Brian Ross Reports on the D.C. Madam: Read the Complete Transcript

Jeane Palfrey: Good evening. May I help you?

This is the voice men heard ...

Jeane Palfrey: We have wonderful young ladies on staff ...

... when they called the Washington escort service run by the woman now known as the D.C. Madam.

Jeane Palfrey: We charge a flat 275 for an hour and a half. Were you looking to perhaps book an appointment this evening? How may I help you? And then we would take it from there.

Her name is Jeane Palfrey and over the course of 13 years, she says she fielded thousands of calls from some of Washington's most prominent men.

Men who answered ads for what was known as Pamela Martin and Associates, offering sophisticated, college-educated, attractive women.

Jeane Palfrey: I always defined it as "the Ann Taylor look." I wanted to make sure that they had that certain look. That they could walk into the Hay-Adams, for example, and not be questioned.

It was as upscale as it could be, and the business thrived.

Jeane Palfrey: The Four Seasons, the Mayflower.

Brian Ross: And your gals, as you call them, could walk in there and not be spotted by hotel security as ...

Jeane Palfrey: Not at all, not at all. These were not cheap women. These are very nice women who just needed to make a few extra dollars.

One was a professor at the University of Maryland. There was a successful real estate agent, even a lieutenant commander in the Navy.

Sometimes when Palfrey was unavailable, a legal secretary at one of Washington's top law firms, Akin Gump, would handle the calls as well as go out on calls herself.

Using her e-mail account at Akin Gump, the secretary told Palfrey why she wanted to be an escort: "A day a week would be fun and spa money."

Brian Ross: But were these women proud of what they did for you?

Jeane Palfrey: I don't think they were ashamed.

Brian Ross: You don't think so.

Jeane Palfrey: Oh, no. No, no, no, no.

The D.C. Madam actually ran her business across the country from Washington, out of her elegantly restored period home in Solano County, California.

The calls from Washington were forwarded to an extension in her laundry room.

Jeane Palfrey: Sometimes the washer and dryer were going, and if it was too loud, I'd leave and go into the other room.

Brian Ross: All from right here?

Jeane Palfrey: All from right here.

Brian Ross: This is all it takes to run an escort service?

Jeane Palfrey: Yeah, you need a phone. That's what you need.

Names of customers and their preferences were shredded every night, but Palfrey says she was doing nothing illegal because she was selling what she calls sexual fantasy, legal sex.

Brian Ross: And how do you define legal sex?

Jeane Palfrey: Well, illegal sex is prostitution, which is either intercourse of any type or oral sex. Anything else is considered basically legal.

Brian Ross: And do you think your women went over the line?

Jeane Palfrey: I sure hope not. I sure hope not. Ah, they...

Brian Ross: Can you say that with a straight face?

Jeane Palfrey: I'm, I'm saying that with a straight ...

Brian Ross: Really?

Jeane Palfrey: I'm saying that with a straight face.

A savvy businesswoman with a year of law school, Palfrey actually had her women sign a contract saying they would be terminated if they did anything illegal.

Jeane Palfrey: We're not talking about selling their bodies. We're talking about selling services. You've got to get your hair cut -- you get a service. This is a service. You're not selling your soul, for God's sakes.

Brian Ross: You certainly are taking the romance out of it.

Jeane Palfrey: There is no romance in it. It's a service. I don't think there's any romance in any of this.

But if she thought her carefully worked out legal strategy would protect her profitable business and comfortable lifestyle in California, she was wrong.

Seven weeks ago, as part of a Bush administration crackdown on prostitution, a federal grand jury indicted Palfrey, accusing her of running a large-scale prostitution ring that brought in more than $2 million.

But instead of accepting a deal from prosecutors to spend a few months in prison, Palfrey showed up in court to plead not guilty and tell prosecutors she would call all of her prominent customers as witnesses.

Jeane Palfrey: I told them to go to hell. Absolutely, they could go to hell with their deal.

In the 1990s, Palfrey served 18 months in prison in San Diego on charges of attempted felony pimping and says she is not going back.

Jeane Palfrey: I sure as heck am not going to be going to federal prison for one day, let alone, you know, four to eight years here, because I'm shy about bringing in the deputy secretary of whatever. Not for a second. I'll bring every last one of them in if necessary.

To prove just how prominent her customers were, Palfrey and her lawyer, Blair Sibley, turned over four years worth of long-distance phone records to "20/20."

We did not pay for them nor did we promise to share the results of our research.

Palfrey says federal agents had no interest in the records and studiously avoided learning about her male customers, as usually happens in such cases, according to a leading academic expert on the subject Melissa Farley.

Melissa Farley: The women are arrested; the women are incarcerated; the women are taken out in handcuffs, and the men who buy and use women in prostitution slowly and quietly slink off, and they're pretty much socially and legally invisible.

But not in the case of the D.C. Madam. Most prominent of her customers was Deputy Secretary of State Randall Tobias, who was in charge of the Bush administration's efforts to crack down on prostitution worldwide.

This was Tobias at an AIDS conference in 2004.

Randall Tobias: Abstinence works. Be faithful works. Condoms work.

Tobias resigned 24 hours after confirming to "20/20" that he had been a customer, saying, "He had some gals over to the condo for massages."

Tobias said it was no different than ordering a pizza and denied there was any sex.

Melissa Farley: I don't see the Johns as a victim; I don't see their privacy rights being victimized so much as I see them as predators.

The phone records trace back to thousands of men, including a career Justice Department prosecutor.

There are NASA officials; at least five military officers, including the commander of an Air Force intelligence squadron.

Also named by Palfrey is Harlan Ullman, a leading military analyst who wrote the book "Shock and Awe," a concept cited by the Pentagon in planning the war in Iraq.

Palfrey says she remembers Ullman as "Mr. U," -- remembers him well.

Jeane Palfrey: I think he was a disagreeable character. And there were some complaints about him, yes.

Brian Ross: From your women.

Jeane Palfrey: Yes.

Brian Ross: They didn't want to go?

Jean Palfrey: Because he was an unpleasant person.

In a statement to "20/20," Ullman's lawyer said any notion that Ullman's testimony would help Palfrey is incorrect.

Palfrey says Ullman and her other clients shouldn't blame her for their embarrassment.

Jeane Palfrey: This is on the head of the government. They looked at us and said we don't care about the clients. We just don't care.

The phone numbers also track back to Georgetown mansions and prominent CEOs, officials at the World Bank and the International Monetary Fund and lobbyists both Republican and Democratic.

But as usually is the case in Washington, much of it is dull. There were no members of Congress that we could find in these phone records, no White House officials.

Quite frankly, but for the few exceptions, most of the men on this list just aren't newsworthy, not even as customers of the D.C. Madam's escort service.

The most tragic aspect of this case is what happened to one of the women who worked for Jeane Palfrey.

Brandy Britton was a professor at the University of Maryland, with a Ph.D. in sociology when she started to work as a call girl for the D.C. Madam.

Jeane Palfrey: This is a woman who was divorced, who was trying to raise two, ah, high-school children, college-age children. Great job title, the great position, all the respect in the world, but she wasn't making enough money. So she decided to do a little moonlighting.

Last October, as the investigation into the D.C. Madam was gaining steam, Professor Britton was arrested by local police on prostitution charges, making big headlines in Baltimore.

Jeane Palfrey: And she was publicly outed, is a good way to put it, she was absolutely humiliated. Ah, she couldn't take the humiliation. Her whole life was destroyed. And she, she just, ah, ultimately committed suicide.

Jeane Palfrey says she's been humiliated too, but she won't let the government bring her down without a fight.

Jeane Palfrey: I just keep my head high. I guess I'm made of something that Brandy Britton wasn't made of. You know, I, I've got something in me. What that is, it's, it can't be defined, but there's something in me that won't let 'em get away with it. And I'm not going to let these bastards get away with it.