PHOENIX — Prosecutors say the founders of the online classified advertising site Backpage.com should have to post bail, wear electronic monitors and detail their financial holdings if they want to be released from jail while facing dozens of counts of money laundering and facilitating prostitution.
Michael Lacey and James Larson have been jailed since their arrests last week in what authorities said was a scheme to knowingly publish ads for sexual services and use foreign banks to hide revenues.
Five employees of the site also were arrested, but Lacey and Larkin are the only ones in jail.
A hearing is scheduled Wednesday for lawyers to argue over whether Lacey should be released from jail. A similar hearing is set Thursday for Larkin.
The indictment alleged Backpage.com ignored warnings to stop running advertisements promoting prostitution, sometimes involving children, because the lucrative enterprise brought in a half-billion dollars since its inception in 2004.
Lacey, Larkin and three Backpage.com employees have pleaded not guilty. Two others have yet to enter pleas.
Prosecutors say the prospect of Lacey and Larkin, who are in their late 60s, spending the rest of their lives in prison creates an incentive for them to flee from authorities. Both men have access to money in foreign bank accounts that would aid them in escaping prosecution, authorities say.
"These factors suggest that Lacey could easily flee the country and use the wealth he has stashed overseas to live out the remainder of his life, in a lavish style, as a fugitive," prosecutors said in a court filing, echoing a similar statement they made about Larkin.
Prosecutors say Lacey transferred more than $16 million to foreign bank accounts in a bid to thwart any efforts by the government to seize the money. His attorneys say Lacey made no attempts to hide the trust that holds the money.
Lawyers for Lacey and Larkin say their clients aren't at risk of fleeing and don't pose a danger the community.
They say Lacey and Larkin, who already face a separate money laundering case brought by state prosecutors in California, haven't been convicted of any crimes and have complied with all their bail conditions in California.
Their lawyers say Lacey and Larkin sold their interest in Backpage.com in 2015, though prosecutors contend the pair retained some control over the site.
Paul Cambria Jr., one of Lacey's attorneys, said in court records that the case will not likely lead to convictions. "The government's case is so weak that it provides no incentive for Mr. Lacey to flee," Cambria said.
Prosecutors were seeking only a "sizeable" bail amount for Larkin, but they are asking for a seven- or eight-figure bond for Lacey. They also want to bar both men from engaging in any financial transactions without the approval of the court and government.
Lacey has asked to be released without posting a bond, while Larkin has proposed a $250,000 bond.