Palfrey's Lawyer: Escorts Performed Fantasies, Not Sex

WASHINGTON — Deborah Jeane Palfrey, the woman accused of running a Washington, D.C., prostitution ring over a 13-year span, is making good on her threat to expose what she claims is a high-powered client list to show that her escorts stayed within the law, one of her lawyers said.

Ms. Palfrey appeared in federal court in Washington yesterday for a hearing in her case. That follows the April 27 resignation of Randall Tobias, head of the U.S. Agency for International Development, after ABC News asked him about his use of a so-called escort service known as Pamela Martin & Associates and operated by Ms. Palfrey.

Montgomery Blair Sibley, Ms. Palfrey's attorney in a civil case seeking the return of assets seized by authorities, said Ms. Palfrey is exposing clients to bolster her criminal defense by testifying they used her service for fantasy and role playing, not sex. ABC News has Ms. Palfrey's phone lists.

"This was adult sexual fantasy which stayed within legality, much like going to a strip club," Mr. Sibley said in a telephone interview. "You can pay an escort to come to your home, get naked, and get a massage, and you haven't broken any laws, assuming you stay on your stomach."

Mr. Tobias, 65, told ABC News he called the service "to have gals come over to the condo to give me a massage." He denied having sex with the escorts, according to the network's report.

Mr. Tobias's resignation, officially listed as "for personal reasons," deprives Mr. Bush of an official who was leading overseas aid initiatives that were an administration priority.

Mr. Tobias, formerly the chief executive of Eli Lilly & Co., assumed leadership of the U.S. government's overseas aid agency on March 31, 2006. He also served as the coordinator of all U.S. foreign assistance, a position created last year by Secretary of State Rice.

The suddenness of Mr. Tobias's departure caught officials by surprise. Two days before his resignation, at an event to mark the U.S.commitment to battling malaria, Mr. Bush lauded Mr. Tobias's work at USAID and at his previous job where "he led America's monumental effort to confront and deal with the HIV/AIDS epidemic on the continent of Africa."

Calls to Mr. Tobias's family foundation and business offices in Indianapolis weren't returned yesterday. State Department spokesman Sean McCormack didn't return calls or e-mails after the ABC report was broadcast.

At USAID, Mr. Tobias ran an agency that has an annual budget of about $14 billion and provides assistance to more than 80 countries.

Among other duties, Mr. Tobias also was responsible for implementing U.S. policy that required grant recipients to take steps against prostitution and sex trafficking and supporting efforts to fight the spread of AIDS. The AIDS policy emphasized abstinence as the first line of defense against the disease.

The case against Ms. Palfrey grew out of a two-year investigation by the Internal Revenue Service and the Postal Service. She was indicted in federal court last May on charges of racketeering. The indictment charges she operated a call-girl ring that involved 132 women and generated more than $2 million in income.

In court papers filed in connection with her case, Ms. Palfrey contended "the tentacles of this matter reach far, wide and high into the echelons of power in the United States."

Ms. Palfrey, who operated out of Vallejo, Calif., contends she offered services that were legal and has pleaded not guilty.

According to the indictment, Ms. Palfrey used male "testers" who agreed to meet with women who wanted to work with Pamela Martin and Associates and determine their ability to "perform the appropriate prostitution activities."

Court filings excerpted "newsletters" Ms. Palfrey sent to women working for her as escorts advising them how to avoid getting caught by law enforcement. Male customers paid fees ranging from $250 to $300 for what Ms. Palfrey called adult fantasy services.