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'PSYCHIC NETWORK' MASTERMIND

THE BALTIMORE SUN

For Michael Warren Lasky, making predictions is not a whimsy. It's a career.

He cut his teeth as a professional sports handicapper, often guaranteeing the outcome of horse races. Then he divined an even more lucrative business -- the "Psychic Friends Network," a 900 telephone line produced by his Baltimore-based company, Inphomation Inc., makers of those 30-minute commercials dressed up as television talk shows.

The psychic line, geared for callers looking for advance notice on the outcome of their love life, career, or any other question of fate, has become one of the nation's top-grossing infomercials -- but not without also becoming the subject of controversy. The CBS news show "60 Minutes" called it the "Godzilla" of the industry. Some customers have complained about the service. And critics say it's appalling.

"It is nothing less than a national shame," said Bob Garfield of Advertising Age magazine. "It angers me, it frustrates me. At the very minimum, it's grossly exploitative of those probably least capable of defending themselves against naked ignorance and superstition."

But Mr. Lasky has been criticized before and shrugs it off now. "You have a phone in your hand," he said, "you don't have a gun to your head."

He insists he is only giving people what they want: Customers log an average of 2.5 million minutes per month calling their own personal "psychic," the company reports. At $3.99 a minute per call, the bill can add up quickly. For 15 minutes, for example, it costs $59.85; for 30 minutes, almost $120.

The result: Inphomation generates more than $100 million in annual sales, second only to Jane Fonda's fitness tape, according to industry analysts.

The "Psychic Friends Network" is part of a larger phenomenon -- the explosion of infomercials since the Reagan administration lifted restrictions on commercial air time in 1984. Television ads, once limited to 16 minutes per hour (20 minutes per hour during political campaigns), are now unlimited.

And the top has blown off. Television has become a free-wheeling bazaar of goods and services, the denizen of get-rich, lose-fat infomercials.

Today, nearly half of the nation's adult consumers have watched an infomercial, according to a recent Gallup Poll. All of which translates into more than $800 million a year in consumer spending and in excess of $400 million of air time bought annually.

Infomercials -- to some, the bane of late-night television -- is big business.

"Someone once said an ad is the truth well told. In 30 minutes, you have a lot of time to shape the truth," said Mitchell A. Orfuss, an executive of J. Walter Thompson, the huge New York advertising agency.

Increasingly, the infomercial industry is becoming the province of major corporations, including American Airlines, Black & Decker, Club-Med, Ford Motor Co., Pepsi, Procter & Gamble, Playboy, Revlon, Sears and others, according to the National Infomercial Marketing Association.

Inphomation Inc., launched in 1990, has helped fuel the wild-fire growth, playing nearly 800 ads a day on broadcast and cable television stations, offering viewers across the nation a stable of infomercials: "Barbara De Angelis Ph.D.: Making Love Work," a how-to on personal relationships; "The Helicopter Lure" for fisherman, and more recently, "Check It Out," a would-be detective's manual.

But the biggest money-maker is the "Psychic Friends Network."

For Mr. Lasky, the 900 line was more than a leap of faith. Asked whether he believes in psychics, he said, "It's very difficult to believe in a lot of different things, but the answer now has to be yes."

And based on its volume, so do many other people. But not all his customers have come away satisfied.

Betty Jean Jeffreys of North Carolina, for instance, said she couldn't get a straight answer from her psychic.

Worried about her finances, Ms. Jeffreys, a 57-year-old free-lance court reporter, called in August after watching the infomercial, a polished 30-minute segment with Grammy-award winning singer Dionne Warwick acting as hostess.

"It was so convincing," Ms. Jeffreys said.

What Ms. Jeffreys didn't know is that like other infomercial celebrities, Ms. Warwick is paid a fee and royalties for her appearances. Although Mr. Lasky declined to say how much he pays her, industry experts say celebrities' fees range from $5,000 to $50,000, with royalties ranging from 2 percent to 5 percent of gross revenue.

His psychics get a cut, too. Mr. Lasky said he pays his psychic "independent contractors" a percentage of each billable minute on the phone with a customer, a rate at which they can make between $200 and $800 a week. Now numbering about 2,000, he said he finds his psychics through other psychics.

But the anatomy of infomercials was not Ms. Jeffreys' concern. She wanted someone to talk to. So she dialed.

"They had a woman come on the line," she said. "Her conversation was very slow -- to hold me on the line and tell me nothing, just stuff that would fit anybody."

Ms. Jeffreys tried to tell the psychic that she couldn't afford to stay on the phone for too long and that she had written down some questions.

'Not a mind reader'

But the psychic, Ms. Jeffreys said, ignored her questions about the future, finally telling her in exasperation: "I'm not a mind reader."

When Ms. Jeffreys later received a bill for $43.89 for the call, she filed a complaint with the Maryland attorney general's office, which intervened and helped get her money back.

Inphomation Inc. is not required to give refunds to dissatisfied customers like Ms. Jeffreys, but Mr. Lasky said the company goes out of its way to accommodate them. Still, he makes no apologies: "You know of any business that has no complaints?"

Establishing the psychic network was simply a natural extension of Mr. Lasky's previous endeavors, he said: "Everything sort of follows, there's a pattern."

Over the years Mr. Lasky has run several businesses, and records show some of his practices have been questioned by clients and government officials alike.

Under the name Mike Warren, he often guaranteed to pick the winner of selected horse races, among other sporting events. Only it didn't always work out that way, according to several complaints on file at the Maryland Racing Commission.

"I received an advertisement from Mike Warren Sports," Richard Kushner of New Jersey stated in an October 1981 complaint, which included the original advertisements.

"The advertisement states that if you send $100 to Mike Warren Sports, he will in turn send you the name of a horse guaranteed to 'win or you get your money back.' Needless to say the horse did not win, and when I called to get my money back, they said, 'No refunds -- we will send you the names of three horses guaranteed to win.' "

Mr. Lasky, asked whether customers were denied refunds, said, "I don't think that's true."

Even more, he insisted that he made money for his customers, adding that he predicted correctly on about seven out of 10 horse races. "I can't please some of the people some of the time," he said.

For all his success in handicapping, it presented a hurdle in his repeated attempts to obtain a license to own thoroughbred race horses. He was denied in New York state and New Jersey in 1982, and that same year, he withdrew his renewal application in Maryland after officials warned he would be turned down.

'False credibility'

"Licensing Mr. Lasky, as an owner (or in any capacity) while he is engaged in his current occupation could result in the clothing of Mr. Lasky with a false credibility . . .," the New York State Racing and Wagering Board concluded in January 1982.

Mr. Lasky said the panel had raised a "good question," but he argued that New York's concerns would have been allayed if it had approved his application. "If you license me, you control me," he said.

That September, the Thoroughbred Racing Board of the Maryland Racing Commission informed Mr. Lasky that his owner's license would not be renewed, stating: "Your advertising and solicitation practices relating to horse racing are misleading and constitute attempted fraud or misrepresentation in connection with horse racing."

Mr. Lasky said of the charge: "I think it was completely preposterous. . . . It has no merit."

In 1986, the attorney general's office sued him for refusing to turn over the membership list of the Pikesville Nautilus club, which he had operated until it failed in March 1985.

"My review of the complaints revealed many consumers were holding lifetime memberships or memberships which were purchased shortly or days before the club's closure," said JoAnn Shepard, then the assistant health club administrator of the state consumer protection division.

But Mr. Lasky argued that he was the real victim of the spa's failure: "I lost about $350,000" of his investment, he said.

Two years later, in May 1988, soon after he was granted a race horse owner's license in Maryland, Mr. Lasky was again taken to task by state officials, this time over one of his handicapping mailings, which used the Preakness logo and referred to "official Preakness Stakes information."

The racing commission said the mailing "gives the appearance of a direct involvement between Mr. Lasky and the ownership of Pimlico Race Course which is misleading and deceptive, and should discontinue."

Mr. Lasky said he had used the same kind of materials before and never encountered a problem. Furthermore, he said his mailings helped to promote the sport. "As a handicapper, I bring interest to the game," he said.

Only the beginning

He has brought even more attention to soothsayers with the stratospheric success of the "Psychic Friends Network." And Mr. Lasky vowed that it's only the beginning.

"It's going to be greater and a more important business," he said of his company. "My goal is to be at the top . . . like Time Warner," the giant media conglomerate.

A psychic, Mr. Lasky noted, predicted it.

With his 900 telephone line, he has guessed right so far.

"It says as much about us as a society that we need services like this," said Steve M. Dworman, publisher of Infomercial Marketing Report in Los Angeles. "That we're lonely, that we don't know who our neighbors are."

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