Owners of once-popular psychic company indicted by grand jury

(KRT) - Some 6 million people called late-night TV psychic Miss Cleo, and the companies that operated her hot line are swamped with civil fraud complaints. Now, for the first time, the companies are facing criminal charges.

The St. Louis Post-Dispatch has learned that a grand jury in St. Charles County, Mo., returned a suppressed indictment Sept. 13 charging the companies and their two principal owners with criminal fraud.

If found guilty, the owners could face a maximum of 10 years in prison and fines of $10,000, in addition to $20,000 in fines for their companies.

Indicted are Steven L. Feder, 52, and Peter Stolz, 54, both of Fort Lauderdale, Fla.

Their companies are identified as Access Resources Services Inc., a Delaware corporation also doing business as Miss Cleo, Mind and Spirit, Psychic Readers Network and A Real Communications Services Inc., and a second company, Psychic Reader Network Inc., a Florida corporation.

The defendants are scheduled to be arraigned in circuit court in St. Charles on Wednesday. One of their lawyers, former U.S. attorney Ed Dowd, said he could not comment on the charges.

Miss Cleo herself was a paid employee and was not charged. Instead of a psychic with a Jamaican accent_as the TV ads portrayed_she turned out to be a sometime playwright and actress from Los Angeles named Youree Dell Harris, now living in Florida.

The Federal Trade Commission and at least nine states have investigated the companies. All their allegations have a similar ring_that callers never got to speak to Miss Cleo or any "psychic," and that they were duped into staying on the line as they ran up phone bills of $4.99 a minute.

Government investigators estimate that hot line callers got $1 billion in bills_half of which were fraudulent and should be returned. The FTC is negotiating a settlement that would put the companies out of the psychic business permanently.

Missouri Attorney General Jay Nixon filed two suits last year accusing the psychic hot line of false advertising, civil fraud and violating the state's no-call law. After filing the suits, the state continued investigating for more than a year as prosecutors uncovered additional evidence they say shows that the hot line's operators were continuing to violate fraud laws long after they signed pledges in civil cases to stop.

One investigator said they wanted to go the extra step to ensure that presidents of companies will go to jail if they allow fraudulent conduct to continue.

The indictment lists two victims from among more than 300 complaints filed by Missouri residents: Julie Mercurio and Alan Vandiver, both from St. Charles.

According to prosecutors, Vandiver got $200 in bills for calls he never made. He told the company that he never had the number the calls were made from, but the company continued to demand payment.

Mercurio's story was similar to thousands of other hot line callers: After getting a solicitation for five free minutes with a psychic, she called a toll-free 800 number that was widely advertised on late-night television. She was directed to call a 900 phone number where the fee was $4.99 per minute.

Mercurio said she was calling for her free consultation. She never got it. Instead, she was kept on the line for an hour after which she heard a recorded message saying her time had expired. Her call was abruptly terminated.

Investigators found that the companies originally hired people they called in-house psychics. But as the business grew along with Miss Cleo's fame, the companies hired people off the street and were encouraged to keep callers on the line for at least 20 minutes.

The companies turned over dozens of memos to prosecutors in which company officials told workers to stop all fraudulent acts.

Miss Cleo went off the air last spring. Callers to her old 800 number are told that the line has been disconnected.

After months of resisting requests from the state Attorney General’s Office to be interviewed, Miss Cleo, aka Youree Harris of Southwest Ranches, in Broward County, fielded questions for more than two hours. The state lawyers were joined by an attorney for her co-defendant in the state’s lawsuit — the company that produced the infomercials that made her an international curiosity.

The spots are off the air, the result of an agreement with the Federal Trade Commission, which is suing that company but not Harris.

The FTC and the attorney general in February both accused Fort Lauderdale-based Access Resource Services of deceptive advertising, billing and collection practices. Among the allegations: That callers paid $4.95 a minute to speak to telephone solicitors posing as psychics and that the company billed people who didn’t call and sent collection letters that make illegal threats.

The psychic hotline drew millions of phone calls generated from the Miss Cleo late-night infomercial campaign. The FTC has said there are 6 million victims in the case.

Assistant Attorney General Dave Aronberg said he went line by line through the Harris’ birth certificate, asking her whether each piece was accurate. Each time she took the Fifth Amendment, he said.

“Any time I asked her where she was born or where she was from, that’s what happened,” Aronberg said. “We maintain the birth certificate speaks for itself, that’s she’s from Los Angeles.”

Aronberg has argued that her TV role as a Jamaican mystic was part of the alleged deception of consumers. Harris said she won her place on television after working as a contract telephone psychic. Aronberg said Harris stated that she responded to a request by Access Resource Services for telephone psychics to help in TV spots and was ultimately rewarded by being named the company’s spokesperson.

The attorney general’s lawsuit, filed in February, charges that Harris’ role exceeded that as spokesperson and made her a participant in the alleged deception of consumers.

This was the government’s first chance to speak face to face with Harris. She indicated that the “Jamaican” accent she used on the commercials — mocked by a Jamaican government spokesman — was not always her style of speaking, Aronberg said.

“She said she has been speaking that way for some time now,” he said.

Harris’ lawyer, William Cone Jr. of Fort Lauderdale, said he thought the interview went well. He didn’t elaborate, noting that the deposition is not yet complete. She’s due back on July 9.

Aronberg said Harris acknowledged she was not a master tarot card reader and is not the Jamaican “Shango Shaman” that Access Resource Services had portrayed her as and was disturbed at being promoted that way. She said there is no such thing as a Jamaican Shango Shaman, Aronberg said.

Repeatedly the TV psychic talked about her “gift” and philosophy of life as the lawyers prodded her for details about how she came to be the spokesperson for the psychic hotline. In answer to an oft-asked question, she said that she saw the investigation coming a year and a half ago, Aronberg said.

“She believes she has a special gift,” Aronberg said.

On Tuesday, he said, Cone called him and asked for his date of birth. Aronberg said Harris wanted to size him up before questioning started.

Harris had little to say afterward. “Father blesses me, I feel wonderful every day,” she said. “I won’t give the devil his due. I praise the father for every day that I have.”

Jonathan Rubin contributed to this report.

Mitch Lipka can be reached at mlipka@sun-sentinel.com or 561-243-6653.

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