Craigslist, we have a problem.

No, not the baby being sold for drug money earlier this week -- that was a hoax and the person who placed the ad was arrested.

Not the malicious ad placed last Saturday that left a Jacksonville, Ore., man with a plundered home, recalling a similar incident last May.

The problem is prostitution. Connecticut Attorney General Richard Blumenthal on Thursday sent a letter to Barry Reingold, Craigslist's lawyer, demanding that the community-driven site clean up its act.

"I am astonished and appalled by Craigslist's refusal to recognize the reality of prostitution on its Web site -- despite advertisements containing graphic photographs and hourly rates, and widespread public reports of prostitutes using the site," Blumenthal wrote.

Though Blumenthal acted on behalf of citizens of Connecticut, following the arrest earlier this month of a Connecticut woman who allegedly used Craigslist to advertise prostitution services, his concerns reflect problems with Craigslist across the nation.

On Tuesday evening, police in Aurora, Ill., west of Chicago, arrested five people for alleged drug possession and prostitution. According to the Chicago Sun-Times, the prostitutes advertised on Craigslist.

Blumenthal contends that Craigslist is ignoring the "serious and growing problem" by refusing to hire anyone to review postings that contain graphic nudity or solicitations with hourly rates. "The company effectively denies the undeniable, incomprehensibly and unacceptably," Blumenthal said. "Although Craigslist touts measures to ban illegal activities and limit or remove inappropriate postings in its erotic services section, a cursory review of this section shows that its supposed solutions are woefully and obviously inadequate."

Erotic postings aren't confined to the erotic services section either. A brief scan through the "therapeutic services" section on sfbay.craigslist.org suggests that that particular category should be relabeled "therapeutic erotic services."

Jim Buckmaster, CEO of Craigslist, said in an e-mailed statement that illegal use of Craigslist won't be tolerated. "This month we implemented new screening procedures for erotic service ads, which [has] dramatically improved compliance with our terms of use and reduced the volume of such ads by up to 80%," he said. "Mr. Blumenthal's office is aware of these improvements, and we are disappointed that he has not recognized the tremendous progress we are making."

Buckmaster said that using Craigslist illegally isn't a good idea since posting information leaves an electronic trail and Craigslist staff regularly works with police officers.

And Buckmaster also challenged the claim that Craigslist profits from prostitution. "In the New Haven Register, Attorney General Blumenthal is quoted as saying that our company profits from prostitution," he said. "That is both utterly false and significantly defamatory, as 100% of our revenue comes from paid job listings and broker apartment rental listings. We certainly hope that the attorney general was misquoted or misinformed, and we look forward to an immediate retraction of this false and damaging allegation."

Buckmaster said that telephone company yellow pages, weekly newspapers, and other offline and online media in Connecticut regularly include paid erotic ads. "In this country, that's legal," he said. "Unlike these media, of course, Craigslist does not derive any revenue from such ads."