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Goldman fund to exit company owning sex traffic site

By Ilaina Jonas

NEW YORK (Reuters) - A private equity fund run by Goldman Sachs Group Inc has agreed to sell its stake in the media company that runs a sex trafficking forum back to company's management, a spokeswoman said on Sunday.

GS Capital Partners III on Friday signed a deal to sell its 16 percent stake in Village Voice Media, which owns the website, called Backpage.com.

The fund began negotiations with Village Voice Media in March, after deciding in 2010 that it had grown "uncomfortable with the direction of the company," and Goldman's inability to influence its operations, said Andrea Raphael, a Goldman Sachs spokeswoman.

The sale was first reported in a Nicholas Kristof column in The New York Times on Saturday. The fund's investment was also the subject of a Kristof column last week.

Raphael said the fund invested $30 million in the Village Voice in 2000. The investment was converted into a 16 percent minority stake when the Village Voice merged with New Times Inc in 2006.

She declined to disclose the sales price, but said the fund lost a "vast majority" of its investment.

Village Voice Media was not immediately available for a comment.

Online prostitution advertising generated at least $3.1 million in revenue in February, on five U.S. websites, an increase of 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 March 22.

Village Voice Media owns the alternative newspaper The Village Voice, which was founded in 1955.

Over the years, the newspaper has published groundbreaking investigations and received three Pulitzer Prices. Its back pages, in contrast, have for decades been the bastion of escort service advertising.

Backpage.com also posts lists for hundreds of other classified advertising throughout the country.

(Reporting by Ilaina Jonas, Editing by Gary Crosse and Maureen Bavdek)

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