Foreign Aid Head Resigns Amid 'D.C. Madam' Scandal

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Randall Tobias, head of the Bush administration's foreign aid programs, abruptly resigned Friday after his name surfaced in an investigation into a high-priced call-girl ring, said two people in a position to know the circumstances of his departure.

It was Tobias' own decision to resign, according to one of the people, who said the issue came up only in the past day or so. The people spoke to The Associated Press on condition of anonymity because the investigation is still under way.

Tobias submitted his resignation a day after he was interviewed by ABC News for an upcoming program about an alleged prostitution service run by Deborah Jeane Palfrey, so-called "D.C. Madam."

The New York Times reported that Palfrey not only intends to name names but, as a defense strategy, is threatening to call some of Washington's most powerful movers and shakers as witnesses.

Read here for full coverage of that story.

ABC reported on its Web site late Friday that Tobias confirmed that he had called the Pamela Martin and Associates escort service to have women come to his condo and give him massages. More recently, Tobias told the network, he has been using a service with Central American women.

Tobias, 65, who is married, told ABC there had been "no sex" during the women's visits to his condo.

U.S. officials would not confirm the information. A message left on Tobias' voice mail seeking comment was not returned.

Friday evening, the State Department put out a statement announcing Tobias' resignation, saying he "informed Secretary of State Condoleezza Rice today that he must step down as Director of U.S. Foreign Assistance and U.S. Agency for International Development Administrator effective immediately."

"He is returning to private life for personal reasons," the statement said.

Tobias held two titles: director of U.S. foreign assistance and administrator for the U.S. Agency for International Development. His rank was equivalent to deputy secretary of state.

Rice named Tobias to head the two programs in January 2006. He had been the White House's coordinator for global AIDS relief.

Before joining the administration, Tobias was a director and chairman of Eli Lilly and Co., the Indianapolis-based pharmaceutical company.

"The lives saved and made better around the globe by Randy's work at the State Department constitute a rich legacy on which he can look back with justifiable pride," department spokesman Sean McCormack said Friday.

Tobias' name surfaced in connection with the investigation involving Palfrey, accused earlier this year of running an illegal escort service in the nation's capital.

Palfrey claimed she has 46 pounds of phone records involving clients. Efforts to reach her late Friday were unsuccessful. Montgomery Blair Sibley, an attorney who represents Palfrey in non-criminal cases, declined comment.

She recently made good on her threat to identify high-profile clients, listing a military strategist known for his "shock and awe" combat theories as a regular customer in court documents filed this month.

The 50-year-old Palfrey was indicted in March by a federal grand jury on charges of running a high-class call girl ring from her home in Vallejo, California. She has denied the escort service engaged in prostitution.

And in 1991, Palfrey was convicted of operating an illegal prostitution business from that same home, according to the New York Times. She served 18 months in prison.

In court records, prosecutors estimate that her business, Pamela Martin and Associates, generated more than $2 million in revenue over 13 years, with more than 130 women employed at various times to serve thousands of clients at $200 to $300 a session.

Palfrey had threatened to sell phone records that would identify 10,000 clients to pay for her criminal defense, but a federal judge ordered her not to release them. But Palfrey gave them to ABC News before the order took effect.

Prosecutors have accused Palfrey of trying to intimidate potential witnesses by exposing them publicly.

The Associated Press contributed to this report.