Your plight is a common one plaguing the Internet right now, which is the propensity for websites to post arrests and castigate people, only to then offer to stop publishing negative facts about you for a fee (usually around $100). Your assessment that the website operator will simply republish your information on a different site (to extract additional fees) is also common. For your friends who paid the fee, they may have a breach of contract claim based upon paying to have the information removed if it was not actually removed.
However the publishing of negative true facts about you is not defamation. An action for defamation requires: (1) a false and defamatory statement; (2) an unprivileged publication to a third person; (3) fault, amounting to at least negligence; and (4) actual or presumed damages. The first element is often the hardest to prove, which is that the statement was a false statement of fact. Truth is a defense to defamation. Therefore if the website stated that you were arrested, based upon your question, this would be a true (albeit embarrassing) fact and would not be defamatory. However if the website posted that you were convicted of the alleged crime, and ultimately you are either exonerated or the charges dropped, this statement would be false and could be actionable.
The other claim to consider beyond defamation is False Light. The Nevada Supreme Court has differentiated false light from defamation. "There are cases indicating that the false light invasion of privacy may be committed even when the publication is not defamatory. While a false light claim may be defamatory, it need not be. (citation omitted). The false light privacy action differs from a defamation action in that the injury in privacy actions is mental distress from having been exposed to public view, while the injury in defamation actions is damage to reputation.” PETA v. Bobby Berosini, Ltd., 111 Nev. 615, 623 (1995). Conversely the United States District Court for the District of Nevada has stated that false light requires: (1) at least an implicit false statement of objective fact; (2) actual malice; and (3) mental distress caused by being exposed to public view. Unlike a defamation action, a false light action does not require a showing of injury to reputation. Therefore, in those circumstances where a false statement may cause subjective emotional distress but no injury to reputation, a false light action may permit recovery where a defamation action would not. Flowers v. Carville, 310 F.3d 1118 (9th Cir. 2002).
Answered on Dec 27th, 2012 at 2:35 PM