Heidi Fleiss' Hollywood sex scandal -- The sordid saga of how a nice Jewish girl from L.A. is bringing Hollywood to its knees

By Dana Kennedy
August 20, 1993 at 04:00 AM EDT

Call it a midsummer nightmare. The last thing Columbia Pictures needed after the resounding flop of Arnold Schwarzenegger’s $75 million Last Action Hero was a woman named Heidi Fleiss. But the 27-year-old alleged madam-to-the-stars has given two of the studio’s chieftains — executive vice president Michael Nathanson and executive vice president of production Barry Josephson — leading roles in the ever-widening Hollywood sex scandal. Nathanson disavows any professional connection to Fleiss and her purported drug and prostitution ring, and Josephson has so far declined comment.

Yet the publication of their names in the Los Angeles Times and elsewhere has reportedly prompted Sony CEO Peter Guber to launch an internal investigation into the rumors that Fleiss’ services were charged to the studio’s coffers. ”It’s like sleeping death around here,” says a Columbia development executive. ”Nothing’s getting done. They’re mounting investigations. It’s all in the accounting department, that’s what they’re concerned about.”

How did Columbia become embroiled in the biggest controversy to hit Hollywood in years? How did high-priced prostitution-long a traditional but discreet industry perk-become the topic du jour from L.A. to London? Herewith, the anatomy of a scandal:

An Uncommon Madam
Likened in one breathless report to an ”international catwalk model,” the dark-haired, wisecracking Fleiss is not your run-of-the-mill madam. The daughter of a prominent Los Angeles pediatrician, Fleiss learned the tricks of the trade from the legendary Beverly Hills madam, Elizabeth (Alex) Adams, who ran the preeminent Hollywood call girl operation for 20 years until she was busted by the Los Angeles Police Department in 1988. The arrest of Adams left a power vacuum. Among her heirs apparent was Heidi Fleiss. After apprenticing with Adams, Fleiss founded her own call girl business with the help of then boyfriend Ivan Nagy, a TV director.

Fleiss’ association with Hollywood’s ultrarich soon put her on the fast track. In 1992, her father purchased a house from Michael Douglas, which Heidi shared with pal Victoria Sellers, daughter of the late Peter Sellers. Before long she was side by side with celebs — such as Billy Idol, Bob Evans, and rock star manager Elliot Mintz (all of whom have been seen with Fleiss but are now publicly distancing themselves from her and this scandal) — at haunts like L.A.’s Monkey Bar. ”She was obviously good at what she did,” says one waiter. ”She could afford to eat here.” Apparently, the only thing Heidi wasn’t good at was keeping a low profile. ”Heidi has a big mouth,” says LAPD vice squad Capt. Glenn Ackerman. ”She talks more than any other madam I’ve ever heard of. She likes the celebrity.”

Speaking of the cops
According to Ackerman, vice detectives had known about Heidi for ”some time” but did not begin a formal investigation until February 1993. The probe languished until March, when vice detectives read an odd account in the L.A. Times in which Madam Alex, now 60 and bedridden with diabetes, accused ”a rival madam” of stealing her clients. ”Our interest was piqued,” says Ackerman. ”Especially since we heard Heidi was proclaiming herself the new Hollywood madam.”

Fleiss was arrested June 9, in a sting operation conducted by the LAPD, the Beverly Hills Police Department, and the Justice Department, and charged with pandering, pimping, and narcotics possession. But except for a short article that appeared in the local-news pages of the L.A. Times, Fleiss’ arrest received little coverage. ”We couldn’t understand why nobody else picked up on it,” says Ackerman.

In fact, a number of journalists had at least as much information about Fleiss as the authorities did, but many were deterred from publishing it — some for lack of hard evidence, others from external and internal pressure.

John H. Richardson, a senior writer at Premiere, wrote a story about Fleiss in August 1992, but his editors elected not to run it. Interestingly enough, Richardson’s novel, The Blue Screen, currently serialized in Premiere, eerily presages the entire Fleiss affair. It contains what Richardson calls ”composite” characters who closely resemble Fleiss and her associates.

Entertainment Weekly contributing writer Jeffrey Wells had been leaked reports about Fleiss six months before the arrest, but then received two letters from high-powered attorney Bert Fields, threatening legal action if Michael Nathanson’s name or Columbia Pictures were mentioned in association with a prostitution and drug scandal.

In mid-July, The Hollywood Reporter prepared a story on Fleiss and her links to Hollywood. The piece never appeared. ”We didn’t have anybody on the record,” says editor-in-chief Bob Dowling. A newsroom source says that Nathanson threatened two journalists at the paper on July 15, warning, ”I’ll have Bert Fields sue you for slander, get your paper for libel, and I’ll ruin your reputation.” Columbia declined comment.

Finally, on Aug. 1 the L.A. Times published a 3,000-word account by staffers Shawn Hubler and James Bates chronicling Heidi’s escapades as ”madam to the stars.” To some, the Times story was as much a shock as Heidi’s charges. ”I’m amazed that the L.A. Times is not letting go of this,” says writer-producer Julia Phillips. ”They’ve functioned like a house organ for this town. Usually they’d be moving heaven and earth not to break it.” Counters Bates, ”That’s a long-stale myth. We don’t shy away from these stories.”

In the Line of Fire
Though Heidi’s ”girls” reportedly worked all over town, Columbia has taken most of the heat, partly because of Nathanson. Linked to Heidi through his old friend Nagy, Nathanson — supposedly fearing he would be exposed by one of the journalists working the story — issued a statement through his lawyer, Howard Weitzman, on Aug. 3 denying rumors that he did business with Fleiss. Nathanson, 37, ”has not done anything that should cause concern on behalf of Columbia,” said Weitzman. But Nathanson’s bizarre attempt at spin control meant his name — and Columbia’s — would be associated in print with the story. Three days later, Nagy leaked a copy of Heidi’s diary to the New York Daily News, which noted that the phone number of Columbia exec Barry Josephson was among those in Heidi’s black book (Heidi claims the book was stolen and doctored). Josephson did not return calls for this story.

Since then there have been numerous allegations made against the studio, as well as reports that drugs allegedly fueled the bacchanalia. A source described one especially notorious party at the Beverly Wilshire Hotel. The event, called a ”three-room deal,” was allegedly arranged by one Columbia executive so that a studio bigwig could enjoy three different hookers in three adjacent rooms.

In the middle of it all, Columbia brass, already laboring under siege-like conditions, escaped to a long-planned retreat in Santa Barbara. But even as executives dined on shark steaks during a beach party, a source says, executives used paper shredders during meetings and asked for the latest newspapers so they could check on the scandal.

Fear and Loathing in L.A.
Although the grapevine is ripe with rumors that other executives will be linked, a more hotly debated possibility is whether some celebrity names might surface. Heidi’s threat to tell all for $1 million — she already has a standing offer from Penthouse — and her reputation as a loose cannon increase the worry. When contacted for this story, Fleiss responded explosively. ”All these egos, all these actors, all these executives that are running around — I’ve got all the information in my head,” she says. ”It’ll come out when the time is right and when the price is right.” It’s that kind of talk that’s making Hollywood shudder. ”Thank God, she doesn’t know me,” says one producer. Adds another, ”The attitude has changed from, ‘Why don’t I get invited to those parties?’ to ‘Thank God, I wasn’t invited.”

Who might the Heidi affair take down? Well, there’s Fleiss herself. Now free on $100,000 bail, she has a preliminary hearing scheduled for Sept. 10. If convicted on all charges, she could be sentenced to up to 11 years, yet Captain Ackerman wonders ”if she really understands she’s facing some serious time.”

Even if Fleiss doesn’t name names, Columbia has been sullied. Last week, the studio replaced Nathanson as president of production. Taking his place is a former Warner Bros. executive, Lisa Henson, daughter of the late Muppets creator, Jim Henson. Some insiders say other studios are also scrambling to contain any connections to Heidi.

Studio execs and celebrity marriages may be hurt by Heidi-mania, but the world’s oldest profession will surely still be plied in Hollywood. ”Heidi’s an agent filling a need,” says screenwriter Doug Richardson (Die Hard 2). ”Someone has to be Hooker Central.”

No matter what the denouement of the case, stars and execs have a way of surviving scandal. Recalling the last Columbia imbroglio, 1977’s David Begelman check-cashing scam, one Hollywood executive adds, ”If Begelman can cash a check with Cliff Robertson’s name on it and work again, I don’t think someone’s got to worry about sleeping with a girl for money.” — Additional reporting by Pat H. Broeske, Jeff Gordinier, Heidi Siegmund, Ann Thompson, and Jeffrey Wells