Goldman Sachs Sells Village Voice Stake After Sex Trafficking Furor

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It’s been a rough couple of weeks for Wall Street giant Goldman Sachs. Still, it’s hard to imagine a more embarrassing public relations fiasco than being connected with child sex trafficking — even indirectly. But that’s exactly what happened over the weekend after New York Times columnist Nicholas Kristof revealed Goldman’s $30 million stake in Village Voice Media, which has come under fire for its Backpage.com website, which Kristof labels the “biggest forum for sex trafficking of under-age girls in the United States.”

Realizing that a connection to any company associated with the words “child,” “sex,” and “trafficking,” is probably the last thing Goldman needs, the bank struck a deal to sell its stake back to the media company on Friday. A Goldman spokesperson told Reuters that the bank lost the “vast majority” of its investment. But clearly, it was worth it for Goldman to sever ties. As Kristof wrote:

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

Goldman had originally paid $30 million for the stake in the Village Voice in 2000 through a private equity subsidiary, GS Capital Partners III. In 2006, after Village Voice Media merged with New Times, Goldman’s investment converted into a 16% stake in the company.

(More: With ‘Muppet’ Hunt, Will Goldman Sachs End E-mail Smack Talk?)

The Village Voice, of course, is the legendary downtown New York newspaper that pioneered the alternative daily format. For much of its history, the paper made money by selling “adult services” ads in the back of the paper.

Village Voice Media also owns Backpage.com, which accounts for an estimated 70% of prostitution ads, according to AIM Group, a publishing industry research firm. AIM Group said that Backpage.com generated $2.6 million in revenue from prostitution ads in January, and over $25 million over the last year. Kristof has been waging a “name ‘em and shame ‘em” campaign against child sex-trafficking for some time.

Goldman said that it had no influence of Backpage.com’s operations, and there’s no suggestion that Goldman aimed to profit off child sex trafficking. In fact, by 2010, Goldman had already become “uncomfortable with the direction of the company,” a Goldman Sachs spokeswoman told Reuters. Still, it’s worth noting that one of the bank’s executives sat on Village Voice Media’s board for four 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,” Kristof wrote.

Of course, now that Goldman has exited its investment, it’s lost whatever influence it might have been able to deploy to get Village Voice out of the prostitution business, as Kristof points out. But given the negative publicity that has been swirling around Goldman of late, it’s not surprising that the bank decided to cut its losses and put as much distance between it and Village Voice/Backpage.com as possible.

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