- The Washington Times - Tuesday, October 10, 2006

Federal officials have filed suit against two California properties owned by a woman whose D.C.-based escort service is the subject of a money-laundering and prostitution investigation.

A civil suit filed Oct. 3 by the U.S. Attorney’s Office in the District lists two properties owned by Deborah Jean Palfrey — one in Vallejo and one in Escondido, Calif. — as subject to forfeiture pending the outcome of the criminal investigation. As of July, the properties were worth $495,000 and $480,000, respectively.

“We’re alleging this property was derived from or traceable to proceeds of criminal activity,” Assistant U.S. Attorney William Cowden said.

Miss Palfrey, 50, of Vallejo, Calif., has been at the center of a two-year investigation by the Internal Revenue Service and U.S. Postal Service, which are examining charges that she illegally earned money from prostitutes working as escorts for her business, Pamela Martin and Associates.

The federal investigation focuses on the escort service she has operated since 1993 as a call-girl ring in the District, Maryland and Virginia, according to court documents.

IRS investigators already have seized more than $427,000 from accounts in Miss Palfrey’s name, court documents show.

Miss Palfrey, who court documents say served 18 months in prison on a 1991 conviction for operating a prostitution business in California, could not be reached for comment via phone or e-mail yesterday.

In an interview with the Web site the Smoking Gun — which first reported the investigation Monday — Miss Palfrey said that she never kept records in order to protect her clients’ confidentiality.

She also said that her workers did not engage in “illegal sexual activities.”

There are “a lot of erotic activities that one can do without participating in things that are illegal,” Miss Palfrey said.

Miss Palfrey advertised the business online, in the Yellow Pages and in the Washington City Paper, court records show. She hired women who were at least 22 years old and required that they mail her an application and photo before being employed.

The women also went through a screening process in which they were required to engage in sexual activity without being paid to ensure that they were not law-enforcement officers, according to court records.

The prostitutes were encouraged to work at least three nights a week, charging their clients as much as $300. They would send money or postal orders with half of their earnings to Miss Palfrey, who used the funds to pay for her mortgage, car lease and stocks.

Court documents say that she earned more than $750,000 from the ring since January 2000.

According to search warrant records, investigators on Oct. 3 seized items including appointment books, binders of notes on men for the escort service and binders containing women’s profiles from Miss Palfrey’s home and her car in Vallejo.

Investigators also seized mapbooks of the District, Maryland, Northern Virginia and New York, as well as gold coins from Canada and South Africa.

The seizures have fueled speculation that the prostitutes’ clients may have included high-profile doctors, lawyers and politicians in the D.C. area.

Channing Phillips, a spokesman for the U.S. Attorney’s Office, said he could not comment on what prompted the investigation but added that “it’s not because of her suspected clientele.”

“The affidavit speaks for itself in terms of the allegations, which like in any case, we would have an obligation to investigate,” Mr. Phillips said.

• Jim McElhatton contributed to this report.

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