Deborah Jeane Palfrey told reporters that she is "genuinely sorry" if people are hurt when identified as clients of her elite escort service -- but she has no choice but to call them to prove that her escorts provided only the fantasy of sex. Not the real thing, which would be illegal.

Of the deputy secretary of state who resigned Friday after being confronted by an ABC reporter asking why his private cellphone number was on Palfrey's phone list, Palfrey could only sympathize: "I unfortunately know firsthand the implication such a revelation can have upon one's life."

She also knows the town is edgily awaiting the next name to be dropped, in a verbal Dance of the Seven Veils. According to ABC's Web site, Palfrey's potential witness list includes "a Bush administration economist, the head of a conservative think tank, a prominent CEO, several lobbyists, and a handful of military officials."

But forget them for the moment, Palfrey suggested yesterday; instead, she urged reporters to help expose why prosecutors are unfairly hounding her.

"Put aside the titillation of the who's-who list -- at least in part -- and instead investigate the disturbing genesis, the confounding evolution and the equally alarming continuation of this matter," she said. "I believe there is something very rotten at the core of my circumstance."

The government is armed with its own witnesses.

Among them are several women prepared to testify that they were prostitutes who worked for Palfrey's firm, Pamela Martin & Associates. There also are men who, though they would prefer she plead guilty and leave their names out of it, will testify that they paid for sex with women working for Palfrey, according to court records and law enforcement sources briefed on the three-year investigation.

Prosecutors also have a paper trail of money transfers and newsletters to buttress their contention that Palfrey knew her Washington area escorts were providing something more concrete than vivid fantasies.

She came to their attention almost inadvertently, sources said. The investigation began with an unsolicited tip to -- who else? -- the Internal Revenue Service from an angry man who said he had discovered that his girlfriend was working as a prostitute for Palfrey.

Then they heard from a woman who said she had answered Palfrey's ad in the City Paper seeking prospective escorts, sources said. To the young woman's surprise, when she went on a date with a client, he wanted to have sex with her. She declined, and soon she heard from Palfrey, who told her the escort service was "not a social network" and the woman should start providing what clients really wanted, according to sources with knowledge of the investigation.

Not that Palfrey wasn't careful. According to records prosecutors filed in the case, a woman who worked for Palfrey was arrested in an Alexandria prostitution sting. That caused great consternation. Soon after the arrest, Palfrey's newsletters included detailed instructions on avoiding arrest. One tip: Have the client undress first.

Now, as the case is moving closer to trial, U.S. v. Palfrey is reaching three-ring status.

Palfrey's attorney, Montgomery Blair Sibley, said she "never kept a little black book," so she had turned over to ABC 46 pounds of personal phone records, hoping the news organization would mine them for names of clients who patronized Pamela Martin & Associates.

That's why "20/20" reporter Brian Ross called Randall L. Tobias last week at his office in the State Department, where he worked on foreign aid promoting administration policies in favor of abstinence and against prostitution. Tobias told ABC that he had received massages from Palfrey's escorts but not sex. Then he quit his job.

As Washington waits for the next name to be slipped into a dry court filing, or blurted out on national television, exasperated federal prosecutors argue that Palfrey and her attorney are running a media blitz -- using "20/20" to intimidate and coerce men whose careers and reputations could be ruined when the world finds out they were paying $300 an hour for escorts.

Some veteran Washington defense lawyers privately question Palfrey's strategy: Who would willingly appear as a defense witness to help someone who has just made him the brunt of gossip and ruined his career and life?

In her statement, Palfrey said the approach was necessary "since the government has placed me in the untenable position whereby I do not have sufficient monies to undertake this extraordinarily expensive task on my own." The federal government has frozen her assets, including two California houses, and she is now "indigent," she said.

As a client, Palfrey may not be easy. She had been assigned one of the court's most respected defense lawyers, A. J. Kramer. But the two had "irreconcilable differences" over how to best proceed with her defense, she said.

Kramer declined yesterday to comment on their split, but it was clear that Palfrey's and Sibley's propensity to hold news conferences after every court hearing did not mesh with Kramer's style.

Presiding U.S. District Judge Gladys Kessler agreed yesterday to appoint a new public defender for Palfrey within a week. The judge denied Palfrey's request, however, to hire Herald Farhinger, a New York lawyer who has represented Hustler publisher Larry Flynt and Claus von Bulow, the British socialite who was first convicted then acquitted of trying to kill his wife.

Palfrey, who served 18 months in a California state prison for a 1992 conviction for attempted felony pimping, added later that she was dismayed that Tobias had refused to come forward on his own.

"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.