is a tiny investment by a huge company, and I have no reason to think that Goldman’s top executives knew of its connection to sex trafficking. Goldman prides itself on its work on gender: its 10,000 Women initiative does splendid work supporting women in business around the globe.

Full disclosure: Goldman’s foundation was one of about 15 funders of a public television documentary version of a book that my wife and I wrote about the world’s women.

That said, for more than six years Goldman has held a significant stake in a company notorious for ties to sex trafficking, and it sat on the company’s board for four of those years. There’s no indication that Goldman or anyone else ever used its ownership to urge Village Voice Media to drop escort ads or verify ages. Elizabeth L. McDougall, chief counsel for Village Voice Media, told me on Friday that she was “unaware of any dissent” from owners.

Several lesser-known financial companies also hold significant stakes in Village Voice Media, and one person close to the company says that there are about a dozen owners in all.

One is Trimaran, an investment company in New York. It wouldn’t disclose the size of its stake but told me that it had “no influence whatsoever” on management and is now trying to sell its shares.

Two other companies, Alta Communications and Brynwood Partners, did not respond to my repeated inquiries about ties to Village Voice Media (Brynwood may be an asset manager rather than an owner).

One thought: If the minority shareholders, Goldman included, worked together instead of rushing for the exits, they might be able to pressure Village Voice Media to get out of escort ads.

There are no easy solutions to sex trafficking. I think the most important single step is for prosecutors to focus more on pimps and johns. Closing down the leading website used by traffickers would complicate their lives, and after so many years of girls being trafficked on this site, it’s time to hold owners accountable. — IHT

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