Shortly after Goldman Sachs, one of the most influential and blamed U.S. banks, has been involved in a scandal because of the selfish way of treating its customers, the bank is now back in the public spotlight because of a sex trafficking scandal. The new scandal started, as the previous one, from an article published by The New York Times. Columnist Nicholas Kristoff show that a private equity fund controlled by Goldman Sachs dropped 16% stake of shares it held in Village Voice Media, a media conglomerate that provides a substantial income of subsidiary Kristoff calls “the largest forum of under-age sex trafficking in the U.S.”.
Headlines in the international press are harsh: “A fund of Goldman will waive its participation in a company that has a sexual traffic website”, headlines Thomson Reuters. Also, title of Jezebel publication is more severe : “How Goldman Sachs invested in child sex trafficking”. The business concerned is Backpage.com, a site that with business ads much like Craig’s List, a site with job announcements, real estate, events, etc. When Craig’s List has banned ads with sexual connotation after pressure from public and regulatory authority, Backpage obtained a significant gain, because virtually all these ads have migrated to this forum. “Of the five Web sites that carry such activity in the U.S., over 70% of the ads for prostitution are posted on Backpage, getting more than 22 million dollars annually, according to AIM Group, a media research and consulting company”, writes Kristoff.
Goldman Sachs claims to be innocent, because when the private equity fund has invested, in 2000, in Village Voice Media, there was no connection between the media conglomerate and Backpage. This connection came later, after a deal made in 2005. By the time Goldman Sachs was involved, Village Voice already had a long and controversial history about the ads it published. Goldman Sachs knew or should have known that a company in which one of its funds had invested was making money from “erotic services” ads. This does not mean that it was performing an illegal activity, much less promoting sexual slavery, but it means that the bank had several years to decide whether it wanted to have ties with Backpage.com. “We have been trying to get out of this investment for a long time and we made an agreement to sell the participation of fund with that company”, announced Goldman Sachs. The bank never wanted to invest in a site that advertised prostitution, being involved in this investment due to a business failure of the private equity fund.
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