Alone and depressed, Stephen Schwartz was flipping through channels one evening in late 1999 when Miss Cleo appeared on his television screen. The 49-year-old supermarket delivery man became transfixed as the psychic doled out insights into love, finance and employment prospects. When she offered to do the same for him — free for the first three minutes and at a discounted rate for the rest of the call — Schwartz decided it was a deal he could not pass up.

"I was in a real state of depression at that point," the Maryland resident recalled. "I was hoping that she could give me some idea of what my future might be."

But when he called, Schwartz says, Miss Cleo was nowhere to be found. The "psychic associate" he spoke with commented on his personality and character, but offered little else in the way of a psychic reading until, disappointed, Schwartz ended the call.

Then came the real surprise. The network had billed him at full cost. "They stuck me with a $300 bill," Schwartz said. "They didn't keep their end of the bargain."

Schwartz eventually took his case to court, filing a civil suit to reclaim his money. He recouped nearly $200 after the company failed to show up in court.

"They are acting like predators," Schwartz said of his psychic experience. "They prey on lonely men such as myself. I think they should be out of business."

Schwartz is one of millions of customers who have responded to ads for Miss Cleo's Mind and Spirit Psychic Network since its launch in 1999. In the past two years, the network has grown to become the most popular telephone psychic service in the country. Infomercials featuring Miss Cleo have become fixtures of late-night and low-budget T.V. advertising slots. She also helps hawk a Web-based psychic consultation service, a line of at-home tarot products distributed by the Walgreens drug store chain, apparel, and even an online dating service.

But the one place Miss Cleo, whose real name is Youree Cleomili Harris, is least likely to be found is on her hotline—which is actually staffed by "psychic associates" who are part of a business empire constructed by a wealthy South Florida businessman, Steven Feder.

Feder, along with his cousin, Peter Stolz, used Harris' image (she is paid a fee to represent the company in the commercials) to turn the network into a multimillion-dollar business. A former New Jersey resident, Feder is now facing a bevy of lawsuits alleging that his business defrauded consumers and violated the "no call" rules that residents of many states can use to protect themselves against phone solicitation.

But Feder's legal troubles have brought into question more than just whether his schemes are breaking the law. What are his customers getting for their money?

A look at the inner workings of Miss Cleo's network suggests that the answer, in some cases, is not much at all. Some of the psychics touted on television as highly qualified may be little more than telemarketers reading from prewritten scripts, law enforcement officials say. And when Courttv.com called the psychic hotline, the "associate" who answered did just that, reciting the "psychic reading" from a script a reporter later obtained.

The "psychics" are governed, says one who has worked for the network since 1996, by one major tenet: Keep the customer on the line for as long as possible—and keep the money flowing.

A lawyer for Feder does not dispute that the psychic network is a money-making enterprise, but insists that the company is not breaking any laws. In fact, he says, the network provides a valuable service to its customers.

"This is a business as well as a psychic entertainment service," said Sean Moynihan, a lawyer with Klein, Zelman, Rothermel & Dichter in New York. "The people who call are adults. They make a volitional decision to call the number. If at the end of three minutes they're not enjoying it then they don't have to continue." If they do, it will cost them $4.99 a minute.

On the Heels of Miss Cleo

The Mind and Spirit network isn't Feder's virgin attempt at making money in the telephone psychic business. In 1993, he and Stolz started a company that battled for market share with the successful Dionne Warwick's Psychic Friends Network, the first psychic network to achieve widespread success.

Their first attempts didn't catch on, but over the years, Feder and Stolz honed their craft. They hired celebrity mouthpieces such as former Miami Vice star Philip Michael Thomas and former Dynasty star Catherine Oxenberg to represent the company. They began building an extensive database of information about their customers. And they developed an aggressive marketing strategy using that information to keep customers coming back.

The network does not release its sales figures, but a study by the New York State Consumer Protection Board reported that their business brings in as much as $400 million annually. The original company started by Feder and Stolz in 1993 is now the Psychic Readers Network, Inc. (PRN), which handles advertising for the sprawling enterprise. According to public records, the two now control 16 other corporations from an office in Fort Lauderdale. One of those corporations is Access Resource Services, Inc. (ARS), which Moynihan, the lawyer, identifies as the "fulcrum" of the enterprise.

But it is Harris, or "Miss Cleo," who says she comes from a line of Jamaican shamans, that has given Feder and Stolz the perfect face to put on the well-tuned marketing engine they have built over the years.

From studio sets rife with mystical trappings, such as whorls of incense, candlelit backdrops and rune graphics, Miss Cleo doles out advice in a thick Jamaican accent, offering customers pearls of wisdom.

"If you want him to believe that it's over, then you've got to stop accepting the booty calls at 2 a.m. in the morning," she tells one anguished caller.

CONTINUE
1  | 2  | 3