By
Matt Bean
Court TV
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.
Keepin' 'em on the Phone
While Feder and Stolz seem to have a company for every part of
their business—advertising, debt collection, direct marketing, and
more—none of their 17 companies actually employ the psychics that
staff the psychic hotlines.
Subcontractors, referred to as "bookstores" by insiders, recruit,
train and manage thousands of psychics who handle the calls spurred
by Miss Cleo's commercials. The subcontractors, such as Nevada-based
Buckwood Communications or Fort Lauderdale-based Real Communication
Services, are fed by an 800 call center in Nebraska called West
Interactive. Operators there simply provide each customer a 900
number, which can change depending on the time of day, the region in
which a commercial is shown, and the standing of subcontractors with
Feder and Stolz.
Each psychic reader is paid by the subcontractor on a
call-by-call basis (see
a psychic's job application here). A central clearinghouse keeps
track of who's logged on and available to take calls. This telephone
system, to which Courttv.com was granted access through a government
official, features a daily pep talk from Feder, followed by another
from the manager of the psychic's particular group.
|
"Your readin' will amaze you," Miss Cleo
promises. |
In a recent version of Feder's message (click
to hear it yourself) the telephone magnate emphasizes his newest
venture, the Miss Cleo dating service. "Please make sure that you
send every single person to that Web site, and let them know that we
have given them a free membership," he tells the psychics. "This is
another venture that we're going into."
As of Wednesday, only five days after launching the CleoDate Web
site, Feder already had more than 1,300 subscribers signed on.
The next "pep talk" message (click
to hear it yourself) is from the psychic's group manager. "I
know it's been kind of slow ... the group averages have been
anywhere from 19s to 21s — that's across the country, so if you're
not getting calls it's because you're falling below that," the
unidentified woman says. "I would say everybody just be patient and
just stay logged on as long as possible ... Everybody just hang in
there as much as you can."
The "19s" and "21s" that the group manager mentions are averages
of how many minutes a psychic can keep customers on the phone. For
the psychics, this number is as good as a pulse. If it dips too low,
it can be fatal — the psychic can be booted off of the system
without notice. In his daily message from Jan. 14, Feder himself
seemed to imply as much, warning psychics to "Treat each call as if
it is your last!"
As the South Florida psychic reader who has worked with Feder
since 1996 told Courttv.com, calls are distributed according to a
priority system (explained
more here), a high-pressure tactic that sends customers to the
psychic with the highest average.
"We're obliged to keep people on the line," the psychic said. "We
have to make things up, because we need the priority rating or we
won't get calls. It's impossible. Last week, even though I had a
61-minute call, I didn't get anything for six days."
Because most psychics make only 14 to 24 cents a minute,
depending on the their average call time, a break of that long can
be a serious financial blow.
As positive reinforcement, psychics are reportedly paid 25 cents
for every postal address they collect and 10 cents for every e-mail
address. If they don't collect enough, they can be dropped from the
network.
According to the Florida psychic, the pressure placed on psychic
readers is passed on to the customer. "Most psychics don't even look
at the cards," he says. "With so much pressure to keep people on the
line and get their information, you need to tell the customer a lot
of bullshit. But you can hurt people. You can hurt people very very
deeply."
Still, the psychic admits to manipulating customers into staying
on the phone. One effective way to keep callers on the line, he
says, is to reveal a tidbit that piques their curiosity. One
failsafe topic: Tell them their loved one is cheating.
"If you say there is cheating, there are a ton of questions they
will want to ask," the psychic said.
Techniques like this are commonplace, judging by the countless
tutorials subcontractors have placed on the Internet for their
psychics to read.
"When you feel that the caller is hanging up after only a few
minutes because he/she wants the free minutes only, try saying that,
in your opinion, if they call back for several short free readings
they will only get what they are paying for, but if they stay on now
and let you complete their reading, you are sure it will change
their life,"
suggests
one tutorial.
In a section titled "What if I Don't Give Tarot Card Readings,"
another guide encourages psychics to fib their way through the
reading if they're at a loss. "This is not a hard call to make; even
if you know nothing about Tarot Cards," the guide states. "If
someone calls the line asking for a Tarot card reading, you KNOW
there is something troubling them. Start the conversation just like
that ... No caller has gotten upset just as long as you're giving
some kind of a reading. That's what they're paying for."
Tips like these aren't all psychics use to help them perform a
reading. Many also recite verbatim from detailed "scripts" that
forgo the need for tarot cards altogether. The four scripts obtained
by Courttv.com are packets containing pages for each tarot card in
the deck, along with a suggested passage containing possible
interpretations for that card.
|
"The Fool" is one of 78 cards in a Tarot
deck. |
The tarot card technique that Miss Cleo and many of her "psychic
associates" use is an age-old practice dating to the 15 century,
when gypsies are thought to have brought it to Western Europe.
A typical tarot deck consists of 78 cards, each bearing a picture
of a natural object, such as a star, or a character representing one
of man's many vices, such as "the fool." Each card also carries with
it a particular implication, and a script will offer a number of
prefabricated dialogues on each one.
Not every reader uses tarot cards, and other scripts are
available that cover just about every corner of the mystic world,
from numerology to astrology to mental imaging.
Given the network's "for entertainment purposes only" disclaimer,
the whole issue of whether callers are getting real psychic readings
may be a moot point legally. Whether many customers would continue
calling if they knew the true tricks of the trade, officials say, is
another question.
Moynihan, a network lawyer, says that the script problem lies
with the subcontractors — not his clients.
"That may be the practice of a certain subcontractor or
subcontractors," he said," but [my clients] hire independent
contractors who have their own internal operating rules. [The
subcontractors] have control over themselves."
According to Moynihan, subcontractors are expected to adhere to
specific ground rules, such as not using scripts and hiring bona
fide psychics. The network also requires each new reader to sign an
affidavit concerning their veracity as a psychic. The penalties for
violating the ground rules, Moynihan says, are severe. "If we find
out that somebody is using scripts or advertising to hire
telemarketers rather than psychics, they will be fired," he said.
The Future Looks Bright
Since launching Miss Cleo's network in 1999, Feder and Stolz come
under consistent fire from customers who say they've been jilted by
the psychic duo. Currently eight states have taken some form of
action against the network for problems ranging from deceptive
advertising practices to billing errors.
|
"Don't let sex be the thing that brings you
back to a familiar place," Miss Cleo advises one caller. |
Susan Grant, director of the National Fraud Information Center,
says that most of the problems facing the Miss Cleo network could be
solved by clearing up the advertising. Grant says the blurred line
between the free portion of the call and the paid portion is the
main culprit.
"Companies that provide services through 900 numbers have an
obligation to make it clear what you're going to be charged and on
what basis," Grant said. "But cases like the Miss Cleo case
illustrate that a lot of times that information isn't presented in a
straightforward and understandable way."
"Usually people think that they're getting a free reading to
sample the service," Grant added. "But they end up being hit with
charges they couldn't see even with a crystal ball."
The first suit filed against Feder's companies was brought in
1999 by the state of North Carolina. Mike Easley, the state's
attorney general, alleged that customers were being billed for time
advertised as free — and if they did get free time, much of it was
spent on hold or on answering logistic details.
ARS, named as a defendant in the suit, agreed to settled the case
for nearly $60,000.
That suit brought up another complaint as well, that some
residents receive collection notices for phone numbers that weren't
even theirs.
Moynihan says that billing problems such as these generate 90
percent of the complaints against the network or ARS (Access
Resource Services, Inc.), which handles collections for the network.
According to FTC rules, a long distance company is obligated to
dismiss 900 calls that customers have contested. ARS is then stuck
with the bill. To recoup its losses, the company aggressively
pursues payment by using the phone number from which the call was
initially dialed to track down and bill the caller.
As a result, Moynihan admits, people sometimes get bills and
collection notices for calls they didn't make. "It might have been
your gardener, it might have been your maid, or it might have been
your babysitter — but if it appears on your phone bill, the call was
placed," he said.
The lawyer argues that a business handling so many calls is bound
to make a few mistakes. "But you're not talking about thousands of
complaints," he says. "You're talking about 50 or 60."
Still, some of the billing mixups have been particularly
egregious. Some families have reported receiving ominous collection
notices for relatives that had long ago passed away, for example.
Mixups of this sort have become rallying points for detractors of
Feder and Stolz's aggressive practices.
With the North Carolina suit settled, the network must now face
many of the same allegations in suits pending in Illinois,
Pennsylvania, Wisconsin and Missouri.
In Missouri, Attorney General Jay Nixon has already won one
victory against ARS.
Shortly after Nixon filed suit in July 2001, alleging that ARS
called residents that should have been protected by the state's
no-call rule, the company agreed to pay
$75,000
in fines.
"Miss Cleo should have seen this coming," Nixon said in a
press
release brimming with appropriate puns. "It doesn't take a
crystal ball to realize that ripping off consumers isn't without
consequences. I predict the courts will see that Miss Cleo pays for
a serious lack of foresight."
Saying Nixon "blindsided" his clients, Moynihan claims that the
company called only its former customers, which it was allowed to do
under Missouri state law. "All the complaints were just absolutely
wrong," the attorney said. "But we settled to stop the bleeding from
all the negative press."
The publicity over the Missouri victory was so damaging, in fact,
that Feder and Stolz put out a special Miss Cleo commercial to
address it. Soon after the settlement, the screen shaman claimed in
a new series of ads: "For years, people have been persecuted for
their beliefs," adding that she wasn't about to let "them" hold her
back from helping people.
While Nixon may have grabbed the biggest headlines with his
victory, it was an Arkansas suit that dealt Feder and Stolz their
first financial knockdown. In November 2001, the state forced ARS to
forgo $3.2 million in charges for violating the no-call rule as well
as for the recurrent allegations of misleading advertising and
wrongful billing practices.
The New York Consumer Protection Board, too, has used its no-call
rule, which was passed in April 2001, to seek $224,000, or a maximum
of $2,000 for each of 112 no-call violations, from ARS in an
Oct. 31, 2001, filing. But authorities there have added yet
another group to those they wish to protect — the psychics
themselves.
"We want to warn people thinking about joining this enterprise
from a stay-at-home workplace that they should take some more time
to think about this," said Jon Sorenson, spokesperson for New York's
consumer protection board. "They're just like the customers at first
because neither of them know what they're getting into."
Attorneys in the network's home state of Florida haven't brought
suit against PRN or ARS — but they have succeeded in getting the
company to change its advertisements so that they don't seem to
offer an entire reading during the three-minute trial period. The
company also agreed to stop implying that every caller would get
through to Miss Cleo, and has since changed her tagline from "Call
me now..." to "Call now for your free readin'."
These changes may have been largely cosmetic, but a third
agreement signed in late 2001 binds the company to follow in Florida
any agreement it makes in another state.
The biggest suit threatening Feder and Stolz right now is a civil
suit filed by the author of a popular book on tarot card readings.
Nancy Garen, who wrote 1989's "Tarot
Made Easy", claims Feder and Stolz used material verbatim from
her work on their Web site and told their psychic readers to use it
as a guide during calls. She is seeking $250 million.
Garen and her lawyer, Larry McFarland, claim to have found a
total of 154 sections of "Tarot Made Easy" on the site in an online
tarot card reading section offered free to customers of the network.
"Ninety percent of those cards had text copied from 'Tarot Made
Easy,'" McFarland said. "It just floored us."
While Moynihan did not deny that material from Garen's book might
have been used by the company, the lawyer says the suit won't stand
up in court. "Whatever it was, it was certainly not something that
was directed by the principals of the company," he said.
McFarland says the ongoing discovery period of the lawsuit has
helped him develop a case for the use of the book as a script.
In one e-mail the lawyer obtained (click
here to view), Feder urged his psychics to sign an affidavit
stating that he never requested them to use Garen's book.
"Could anyone imagine giving a spiritual or psychic reading by
using the descriptions of a tarot card read verbatim as a reading?"
Feder asked. "I'm tired of us being accused of being frauds and
fakes when we make a difference in thousands of people's lives every
day."
A followup e-mail from the group manager stated that unless
psychics filled out the form, they wouldn't be allowed to field
calls.
"I am sorry to be a pain but I sent you an affidavit a few days
ago and you have not sent it back yet. It needs to be signed and
returned no later than 10-19-01 which is tomorrow or you will not be
able to work," the e-mail states. "Please send it in if you want to
keep working. It is a requirement from the main company."
But perhaps the most surprising development in Garen's case was
when Harris —Miss Cleo herself—actually contacted one of the
author's lawyers—to offer an apology.
"Ms. Harris stated, 'Please tell Ms. Garen I am so, so sorry,'"
Sebastian Gibson, another lawyer for Garen said in his
deposition of his 30-minute conversation with Harris. "It's
horrendous, it's disgusting, especially when they take that route.
There was no need for them to do anything like that. I told them
long ago, 'Why are you doing this?'" Harris said, according to
Gibson.
It might not matter how involved Miss Cleo is with any of the
activities alleged in the suits. In the end, her popularity could
prove to be her downfall.
"People don't think about PRN or ARS," said the Florida psychic
who spoke to Courttv.com. "They think about Miss Cleo. And if her
reputation gets dangerous, they'll just get rid of her."
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