The D.C. Madam's Surprising Employees

Yes, the showdown between President Bush and the Democrats over the Iraq War is gripping. And yes, Washington will be avidly tuning in to the first GOP presidential debate. But for a certain segment of the capital's political class, there is no more pressing matter than the black book of the "D.C. Madam"—a woman named Deborah Jeane Palfrey who ran what her lawyer called "an adult, legal sexual fantasy service" in Washington and has turned a mountain of phone bills—including client numbers over to ABC News, which is readying an interview with Palfrey for broadcast Friday night.

Palfrey, 50, is charged with racketeering and running a prostitution ring. While she admits to operating an escort service, she denies engaging in any illegal behavior, and she has given four years worth of phone bills to ABC in hopes that the threat of the names coming out will help shore up her case. A lawyer working with her on civil suits says she hopes to have clients called as defense witnesses. Names have begun to trickle out. But perhaps as interesting as the clientele are the escorts themselves, who worked for Palfrey at a service she called Pamela Martin & Associates. Palfrey claims the women in her employ had at least two years of college experience, and many worked white-collar professional jobs. This afternoon, ABC News reported that a legal secretary at one of Washington's most powerful law firms had been suspended after telling her bosses that she moonlighted for Palfrey's service. Want to attract an elite clientele? You've got to offer an elite array of women—drawn, in this case, from the upper reaches of academia, government agencies and even the military.

In a March 9 statement, Palfrey wrote that she employed women between the ages of 23 and 55 with at least two years of college education, many with graduate degrees. "One was a Howard University professor," Palfrey's lawyer, Montgomery Blair Sibley tells NEWSWEEK. "Several others were paralegals in large law firms." Of the 132 escorts, only a few lacked college-level education, Sibley said. "She made a handful of exceptions for women who didn't have the degree but had the poise. Those women tended to be in the military and had been polished in the ranks there—they knew how to stand straight, among many other things." Sibley couldn't say why the women chose to moonlight in the escort field. But the demand side was clear. "The client base is very high-end and sophisticated. They're not comfortable with someone who is not on their intellectual level. A college-educated woman tends to attract college-educated men. It's human nature."

Most of the women, Sibley says, worked only three nights a week, and they rarely ventured out in public with their clients. "Most encounters were 90 minutes in private residences or hotels. Lap dancers in strip clubs are not prostitutes, and their work is not against the law. Many of our clients don't want to be seen at a strip club with a woman wearing nothing undulating in their lap." Many of the women were in their 40s; several were in their 50s. "These women are shell-shocked, this was a private part of their lives, and if they appear on '20/20' they won't be happy about it," Sibley says.

Palfrey's is not the only escort service hoping to employ smart young women in Washington. The classified section of this week's Washington City Paper (a free weekly) has several want ads in the "Adult Employment" section that are looking for women with more than pole dancing on their curriculum vitae. "LOOKING FOR BEAUTIFUL females with a great attitude and zest for life to work for a full service escort agency. Great income. Students and young professionals are encouraged to apply." Another reads: "ESTABLISHED NONSEXUAL SERVICE seeks mature, reliable, attractive and serious minded ladies for relaxation therapy and private viewings … College students a plus. Upscale environment. Excellent income." Asked why college grads were targeted in these ads, a woman answering the phone at one of those escort services replied: "It doesn't take a genius to figure that out. Because recent college grads are broke. That's why." She then hung up the phone.

College grads might work for these services, but Palfrey insists that in her shop, they were not supposed to actually have sex for money. The D.C. Madam and her lawyer have repeatedly asserted—and have made public, in court filings, other documentation to back up their claims—that women working for her escort agency were supposedly forbidden from engaging in illegal activity. According to one document, attached as an exhibit to a lawsuit that Palfrey filed against a woman she claimed worked for the service but breached the terms of her contract, women working for the agency had to sign an agreement promising not to have sex with customers. According to a blank version of the agreement, the women agreed that the "scope" of their employment with Palfrey's agency "expressly does not encompass in any way shape or form any sexual act, favors or other behavior prohibited by law." The document adds: "Any involvement in any of the above activities by any employee is grounds for immediate dismissal."

Shortly after Palfrey filed the lawsuit accusing the former agency worker of breaching terms of her employment, Gladys Kessler, a federal judge in Washington, issued a temporary restraining order forbidding Palfrey from moving forward with the suit. The judge also prohibited Palfrey from filing similar lawsuits, which the judge said might be intended to "harrass" potential "witnesses, agents and investigators" who might be working with the government in its efforts to build its criminal case against Palfrey for running a prostitution ring.

Federal prosecutors have indicated that if the case is tried in court, they believe they can present compelling evidence that Palfrey, her agency's customers and her associates were fully knowledgeable that she was running a prostitution business—regardless of whatever agreements Palfrey says were signed.

Prosecutors note in court filings that in 1991 Palfrey was convicted for operating an illegal prostitution business in California and served 18 months in prison. After her release, the government says, she set up Pamela Martin & Associates, the California and Washington agency at the center of her current legal problems. Under this business rubric, prosecutors allege, "From 1993 until 2006, prostitutes hired by Palfrey ... engaged in sex acts for paying customers of the so-called escort service in hotels, residences, and offices located in Virginia, Maryland and the District of Columbia."

The government says Palfrey recruited both workers and clients through the Internet and the Washington City Paper; ads recruiting escorts were also placed in the University of Maryland's student newspaper. Once hired, the government claims, Palfrey sent each prostitute to a "screening" appointment—during which the woman was required to have sex for no pay with a man whom Palfrey trusted and knew was not a police officer. The government says that Palfrey used this mechanism to ensure that none of the women she signed up were undercover cops themselves, and so that new recruits would have no doubt that their work for her agency would include "sex acts."

Prosecutors argue further that Palfrey ran her business principally by long-distance phone calls to and from her home in Vallejo, Calif., near San Francisco. When the Feds raided her residence last year, court papers show, they seized numerous documents related to her business, including copies of "newsletters" she sent out over the years to women working for her service. The newsletters are highly suggestive about the kind of business Palfrey was running—but they could also be very ambiguous. In a May 1994 newsletter, for instance, Palfrey wrote that "Adult service or fantasy escorts command a substantially greater fee, usually $200 an hour; this, of course, because of the risky and sexual nature of these appointments ... Obviously, the more liberal the booking or act, the more $ one makes. Therefore, if (any)one thinks that fantasy prices can ever be changed for purely social services ... all this writer can say, is that the person(s) is a damned fool!. This past weekend ... this new escort (no longer amongst us) thought she could go 'there', collect the $200 and 'just talk' ... her mere presence being justification enough here for the big bucks !!! W R O N G !!!"

In another newsletter quoted in government documents, Palfrey offered her escorts step-by-step suggestions for how to treat a customer they suspect could be an undercover cop. At the end of this lengthy disquisition, she added: "We're not doing anything wrong, but they'll sure as heck try to make anything we do into something wrong!!! Remember this !"

Sibley, who represents Palfrey in various civil lawsuits, insisted that as far as Palfrey was concerned, she was running a "legal fantasy service" and that the escorts she employed as contractors had signed solemn undertakings not to engage in prostitution. Sibley told NEWSWEEK that because the government had frozen Palfrey's assets, she was having trouble lining up a criminal defense lawyer of her choice to help her fight the government's criminal indictment, which includes charges of racketeering. Sibley confirmed that Palfrey's clients did include Randall Tobias, the former chief of foreign-aid programs at the State Department.

Tobias resigned from his job as a deputy secretary of State last week after ABC News journalists confronted him about his involvement with the alleged prostitution ring. (Tobias admitted to using the service, but for massages, not illegal sex-for-money transactions.)

Sibley said that because Palfrey only had phone records indicating who her clients were, and did not know their identities directly, she was hoping that third parties—like the news media, especially ABC—would identify her clients so she could then call them as defense witnesses. In the meantime, the women who worked for her, too, wait—and worry—about how much of this sordid tale will ultimately become public knowledge.

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