Was Success the Downfall of the D.C. Madam?

She was never your typical madam. Discretion was definitely not one of her virtues. After Deborah Jeane Palfrey was charged with running a prostitution ring in the spring of 2007, she released 46 pounds of phone records—including her clients' phone numbers—and said, in effect, to investigative reporters and to the blogosphere, "Go to it." Instantly dubbed "the D.C. madam," she caused considerable heartburn and more than a few sweaty palms on Capitol Hill, in government offices on the Federal Triangle and in the law firms and lobbying shops lining the K Street corridor. In time, the trawl of phone records turned up a U.S. senator who had espoused family values, the State Department chief in charge of dispensing foreign aid (some of it to promote sexual abstinence) and the military strategist who coined the term "shock and awe."

Palfrey herself was not the sort to spend her working hours lounging on a red brocade sofa, chatting with the piano player while sipping cocktails. A teetotaler who dressed mostly in black, she described herself as a "middle-aged, middle-class and very fuddy-duddy white lady," who ran her long-distance escort service out of her laundry room in northern California. But she seems to have had a flair for self drama. During the course of numerous conversations with a NEWSWEEK reporter over the last year, she portrayed herself as a self-made woman looking for the American Dream and as a feminist who wanted to "empower" women. She made available to NEWSWEEK a half-finished 95-page, double-spaced memoir she described as "my little literary undertaking." Her story—about her "little cottage industry"— evokes "Death of a Salesman" more than the heroic tales of Horatio Alger, but it also provides a revealing insight into the motives and lifestyles of high-end prostitutes.

Palfrey took her inspiration from an iconic American movie, "The Deer Hunter," which was set in a small Pennsylvania town like the one where she grew up. Palfrey says she identified with Linda, the stifled, battered, but sultry small-town girl played in the movie by Meryl Streep. Palfrey left home at 18, determined to "move ahead," but failed, she writes—"naïve, too trusting, poorly informed and totally unprepared." In her memoir, she says she obtained a four-year liberal-arts degree (she doesn't say where) and worked at a series of odd jobs, some related to interior design. She was sure she would meet "Mr. Right"—but didn't. One of her lawyers, Montgomery Blair Sibley, tells NEWSWEEK "she had an affair with a married guy that turned sour. She started stalking him and he had to get a restraining order." (According to court records, the married man, a former Marine and Vietnam War vet, told the judge that Palfrey insisted, "Your destiny is with me.") Sibley says Palfrey dropped out of law school in San Diego and "matriculated into being a cocktail waitress to make some money, and then into escorting." Once she began "escorting," he says, "she realized that the people who were running it were doing a terrible job and that she could do it better herself."

The typical San Diego escort service, she wrote in her memoir, was run by "druggies and fools." So she started her own, booking appointments from a desk sandwiched between her washer-dryer and double oven. Palfrey's ingredients for success, she wrote, included basic business practices (like filing tax returns) and "a touch of class." But after only a few months, she was in the shower when she heard shouts of "Police! Open up!" Charged with felony pimping, Palfrey did not show up for her first court date and was arrested in Montana on the Canadian border. Shuffled from jail to jail, she seems to have suffered some kind of posttraumatic stress disorder; she refers to the time as "my Nam." She almost lost her eyesight from an infection suffered from unsanitary conditions. According to court papers, she told a judge that she "seriously considered" killing herself following her arrest.

After a stint behind bars, unable to find a legitimate job because of her felony conviction, she went back into business running an escort service—this time hiring her escorts to service the nation's capital. "Why did I choose D.C.?" she said to NEWSWEEK. "Well, I guess it must have been fate. I just thought it was a very sophisticated place to go, and cosmopolitan. New York, I thought, was a little rough." Palfrey had high standards: the women had to be older than 23 with two to four years of college. "I was not interested in jaded, hard-core girls of any caliber," she said. "I wanted women who were strong and independent, who wanted to go on with their lives but they couldn't get into grad school." The new breed of escorts she hired, she wrote, were not "Lindas," struggling to make do, but upwardly mobile career girls. She couldn't believe, she wrote, the number of women with college or graduate degrees. She claims that one was even a college professor. "I wanted to empower women," she told NEWSWEEK. "It's all about empowerment." Some of the women had a "what-the-hell attitude—'I give it away enough of the time, why not get paid for it'," she said. Others thought they would be paid "ungodly sums of money just for being pretty." These "princesses," she said, "did not last long."

In an interview with NEWSWEEK, one of the prostitutes—"Rosslyn" (her stage name)—characterizes Palfrey (who went by the business name "Miss Julia") as a "great boss." Rosslyn, who started at the age of 34, describes herself as a $60,000-a-year financial consultant with a college degree and a membership in her local Rotary Club. She says she arrived at hotel rooms in her professional work clothes "because men always fantasize about sleeping with their co-workers." "I'd look like one of their own, but I'd keep the sheepskin handcuffs and the little whips in my bag," Rosslyn says. She tells NEWSWEEK that she often slept with her clients but that "I never told 'Julia' about it—it was not her business how I got the job done." Half the time, she says, the men didn't want sex—"some men really did just want some very weird fantasies" or were on medications that meant they could not perform. She says her clients included a network exec and an IRS controller who advised her, "No matter what you do, just make sure you claim everything on your taxes."

Palfrey would not take just any client. When the man asking for an escort sounded like a "jerk," she said, "I'd just turn them away … Somebody would say, 'I want someone with big blankety-blanks.' I'd say, 'I'm sorry, are you referring to a woman's breasts? We have people who are large breasted, or perhaps busty. But we don't have women with those.' The tone of my voice would become so elitist; I would talk to them like I was the Queen of England looking down upon a peasant."

Running the escort service "345 days a year" (she took off holidays and "snow days"), Palfrey became bored. In 2006, after 13 years, she shut down her escort service and began to make other investments (she earned about $2 million overall). She was in Germany buying property when she learned her California house had been raided by the police. Her defense was that her escort service was perfectly legal: her clients just engaged in "fantasies," as far as she knew. To find witnesses for the trial, she says, she released all her phone records—figuring that the bloggers and the reporters would turn up plenty of names. She apparently reasoned that her clients would all deny having had sex. Indeed, one of them—Randall Tobias, a deputy secretary of State—resigned after admitting using the service for "massages." (Sen. David Vitter of Louisiana admitted his name was on the list and that he had "committed a great sin." Harlan Ullman, the military strategist who coined "shock and awe," was mentioned in court papers and has declined to comment.) But the prosecutors amassed enough evidence to convince a federal jury that Palfrey had been running a prostitution ring.

Facing several years in prison for racketeering and money laundering, Palfrey, 52, told Dan Moldea, a writer who interviewed her, that she would rather kill herself than go to prison, according to the St. Petersburg Times. She was living with her 76-year-old mother in a mobile home in Florida. Last Thursday, her mother lay down to take a nap. When she arose, she found her daughter dead in a toolshed, hanging by a nylon rope from the ceiling. Police said she left a handwritten suicide note. Rosslyn tells NEWSWEEK: "I'm shocked, I'm numb. She acted so strong, tough as nails, the steel woman. That people could put someone over the edge for something so minor is so sad. It's not like she was a mass murderer. She wasn't a terrible person. But some of her clients sure were."