It appears that the Child Exploitation and Obscenity Section of the Justice Department’s Criminal Division is back in action, after over a decade of relative calm for the adult industry. Recent comments and legal actions indicate that the “Section” is gearing up for an assault on the industry, using beefed-up obscenity laws, now that Congress passed the PROTECT Act.THE RETURN OF THE OBSCENITY SECTION

It appears that the Child Exploitation and Obscenity Section of the Justice Department’s Criminal Division is back in action, after over a decade of relative calm for the adult industry. Recent comments and legal actions indicate that the “Section” is gearing up for an assault on the industry, using beefed-up obscenity laws, now that Congress passed the PROTECT Act. “I have the feeling that something big is going to happen in the near future,” said Patrick Trueman, a former federal obscenity prosecutor and current consultant to the American Family Association – referencing upcoming obscenity prosecutions.1 “I have been assured of that,” he added.2 Andrew Osterbaan, head of the Section, said that new prosecutors and Internet analysts were recently added to target those who sell obscene materials over the Internet and promised, “We hope to alter criminally offensive conduct on the Internet as you see it.”3

Osterbaan is also well aware of the inevitable First Amendment challenges that will be asserted in any such prosecution: “Obviously we’re going to be developing some new case law in that area,” he said.4 Recently, however, Trueman has been complaining about the lack of results by the Justice Department. “This is an issue they haven’t handled well… they haven’t made it a priority, and therefore there have been less than a handful of prosecutions and no prosecutions to date of major pornographers who are violating the law,” he said.5 Violating the law in whose opinion, one might wonder.

Possibly in response to this kind of pressure, Alabama Republican Senator, Jeff Sessions and Texas Republican Representative, Lamar Smith, are planning to introduce a resolution urging the Justice Department and all 93 United States Attorneys across the country to be more aggressive in prosecuting obscenity.6 Concerned Women for America (“CWA”), a so-called public policy group that also supports the resolution, accused United States Attorneys across the country of ignoring over 22,000 complaints of obscenity forwarded to them for investigation since June of last year through ObscenityCrimes.org.7 The group is urging citizens to write letters to their United States Attorney, asking: “What are you doing about obscenity enforcement?”8

Disturbingly, eight out of ten Americans believe that federal laws against Internet obscenity should be vigorously enforced, according to a recent poll by the Wirthlin Worldwide research company.9 Another poll, conducted by Morality in Media, a well-known censorship group, concluded that 70% of respondents did not believe that obscenity laws were being vigorously enforced.10 The reliability of these polls is certainly suspect.

Signs of the upcoming obscenity prosecutions are already apparent: The Justice Department has initiated an obscenity prosecution against Mike and Sharon Corbett, alleging that videos sold through the Website, Girlspooping.com, are obscene. The Justice Department is also looking to renew a 1998 obscenity investigation involving Garry Ragsdale and Clarence Thomas Gartman, in connection with various rape-torture fantasy videos.11 Finally, there was the well-publicized raid against Xtreme Associates, conducted in April, 2003. All of this leads to the inevitable conclusion that obscenity battles are looming on the horizon, and that the adult Internet industry must organize and make their stand.

STREAMING ADULT VIDEO PERFORMANCES NOT PROTECTED BY THE FIRST AMENDMENT

In a disturbing blow to the First Amendment’s protection of erotic speech, a federal judge recently ruled that the First Amendment does not protect “live acts of sexual intercourse, masturbation or oral sex between marital partners captured on “streaming” or real time video tape for dissemination over the Web.”12 The judge issued the ruling in connection with a case brought by a former Sheriff’s Deputy against his previous employer, the Palm Beach County Sheriff’s Office, alleging a deprivation of First Amendment rights as a result of his termination for engaging in group sexual activities displayed on the Internet.13 The court dismissed the Plaintiff’s claims, concluding: “[G]roup physical sexual activity staged, and photographed in a hotel room for mass distribution over a pay Website, does not constitute expressive conduct within the meaning of the First Amendment.”14 While the court paid lip service to the well-established precedent protecting the right to distribute or view non-obscene, sexually explicit materials, it denied such protection for those who “engage” in public sexual activity, “either in the middle of the street, or in a hotel room under the eye of a camera with intent to capture and distribute the images over the Web to a mass audience.15 This ruling strikes at the heart of the constitutional protections afforded those who perform in sexually oriented media. Given the financial status of the Plaintiffs, an appeal of this unfortunate decision is unlikely in the absence of significant industry support.

BILLING WOES

Pressure from Visa and MasterCard over administrative and chargeback requirements have caused a major Internet billing company to go under. Websitebilling.com announced its withdrawal from the Industry and cessation of business on May 23, 2003, citing “arbitrary fines” by card associations, foreign banks and their agents.16 Relatedly, a multi-million dollar fraud suit has been initiated by Paycom against MasterCard, accusing the credit card association of fraud and antitrust.17 Paycom is complaining about “monopolistic” rules and “illegal” fines ranging in the millions of dollars.18

However, it is not only the adult Internet companies that are accusing the credit card companies of fraud. Another fraud suit was filed by three mainstream Internet merchants against Visa, MasterCard, American Express and Discover, claiming that these associations actually profit from Internet fraud and do not seek to stop it.19 The Complaint seeks class action status, claiming that the merchants bear virtually all the costs associated with fraud and theft online. Allegations of monopolistic abuse have also surfaced in this suit.20 “What we’re seeking is not only restitution of excessive penalties but also to cure tomorrow,” said the attorney representing the Plaintiffs in the Raleigh, North Carolina, litigation. The named Plaintiffs are eGeneral, which runs a health Website, New York-based Direct Foreign Exchange, PLC, which runs an online currency exchange, and West Virginia-based Howell Automotive, which sells auto parts online. The damages claimed in this suit could run into the hundreds of millions of dollars. “They are abusing their monopolistic powers because merchants cannot function online without being able to accept these credit cards,” Ishman added.21

This suit comes hot on the heels of a settlement reached by MasterCard and Visa in litigation brought against them by various retailers regarding their debit card practices.22 Visa/MasterCard agreed to pay three billion dollars to settle the class action case, and agreed to lower debit card fees and allow merchants to refuse certain cards.23 Hey, it’s just monopoly money!

The adult Internet industry is frantically searching for a solution to its credit card and billing problems. With PayPal withdrawing, adult Websites are faced with fewer and fewer options. If the current impasse is not resolved soon, the government may not need to launch an assault on the industry to achieve its desired censorship result.

[Stay tuned for Part Two of Larry’s legal update in next week’s issue!]

1 T. Bensman, “Obscenity Case May Be Renewed,” The Dallas Morning News (July 15, 2002).

2 Id.

3 Id.

4 Id.

5 L. Morahan, “Resolution Urges ‘Vigorous Enforcement’ of Obscenity Laws,” CNSNews.com (May 15, 2003).

6 Id.

7 Id.

8 Id.

9 Id.

10 Id.

11 T. Bensman, “Obscenity case may be renewed,” The Dallas Morning News (July 15, 2002).

12 Ronald Thaeter v. Palm Beach County Sheriff’s Office, et. al., Case No.: 02-80462 et. seq. (S.D. Fla. May 21, 2003).

13 Id.

14 Id.

15 Id.

16 C.Farrar, “Websitebilling.com Collapses, Says Under Visa/MC Pressure,” AVN.com (May 27, 2003).

17 D. Kawamoto, “MasterCard sued over online billings,” ZDNet.com (May 14, 2003).

18 Id.

19 B. Sullivan, “Suit: Visa, AmEx profit from fraud,” MSNBC News (May 22, 2003).

20 Id.

21 Id.

22 Id.

23 Id.

Lawrence G. Walters, Esquire is a partner with the law firm of Weston, Garrou & DeWitt, with offices in Orlando, Los Angeles and San Diego. Mr. Walters represents clients involved in all aspects of adult media. The firm handles First Amendment cases nationwide, and has been involved in much of the significant Free Speech litigation before the United States Supreme Court over the last 40 years. All statements made in the above article are matters of opinion only, and should not be considered legal advice. Please consult your own attorney on specific legal matters. You can reach Lawrence Walters at Larry@LawrenceWalters.com, http://www.FirstAmendment.com or AOL Screen Name: “Webattorney”.

It appears that the Child Exploitation and Obscenity Section of the Justice Department’s Criminal Division is back in action, after over a decade of relative calm for the adult industry. Recent comments and legal actions indicate that the “Section” is gearing up for an assault on the industry, using beefed-up obscenity laws, now that Congress passed the PROTECT Act.THE RETURN OF THE OBSCENITY SECTION

It appears that the Child Exploitation and Obscenity Section of the Justice Department’s Criminal Division is back in action, after over a decade of relative calm for the adult industry. Recent comments and legal actions indicate that the “Section” is gearing up for an assault on the industry, using beefed-up obscenity laws, now that Congress passed the PROTECT Act. “I have the feeling that something big is going to happen in the near future,” said Patrick Trueman, a former federal obscenity prosecutor and current consultant to the American Family Association – referencing upcoming obscenity prosecutions.1 “I have been assured of that,” he added.2 Andrew Osterbaan, head of the Section, said that new prosecutors and Internet analysts were recently added to target those who sell obscene materials over the Internet and promised, “We hope to alter criminally offensive conduct on the Internet as you see it.”3

Osterbaan is also well aware of the inevitable First Amendment challenges that will be asserted in any such prosecution: “Obviously we’re going to be developing some new case law in that area,” he said.4 Recently, however, Trueman has been complaining about the lack of results by the Justice Department. “This is an issue they haven’t handled well… they haven’t made it a priority, and therefore there have been less than a handful of prosecutions and no prosecutions to date of major pornographers who are violating the law,” he said.5 Violating the law in whose opinion, one might wonder.

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