Psychics Article: 1-900 Psychics -- What's The Real Story?

Telephone Psychics Are a Gold Mine for Some,
Source of Fraud for Others


By James McNair, The Miami [Florida] Herald
Knight-Ridder/Tribune Business News

[COMMENT: Article originally published/copyrighted by The Miami Herald, August, 1997. Sources, other than Herald, say PRN's per-minute rate increased in 1998 to $5.99; also, psychics 20-to 25-cent per-minute pay rate was reduced to 12-to 15.]

Aug. 23-"I can't believe it! She knew all about me--and all I told her was my name and my birth date! These psychics are incredible! I never thought that someone I never met could know so much about your life!"--"Rainelle," in a TV ad for Psychic Solutions USA.

Sound familiar? It should if you watch TV talk shows, soaps or late-night cable fare. Ads and infomercials for telephone psychics become epidemic after midnight. Change channels? Sorry, the psychics are there, too.

In the mystic realm of dial-a-psychics, millions of Americans look for help, hope and happiness every month from the other end of a telephone line. In their moment of need, the advice of a friend, relative or counselor just won't do. So when Billy Dee Williams or Dionne Warwick says their soothing lines at 2 a.m., calling a psychic for $4 or $5 a minute seems the right thing to do.

Psychic advice hotlines are to the telephone business what the Klondike was to gold panners. The cash generated by pay-as-you-go 1-900 phone calls for entertainment and information services is estimated to reach $1.4 billion a year by 2000, up from $670 million in 1994, says Telemedia News & Views, and is catching Wall Street's eye. Obviously, the Rainelles of the world can't live without their psychics.

But callers may be shocked to find where their money is going. If they came to Fort Lauderdale's posh Harbor Beach section and drove past a three-story $3.5 million house at 14 Isla Bahia Dr., surrounded by lush landscaping, a fleet of exotic cars and a docked 40-foot luxury powerboat, they would have a fair idea.

The palace belongs to Steven L. Feder, a 47-year-old New Jersey native who has struck it rich in the psychic hotlines biz. Feder owns Psychic Readers Network, which supervises "several thousand" independent home-based psychics around the country. PRN claims to handle more calls and log more minutes than any of its rivals, including the Warwick-endorsed Psychic Friends.

Feder isn't one to boast in public and he declined to be interviewed for this article. In private, though, Feder relishes showing off the spoils of his success. Psychics say he brags about his jewelry and his black 1997 Bentley convertible. At his birthday party in March, where Feder was said to be "dripping in diamonds," singer Gladys Knight treated his guests to a private performance.

Feder's anonymity notwithstanding, Psychic Readers Network is known to millions. Who can resist when celebs like Billy Dee Williams, ex-Miami Vice star Philip Michael Thomas, actress-astrologer Joyce Jillson and South Florida radio personality Bo Griffin are urging people to call? Almost without exception, callers are enticed by offers of 5, 10 or 15 minutes of free readings.

But once those free minutes are up, the meter starts ticking away at $4.99 a minute. At that rate, a 30-minute reading will show up on someone's telephone bill as a $124.75 charge. As you might expect, it often has a laxative effect.

Deborah Herman of Centerville, Va., said she lost her telephone service--and her gift-basket business--because of a disputed charge by a PRN psychic.

"They told me I had been given 10 free minutes, but they never specified whether it started at the beginning or the end of the reading. I ended up with a $215 bill from them," she said.

Herman successfully contested the charge. But the momentary loss of her telephone number was fatal.

"My company has already bitten the dust over this," she said. "I had a $30,000 Yellow Page ad that I was still paying for."

Cathryn Radeff of Sheffield Lake, Ohio, responded to a TV spot for three free minutes with a PRN psychic. The mother of seven was billed $78, but didn't pay. Instead, she called regulators.

"In the conversation with the gentleman, I asked, 'This isn't going to cost me anything?' and three different times he said no," Radeff said. "He lied to me."

Complaints pour in from all over the country. The New York attorney general's office has more than 100 on file, Washington, 24. The Florida attorney general's office, with 12 complaints in hand, said it is investigating PRN.

"The focus of our investigation is with regard to what's offered--the free minutes," assistant attorney general Bob Bucknet said. "Either they (customers) hadn't gotten it or they were misled about when it started."

Unlike other telemarketeers, PRN is quick to make redress. Buckner and other regulators said most complaints lead to refunds. Peter Stolz, a PRN vice president and Feder's cousin, said customer satisfaction is a big concern.

"We try to be extra, extra careful, clean and above and beyond reproach," Stolz said. "We give callers complete credits on any complaints. We don't want anybody to be dissatisfied in any way."

Yet many of PRN's psychics are in disharmony.

According to interviews with eight PRN psychics--all of whom asked not to be named for fear of losing their jobs--and documents obtained by The [Miami] Herald, PRN has cut payouts to its top-earning psychics by 20 percent to 30 percent in the past year. PRN psychics receive flat rates of 20 cents to 25 cents for every minute they are logged on to the company's computerized calling system from their homes. Many work the psychic lines to supplement other sources of income.

Last December, PRN raised the call-length averages that triggered per-minute bonus pay. In May, PRN canceled bonuses altogether. When the company raised rates to $4.99 from $3.99 a minute two months ago, psychics didn't receive a penny more. And when free calling time was upped to five minutes, callers took their readings and ran, hanging up at the five-minute beep and killing psychics' chances to make money. Psychics who average less than 12 minutes a call can lose their job, said one veteran of the PRN hotlines.

More and more, they liken themselves to telemarketing agents.

At the start of every call, psychics must obtain callers' names, addresses and phone numbers, all of which feed into computer databases to become leads for the sale of other products, psychic-related and not. In the current Astrological Society of America sales script obtained by the Herald, PRN psychics offer a$9.95-a-month membership--good for a cassette player, tarot cards, a magazine, a personalized astrology chart and 15 minutes of psychic readings--and say the word "free" 18 times.

"It's kind of sad because I feel the intent has been polluted," another PRN psychic in Florida said. "Instead of supplying answers or direction for people in need, they're sold, sold, sold."

Another Florida psychic said she enrolled in the Astrological Society of America to see what her callers were getting. She said the cassette player ate the very first tape. The tarot deck was incomplete, and she received neither the magazine nor the personalized astrology chart. Afterward, she said she was inundated by junk mail.

"I feel they're hiring people just to get money and the vast majority are not psychic at all and are making things up just to keep people on the line," she said. "It gives us a bad name. It makes me ashamed of what I have to do."

According to company policies. PRN will "to the best of its ability hire only qualified psychics who have been tested and interviewed by PRN, not 'chat' operators." But a former employee who managed PRN's psychics said that wasn't the case when he was there.

"A good 90 percent of these people are horse s--t," the employee said. "They're just trained to pick up on certain things and go fromthere."

That manager and one other said PRN's psychic ranks suffer from high turnover. Those who stay on have a sense of powerlessness. For all their psychic powers, they haven't the power to overcome their treatment as telemarketing pawns, they said.

"I'm not going to put hexes on anyone," a Miami psychic said. "If I did, my husband would be writhing in boiling oil."

Loretta Nichols, a teacher of psychic power in St. Louis, said she worked for PRN for two weeks in July but quit because she "couldn't stomach it."

"Once I realized there was no essence of good to it and that they didn't care about their people or their psychics, I quit," she said.

WALL STREET CONNECTION

PRN's money trough extends to Wall Street, which will latch onto most any business concept these days to make money.

The link comes in the form of a limited liability company founded by Feder, Thomas Lindsey (his business partner and co-owner of the $3.5 million house) and Peter Stolz, a PRN vice president and Feder's cousin. The three men sold their 50 percent stake in New Lauderdale L.L.C. to the other half-owner, Quintel Entertainment of Pearl River, N.Y., last September. If you cancel AT&T long-distance service and get a call urging you back, odds are it's Quintel calling.

New Lauderdale is the company that spreads most of the word about PRN's telepsychics. It owns 1-800 and 1-900 telephone lines. It owns membership clubs, like the Astrological Society of America and its Spanish-language counterpart, La Sociedad Astrotogica de America. It hires celebrities and runs the TV spots and infomercials. And when callers' names and addresses roll in from PRN's telepsychics, it churns out junk mail for Quintel's sister products, like cellular phones, music, shampoo and, of course, more psychic readings. Quintel books the revenue.

The sale of New Lauderdale turned Feder, Lindsey and Stolz into multimillionaires.

According to SEC filings, Feder, Lindsey and Stolz received 3.2 million shares of Quintel's common stock. On the day of the deal, those shares were worth $6.50 apiece, or $21 million. A year later, as investors catch on to Quintels money machine, the stock trades for $14. The PRN trio has already cashed in $5 million in stock and has a balance of $42.3 million as of Friday's close.

The deal was especially lucrative for Feder.

Feder's stake in New Lauderdale, exchanged for 1.424 million Quintel shares, is worth $18.3 million. In return for devoting 50 percent of his time managing New Lauderdale--which is one floor below PRN in the International Building on East Sunrise Boulevard--he was rewarded with a five-year contract starting at $187,000 a year, 10 percent annual raises, four weeks of paid vacation and the usual perks of a full-time executive job.

Meanwhile, Quintel is on a roll. In the three-month period ended May 31, the company posted net income of $5.8 million on sales of $53.3 million -- more than half of which came from the New Lauderdale operation. Its customer database includes 30 million names and addresses culled from psychic readings, voicemail services and other 1-900 telemarketed products. Those names, of course, are rented to other companies with products of their own to sell.

"They put me on every junk mail list selling psychic readings, crystals, pyramid cones and pills to increase psychic awareness," said Bonnie Yeager of Bartlett, Ohio. "1 was probably getting five pieces of junk mail a week."

The busier his psychics, the wealthier Feder becomes. For every $4.99 a minute that the psychics chalk up in sales, PRN keeps 39 1/2 cents, according to a Quintel document filed with the Securities and Exchange Commission last Aug. 20. For every dollar Quintel's share price rises, Feder becomes $1.4 million richer on paper.

To his psychics, the dollar amounts are beyond belief. That Feder is part owner of one of the nation's largest independent telemarketing companies is not.

"He's definitely a telemarketer, the way he talks to people and pumps them up," a PRN psychic in North Carolina said. "He doesn't have a clue as to handling psychics."

[Miami] Herald researcher Michael Clark contributed to this report.

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