- The Washington Times - Friday, March 9, 2007

A California woman accused of running a prostitution ring in the D.C. area pleaded not guilty yesterday to racketeering and other felony charges and filed a breach of contract lawsuit in U.S. District Court against one of her former escorts.

A federal judge also ruled that Deborah Jeane Palfrey, 50, will have to resolve the criminal charges she is facing before a related civil matter is settled.

Miss Palfrey was indicted last week on charges that she ran a prostitution business involving 132 women in the District from her home in California for 13 years.

Following her arraignment in U.S. District Court yesterday, Miss Palfrey insisted that her business was a “legal, high-end erotic fantasy” service, known as Pamela Martin & Associates, that operated without incident and required women to sign contracts and follow guidelines ensuring that they would not engage in illegal sexual practices.

“Both the independent contractors and the clientele [were] upscale and came from the more refined walks of life here in the nation’s [capital],” Miss Palfrey said in a prepared statement. “Pamela Martin & Associates functioned as a legal fantasy concern, without incident during its 13-year operational history.”

Montgomery Blair Sibley, an attorney representing Miss Palfrey in the related civil matter, also announced that his client had filed suit against one of her former escorts, Paula Neble.

The suit — which also names 15 “Jane Does” as plaintiffs and seeks $75,000 in damages — accuses Ms. Neble of violating her contract by “engaging in illegal sexual activities with customers of the escort service.”

Mr. Sibley said Ms. Neble worked at the National Institutes of Health, possibly in cancer research, and had made statements that she had engaged in illegal activity while employed by Miss Palfrey.

He did not say where those statements were made or if they were made to a grand jury.

David Schertler, an attorney for Ms. Neble listed in the suit, did not return a call yesterday seeking comment.

Miss Palfrey has announced plans to sell off more than a decade’s worth of customer phone records so she can hire an attorney to represent her in the criminal case. An example of phone records from six days in August 1996 has been made public on Miss Palfrey’s Web site.

Yesterday, U.S. District Court Judge Gladys Kessler did not rule on prosecutors’ request to limit records in government possession from being released for such use if turned over to the defense as evidence.

Mr. Sibley said the order also would not apply to the more than a decade’s worth of customer records still in Miss Palfrey’s possession, and that at least 12 parties have expressed interest in obtaining them, from “checkbook journalists” on up.

He said Miss Palfrey’s defense is seeking to “partner” with someone who would purchase the records and then help examine the list for witnesses to testify in the case.

“She’s had her assets seized, she’s indigent and only with her back to the wall” has sought to sell the records, Mr. Sibley said.

Miss Palfrey also has been entangled for months in a civil forfeiture case in which authorities last year seized approximately $500,000 in stocks, bank accounts and gold coins.

In addition, authorities have placed liens on two of her California properties because they say the houses were purchased with illegal proceeds of the prostitution business.

Assistant U.S. Attorney William Cowden said any proceeds made from the sale of the phone records could be subject to seizure as well.

“The position of the United States is that funds secured through the sale of assets of the enterprise would be subject to forfeiture,” Mr. Cowden said.

Judge Kessler granted prosecutors’ request for a stay in the civil proceedings until the criminal case has progressed. She also ruled that Miss Palfrey will be electronically monitored and ordered her to surrender her passport.

A status hearing in the criminal case has been set for April 12.

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