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This case is an outrage for all the reasons you outlined. Real sadists and torturers in the employ of our state and federal governments--in the military, prison systems, and among paid contractors--with real victims, are allowed to get away with their crimes with either no punishment or a slap on the wrist, while this man who made porn films with extreme subject matter using paid, consensual models is sent to prison for years, not for abusing his models in any way, but for making "obscenity" and thus violating community standards, whose power lies in their very changeability and ambiguity.
This case is a dangerous example of government overreaching. Is this Mr. Little tasteless and offensive? Most likely, although I've never seen any of his porn. The point is, however, that he wasn't making child porn or snuff films or abducting and forcing real victims to "star" in his films. He ran a studio that used paid adult models who consented to the activities, and his materials were only sold to other adults who consented to view them. What is the crime here? It's a thought crime, and nothing more. The government also felt the need to "shop jurisdictions" in order to find a place where they could get a pliant, conservative jury in order to convict this guy. Surely that's a violation of the spirit, if not the letter of the law. Certainly the government would be able to find conservative jurisdictions where juries might be liable to find just about ANY sexually explicit materials as violating community standards, and thus as obscene.
The government never alleged that this man coerced or forced his models, raped anybody, manipulated and deceived them into consenting to one thing and then making them do another, used any underage models, or anything of the sort. If they had any evidence of such activities rest assured they would have jumped at the chance to prosecute him for them. Anonymous accusations posted online are virtually meaningless. They haven't been corroborated or subject to any skeptical inquiry, and anyone can post similar accusations about anyone else at any time. Barring a detailed investigation that uncovers actual evidence of such wrongdoing, I give them little if any merit.
No, the government just didn't like him, he was on the extreme fringe of mainstream adult porn, wasn't well-liked in the industry, and so they decided he was low-hanging fruit and they could nail him (but only after stacking the deck against him by moving the prosecution to a conservative district.) And they got what they wanted, another person locked in a cage for little more than thought crime.
This is certainly not the first time the government has selectively prosecuted a pornographer to make an example, or shopped jurisdictions to find one amenable to the government's needs, or locked someone up for thought crime. Nadine Strossen provides many illustrative examples in her book Defending Pornography. It is part of a disturbing pattern, however, and it's sad that in 2008 we're still fighting these battles, and that so many feminists rush to the defense of the government in this case (as evidenced by any of the posts on this thread.) People need to learn--if you give the government an inch, it will take a mile. Obscenity laws, if they become more successfully enforced, will almost certainly be used more harshly against sexual minorities (as the Canadian example illustrated all too well.) Today the government goes after the fringe; tomorrow, if successful and emboldened, it'll go after more mainstream fare. Just because a woman appears in a porn film doesn't mean she was abused, exploited, manipulated, coerced, is a drug addict, is a victim of child sex abuse, etc. These are all lessons we need to learn and reinforce.