The only thing that smells funny is the conspiracy theory. Poor little Deborah Jean, who has only been convicted once of running a prostitution ring, and in her defense has claimed that she ran a "clean" service with no drugs or the like and also that she was unaware that, for 13 years, her girls got $250 an hour for sex. The Washington Post, not noted as being a big friend to the Powers that Be, has
this story today.
All the investigations surrounding her are completely consistent with Federal monitoring of money laundering activities and racketeering. Sure the investigation was somewhat amateurish, but that's consistent too. Any Federal agency given the bone of "possible terrorist activities" is going to run with it. Reasonable or not.
If any covert agency wanted Palfrey's documents, it wouldn't be difficult. Once again, laws on the books give the Feds lots of leeway, and it could be done very quietly.
Finally, the easiest thing in the world is to make someone "disappear" without a trace. Some bogus "suicide" is counter-productive. As a parting shot, I think anyone interested in this subject should look at Alex Jones infowars.com site where he pushes theories such as "all terrorist attacks are staged by Western Governments to enslave their own people".