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Granholm Throws Down Gauntlet

Granholm Throws Down Gauntlet

August 29, 2002
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" I have done absolutely nothing wrong. I've researched the laws; I have attorneys, and they tell me what I have to do, and I've done it... "

Michigan AG's Actions, Payment Processor Reactions Stun, Wound Adult Web Industry

Michigan Attorney General Jennifer Granholm's bid to rid the Internet of child pornography by cutting the financial legs out from under its purveyors rippled through the online adult entertainment industry Wednesday, raising questions about the reasons behind the move and leaving some Webmasters angry and vowing to clear their names.

On Tuesday, Granholm held a press conference during which she announced that her office had served cease-and-desist letters to six Internet billing companies: iBill, CCBill, BillCards, CardBilling, LancelotSecurity, and Trust-Bill. The letters demanded that the companies either discontinue processing subscription fees for dozens of Internet sites the attorney general's office accused of "allegedly trafficking in child porn" or face criminal prosecution under Michigan law for "aiding and abetting child porn distribution."

At least one of the processors, iBill, reacted by severing relationships with the Websites on the attorney general's list. Another, CCBill, which declined to comment about the situation, reacted less dramatically. It warned its clients that they should be ready to show documentation proving the ages of any persons appearing in sexually explicit imagery on their sites, according to the owner of three targeted sites, who asked not to be named.

"My argument is that I follow the law to the letter," said the Webmaster. "I have done absolutely nothing wrong. I've researched the laws; I have attorneys, and they tell me what I have to do, and I've done it. So how can [Granholm] arbitrarily label me [as having] child pornography and force any of my vendors or my billing companies to cut us off without even checking up on it? Seems to me we should slap a giant class-action lawsuit against her.

"This is a witch hunt," the Webmaster continued. "I mean, if she wants to see child pornography sites, I'll send her the fucking links myself. She's looking in the wrong place. She's looking at the mainstream adult Internet when she should be looking in the corners of the Ukraine and places like that."

The Webmaster was not alone in his sentiments. By Wednesday morning, adult industry and First Amendment attorneys reported receiving multiple calls from potential clients who felt they had been accused unjustly. Veteran adult video director and owner of Purrrfect Video Productions Frank Bongiorno was among them. iBill notified Bongiorno on Wednesday morning that the company no longer would provide third-party billing services for frankiesangels.com because it was one of 11 sites served by iBill that the Michigan attorney general had named as a distributor of child pornography.

"I'm livid that [iBill] makes millions of dollars every year off of adult, and all they have to do is be threatened, without any evidence whatsoever, and they cut us off. I think everyone in the adult industry should cut them off," Bongiorno said. "All I know is that if they had taken five minutes to go through my site, they would have realized that everyone in there looks over 18, and if they had any question, they could have called me and I would have faxed them the appropriate paperwork. Everything is right here. I've been going though it all morning, double-checking everything; it's all legal."

iBill did not return repeated calls for comment.

Bongiorno responded to iBill's notification by hiring noted First Amendment and criminal defense attorney Jeffrey J. Douglas to represent his interests in the matter. Douglas said he intends to contact iBill and "persuade them there's nothing illegal about [frankiesangels.com], and they shouldn't be intimidated by the [Michigan] attorney general's illegal conduct.

"This appears to be an attorney general who has behaved in the most irresponsible manner," Douglas said, noting that none of the images he had seen on frankiesangels.com would pass legal muster as child porn. "This is intentional interference with a contractual relationship."

More seriously, Granholm's actions might constitute defamation per se of the owners of the sites, according to Internet attorney Larry Walters. "The way I see it, the Webmasters who were falsely accused could potentially assert a defamation action (libel/slander) if any statements about child porn turn out to be false," Walters said. "There will be some privileges involved, and there may be an absolute privilege applicable to statements by the AG in the course of her duties as a law-enforcement officer. The processors also need to be careful since, depending on their contracts with the Webmasters, they may be in breach for disabling sites based on unsupported allegations. In such case, the Webmasters may recover business interruption damages for the time they were down. That makes the case a Michigan consumer matter, well within the jurisdiction of the state's attorney general.

"This whole thing is a good example of the 'chilling effect' that we talk about so often," Walters said. "Under federal law, Webmasters can always assert a First Amendment claim, under the theory that the AG is attempting to impose an illegal prior restraint on protected speech by scaring the processors away from these transactions just because of the content of the speech. Of course, that's all dependent on the fact that there was no child porn."

Although some in the adult Internet industry question Granholm's authority to pursue criminal charges against individuals and companies outside of her state, Walters noted that Granholm might be able to prove jurisdiction over the billing companies and Websites because customers of the sites under scrutiny reside in her state. That makes the case a Michigan consumer matter, well within the jurisdiction of the state's attorney general. Walters said it would be considerably more difficult for Granholm to hold the billing companies to a standard of vicarious liability, or culpability for illegal content simply by association, though. Precedent established recently in a federal court case in Louisiana involving MasterCard and Innternet gambling sites indicated that the judicial system considers it "an absurd extension of RICO [the Racketeer-Influenced Crime Organizations Act] to impose liability on [payment processors] for the legality of the sites they serve," Walters said.

Granholm, whose office did not return repeated phone calls, apparently sees the matter differently. In a press release distributed by her office following Tuesday's press conference, she stated, "These Internet billing companies are greasing the wheels of the Internet's global child porn industry.... These companies are acting as the keepers of the keys to child porn Websites across the globe — and they're now on notice that if they choose not to take responsibility for their actions, we'll take them to criminal court."

The reasoning behind her action, she explained, is that it may be difficult to locate and prosecute Website operators — especially those residing outside the U.S. — but by holding billing companies liable for the actions of their clients, her office can disrupt the conduit that not only makes child porn profitable, but protects its users and purveyors with encrypted Website passwords.

"By going after the online money changers of the child porn world, we are trying to target a choke-point in the industry," Granholm's statement said. "Even if a Website is located in a foreign country, we can cut off its business if we disable its ability to accept credit card payments from U.S. customers."

That may not be Granholm's only motivation, though, according to Chicago attorney J.D. Obenberger, whose office received "a number" of calls from concerned Webmasters outside the U.S. whose sites appeared on Granholm's list. Obenberger said language in the attorney general's press release indicated to him that her office may be shoring up a bid for continued federal funding of some of its enforcement programs for next year. "It's hard to assess at this point what merit there may be in her action," he said, noting that because no one outside the attorney general's office has seen the complete list of sites, no one can be sure some of her complaints aren't valid. Still, "the threat to processors implies a lack of confidence in the child porn accusations," Obenberger said. "If law enforcement can obtain a subscriber list of a Website that has illegal content, they certainly do pursue the people actually involved" regardless where they reside, and they obtain almost unilateral support and assistance from foreign governments and agencies. Both the Webmasters said they are ready and willing to address their grievances in court, if necessary.

Bongiorno and the unnamed Webmaster said they believe Granholm's actions are part of a publicity stunt timed to increase her cachet with the state's voters before November's gubernatorial election. Granholm, a Democrat, is running for the office, according to the Website at www.granholmforgov.com.

"It seems to me that this attorney general has an election coming around, and she's grandstanding," the Webmaster said.

Regardless, Bongiorno and the other Webmaster said the industry may have itself partly to blame for the current situation. Some terms are "hot-buttons" they said: words like lolita in particular.

"We do receive some traffic by no means of our own from a Yahoo! chat group called lolita something that put my link up without authorization from me, to send me hits," Bongiorno said. "Now, I'm assuming that's because I have a 'barely legal' girls site, which was the only one [of mine] cited. I honestly don't know [if the Yahoo! group encouraged pedophilia], because I don't surf the site. I'm afraid of all that crap getting on my hard drive. I just surfed back the traffic, saw that it was lolita something, and then I saw that they were promoting my site, which made me believe that they were legally using the word lolita, because I know I'm totally legal. I thought that the fact that [surfers] might be sent to my site to look at legal content as opposed to illegal content was a good thing, so I figured I'd leave it alone."

The Webmaster who asked to remain anonymous said, "Affiliates will say and do anything to make sales, and because they are all over the world, they think they can say whatever they want to say. The Australian, European, and Russian guys say any fucking thing. They put us up on sites called 'Lolita Mpegs' and stuff like this, and all they have are links to our sites.

"We don't have the resources to patrol a hundred thousand links a day, even though I'm working on that right now; we're writing programs to follow all the links that come in to our sites," the Webmaster continued. "If it's coming down on us, we're going to start coming down on the affiliates for getting us in trouble. For example, I don't use the word lolita anywhere. I've always been opposed to that word. But I do see traffic coming from sites that do say the word lolita, and if I see any picture on there of a girl that's questionable, I'll dump them without telling them. But most of the sites that I see want to get paid, so they give me their real name and address, and if it's that easy to locate them, they're probably not doing anything wrong."

Both the Webmasters said they are ready and willing to address their grievances in court, if necessary.

"[Granholm's] punishing innocent companies, and she knows it," Bongiorno said. He's considering having his attorney draft a no-nonsense letter to Granholm criticizing her actions. "I am prepared to fight this thing. I don't know how much we have financially to fight it, but as long as we have the right backing and support, I'll fight this to the end."

It's liable to be a long fight, though. Walters said it's very important for industry insiders to pay attention as the situation and any resulting legal challenges unfold, as they have tremendous potential for precedent setting.

"This is going to be an industry-wide problem," the Webmaster who asked to remain anonymous said. "If [the Michigan attorney general is] successful at shutting down any of us, it's just going to give [law enforcement] encouragement to keep going."


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