Accused D.C. call-girl madam also a stock picker

By Jeremy Pelofsky

WASHINGTON (Reuters) - The woman accused of running a prostitution ring serving Washington's elite, including at least one U.S. government official, also appears to be something of a stock picker.

The woman, Deborah Jeane Palfrey, asked a federal judge on Monday for permission to sell almost 5,000 shares of Dolby Laboratories that were in an account frozen by the government because she believed the stock had reached its high point.

"I believe it's reached its peak," she told Judge Gladys Kessler. Palfrey said she bought the shares in the sound system firm at about $22 a share. "I don't want to see it waste away," she said, facing an expensive trial with most of her assets frozen.

Dolby was at about $37 a share on Monday morning, a possible pre-tax profit of $75,000 (37,000 pounds).

However, about two hours after the hearing ended, the stock started to fall and closed down 5.5 percent to $35.42 on the New York Stock Exchange. It was not immediately clear what sparked the selloff and one analyst doubted a connection.

"At this time I can't do that," Kessler said, denying her request. She said there were procedures for such a request and Palfrey could discuss it with her new defence attorney when one was appointed in the coming days.

Palfrey was indicted last month on criminal racketeering and conspiracy charges for running the service between 1993 and 2006. The government said she earned more than $2 million.

She initially considered selling a mountain of telephone records from her business, Pamela Martin and Associates, to raise funds for her defence. But instead she gave some to ABC News in hopes they would uncover witnesses to aid her defence.