April 30, 2007 / 5:11 PM / 13 years ago

Accused D.C. call-girl madam also a stock picker

WASHINGTON (Reuters) - The woman accused of running a prostitution ring serving Washington’s elite, including at least one U.S. government official, also appears to be something of a stock picker.

Jeane Palfrey, who has been called the "D.C. Madam," and faces federal charges of running a prostitution operation in the Washington area from 1993 through August 2006, speaks to reporters as she departs after a hearing at a federal court house in Washington April 30, 2007. REUTERS/Jonathan Ernst

The woman, Deborah Jeane Palfrey, asked a federal judge on Monday for permission to sell almost 5,000 shares of Dolby Laboratories Inc. that were in an account frozen by the government because she believed the stock had reached its high point.

“I believe it’s reached its peak,” she told Judge Gladys Kessler. Palfrey said she bought the shares in the sound system firm at about $22 a share. “I don’t want to see it waste away,” she said, facing an expensive trial with most of her assets frozen.

Dolby was at about $37 a share on Monday morning, a possible pre-tax profit of $75,000.

However, about two hours after the hearing ended, the stock started to fall and closed down 5.5 percent to $35.42 on the New York Stock Exchange. It was not immediately clear what sparked the selloff and one analyst doubted a connection.

“At this time I can’t do that,” Kessler said, denying her request. She said there were procedures for such a request and Palfrey could discuss it with her new defense attorney when one was appointed in the coming days.

Palfrey was indicted last month on criminal racketeering and conspiracy charges for running the service between 1993 and 2006. The government said she earned more than $2 million.

She initially considered selling a mountain of telephone records from her business, Pamela Martin and Associates, to raise funds for her defense. But instead she gave some to ABC News in hopes they would uncover witnesses to aid her defense.

ABC News reported on Friday that one of her clients was a U.S. deputy secretary of state, Randall Tobias, who was in charge of foreign aid. He abruptly resigned Friday citing personal reasons.

ABC reported that Tobias, 65 and married, said he had received massage services, which Palfrey seized on for her defense. She has contended that she ran a legal, high-end adult fantasy service.

Palfrey expressed regret for Tobias, his family and friends.

“I am dismayed however, by Mr. Tobias’s refusal to come forward until now with this extremely valuable exculpatory evidence,” she said, reading a statement to a swarm of reporters.

“Had he done so earlier along with the many, many others who have used my company’s services throughout the years, I most likely would not be in my current predicament,” she said.

Palfrey said she hoped other people would be identified from the records for her defense. One of her lawyers representing her in a related civil case said he expected Tobias to be called as a witness.

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