Deborah Jean Palfrey, 50, of Vallejo, Calif., entered the plea in U.S. District Court. She was released but ordered to wear an electronic monitoring device.
The alleged "D.C. Madam" ran Pamela Martin and Associates, an upscale escort service in the Washington area, from her home for 13 years before it closed in August.
A federal indictment alleges that it was a prostitution ring that yielded $2 million in assets, including cash and homes. In October, the federal government froze the assets after a 2½-year IRS investigation. Palfrey is suing to have the assets returned.
A federal judge on Friday delayed a ruling on a request to block Palfrey from publicizing her client list. Also Friday, an attorney for Palfrey sued in U.S. District Court, seeking $75,000 in damages from a former employee she accused of illegal sexual activity.
Lawyer Montgomery Blair Sibley said that Palfrey's business was a legal fantasy service and that her employees signed contracts agreeing not to break the law.
The lawsuit is heightening anxiety that the names of high-profile clients and escorts will become public. Dick Morris, once a campaign adviser to former President Bill Clinton, has publicly acknowledged being a client.
There are about a dozen serious bidders for the 40 pounds of phone records, ranging from "checkbook journalists to the gold standard of American journalism," Sibley said. Attorneys for people who fear their names will become public are also after the records, he said.
A judge on Friday postponed the civil case until the criminal case unfolds.