By Chris Francescani and Robin Respaut
April 4 (Reuters) – A second private equity firm with a
stake in Village Voice Media has agreed to sell its holdings
back to the media company amid claims that the alternative
weekly newspaper chain facilitates sex trafficking through its
Web-based ad service, Backpage.com, sources familiar with the
matter said.
But at least one other financial backer of the firm plans to
stick with its investment, despite the recent outcry over the
adult advertising the site runs.
The move by Trimaran Capital Partners to bail out of its
investment comes days after a Goldman Sachs private equity fund
sold its 16 percent stake in Village Voice Media back to the
company. Goldman had become “uncomfortable with the direction of
the company,” Goldman spokeswoman Andrea Raphael said when it
confirmed its plan to sell the stake.
Goldman’s decision to sell was first reported by New York
Times columnist Nicholas Kristof, who has written several
articles about Village Voice Media and the activities of
Backpage.com.
A source close to executives at Trimaran, a New York-based
firm specializing in leveraged buyouts, recapitalizations and
project finance, said the firm has agreed to sell its
“single-digit stake” in Village Voice Media back to the company
because it, too, is uncomfortable with the direction of the
company.
The investment firm would not comment. But in a statement to
its limited partners on Tuesday, Trimaran said it has “reached
an agreement to sell its position in Village Voice “,
according to a spokesman for Lincoln Financial Group, one of the
fund’s limited partners.
“Corporate distance is not a solution to the heinous problem
of human trafficking within the United States, but it makes it
easier to ignore and to deny the opportunity — and the moral
obligation — to help fight it,” Elizabeth McDougall, an
attorney for Village Voice Media, said.
McDougall was not immediately available to respond to
specific questions about Trimaran.
Meanwhile, another firm said it has no plans to divest its
Village Voice Media investment.
Bill Egan, a partner at Boston-based Alta Communications,
which specializes in investments in media and communications
firm, said Alta has a longstanding subordinated loan investment
in Village Voice Media, and has no plans to change the
relationship.
Egan would not disclose the size of the loan, but prior to
the 2006 merger, Alta o wned 14 percent of New Times, according
to a New York Times article written at the time the merger was
announced in 2005. Egan said his firm has no management role in
Village Voice Media.
Village Voice Media is privately held, controlled by two
long-time partners, James Larkin and Michael Lacey, who own more
than 50 percent of the company. McDougall declined to disclose
all the investors.
Village Voice Media has the largest share of revenue in the
United States from online advertising of adult escort a nd
massage services. Critics, including law enforcement officials,
have charged that child sex trafficking victims have been
advertised and sold through Backpage.com. Last week several
dozen people protested against Backpage.com in front of the
Village Voice’s editorial offices in Manhattan.
On Tuesday, McDougall said the company actively cooperates
with law enforcement in reporting suspected illegal activity on
the website.
The company has no plans to close Backpage.com, McDougall
said.
Under similar public pressure in 2010, the website
Craigslist closed down its own adult section of the classified
site.
“If stakeholders are uncomfortable with the pressure of
doing the right thing, they can always opt out,” McDougall wrote
in an email response to questions about potential investor
discomfort over its adult classified ads.
Trimaran and Goldman Sachs were part of an investment group
that acquired the Village Voice and several other publications
from Stern Publishing in 2000. Raphael, the Goldman spokeswoman,
said the Goldman Sachs fund invested $30 million, and the
investment was converted into a 16 percent minority stake when
the Village Voice merged with New Times Inc. in 2006.
The source close to Trimaran executives said that firm had
“no board representation” at Village Voice Media.
Online prostitution advertising generated at least $3.1
million in revenue in February on five U.S. websites, up 9.8
percent from a year earlier, according to interactive media and
classified advertising consultant AIM Group. Nearly 80 percent
of the revenue was attributed to Backpage.com, AIM said in a
report published last month.
