one crucial mistake. tonight, an incredible tale of extortion, straight out of hollywood. plus, psychic detectives. they claim to help solve crimes. but do psychics really have special powers? >> i i think those people are scum. >> this man is betting a million dollars that the answer is no. and, phone warps. look out iphone. google takes another big bite out of the mobile phone market. so, how is google planning to change the world, one phone at a time. >> announcer: from the global resources of abc news, with terry moran, cynthia mcfadden and bill weir in new york city, this is "nightline," august 16th, 2011. >> good evening, i'm cynthia mcfadden. we begin tonight with a crime story worthy of hitchcock. the suspect in the case was after money and he thought he knew how to get it out of a certain rich man.

the crux of his plan was to go after the rich man's teenage daughter. not to physically harm her, even to kidnap her, but to threaten her life in an unusually diabolical way. to make her family so afraid they wouldn't even call police. here's abc's ryan owens. >> reporter: it's now wednesday morning in australia and this young heiress is finally breathing a sigh of relief. >> i'm pretty sure we think we've got him. >> we're feeling good. >> no doubt. >> reporter: 18-year-old madeleine pulver believes australian authorities found the man who broke into her home and strap what she thought was a collar bomb to her neck. remarkably, the arrest went down almost 10,000 miles away in louisville, kentucky. investigators collared and charged this australian businessman, 50-year-old paul doug peters. they arrested the father of

three here at his exwichl's house. one of his daughters, the same age at madeleine. >> on behalf of maddie and the entire family, we are enormously relieved that an arrest has been made. >> r rorter: maddie's or deal began august 3rd. she was home alone in sydney that afternoon, studying for an exam. around 2:15, a masked man entered her room, carrying a baseball bat. according to just released court documents, he told her, "it is down and no one needs to get hurt." he had a black box with him and forced the box against her throat and looped a device similar to a bike chain around her neck. he also attached a document to the contraption. he then instructed her to count to 200 and then left the room. after a few minutes, maddie yelled out for the man, but heard nothing. terrified, she texted her mother to call police. at that time, she read a portion of the document, saw the word

"explosive" and immediately assumed the man placed a bomb around her neck. for nearly ten excruciating hours, that black box was strapped to her neck until authorities were able to x-ray it and determine there was no explosive. >> these past two weeks have been a very difficult time for us and we are hopeful that this development marks the beginning of the end of thiss traumatic ordeal for our family. >> reporter: maddie's father is one of the wealthiest men in australia and police say the note peters attached to the box was an attempt to extort money. if this all sounds like a novel, well, there might be a good reason for that. peters allegedly signed the letter "dirk straun," an apparent reference to a character in the book "tai-pan." the plot? all about one businessman trying to destroy another. >> people get ideas to commit

crimes or violent acts based on what they've read, what they've heard. and so it does not surprise me that he may have been motivated or given maybe even specific ideas or details about how to do this based on possibly a novel. >> reporter: while prosecutor aren't sure yet if the two men ever crossed paths, they do know peters once worked for a company with connections to the pulver family. and while pulver's business ventntes soared, peters' collapsed. >> there are some links between the two, the suspect and the family, however, no direct links and that's still a matter of investigation. >> reporter: but law enforcement say it may well provide a m motive. >> he may feel he was wronged and to the point where he believed that certain amounts of money were owed to him and it's madeleine's father's fault. >> reporter: authorities say he did not cover his tracks well.

that ransom note around maddie's neck contained an e-mail address where she was supposed to go for further instruction. police say peters signed onto that e-mail at a nearby library. what's more, they say his credit card was used to buy the come appropriates of that fake bomb. and then, to purchase a one-way ticket to the united states. his lawyer says he intends to fight the charges in australia, but today, peters said little more than this. >> is there anything you want to say to the pulver family? any worlds for madeleine? >> i hope she's well. >> reporter: for now, one australian businessman is behind bars, accused of trying to extort another. in an international drama that reads like a crime novel and may have just been inspired by one. i'm ryan owens for "nightline" in los angeles. >> what a story and how terrified she must have been. just ahead, psychic detectives who claim to help

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17-year-old daughter ally got off a school bus near her home just outside houston and simply vanished. >> she texted a few people and then at 3:00 in the afternoon, all of that stopped. >> reporter: her disappearance prompted the grim routine we know so well. the posters, the searches, the local news coverage. >> we scoured this whole area. >> reporter: and, the psychic detectives who told her parents they had visions. >> i see water and i see trees, dirt. but it's all very vague. >> i broke down and cried. i'm not ashamed to admit it. when somebody items you that your daughter is in pieces, you don't take that very easily. >> reporter: but 16 torturous months later, ally is still missing. >> they are taking advantage of these people. >> reporter: this is a man who is an outspoken critic of psyching detectives. >> this person, because of fame

and money, steps in and starts to act like an authority. >> reporter: he says this happens all the time, yet not once as the fbi publicly stated that a psychic has h hped solve the mystery and often they're just dead wrong. >> who do you know of my the name keith? >> reporter: in one infamous tv moment on "the montel williams show," sylvia browne told shawn hornbeck's parents to their face that he is dead. >> there are two jagged boulders -- >> he's there? >> he's near the boulders. >> is he still with us? >> no. >> reporter: four years later, shawn was found very much alive. >> this is probably the best day of our lives. >> reporter: browne apologied, but says she's broken case after case since. >> somebody that's holding out hope, you tell them their kid's dead? >> you are amazing. >> thank you. >> reporter: it's because he's much more than a critic.

he's a crusader, a mentalist, who for years has yuked magic tricks to prove magical powers are just an illusion. >> it's not been proven in a laboratory yet. it's not science. it hasn't been science, it never has been. >> reporter: to prove his point, when he was just 18, banachek managed to convince researchers that his gifts were worthy of scientific study. it was all a ruse. >> to be honest, we cheat. >> reporter: had he not told me it was a trick, i would have believed he was a psychic. >> i signed it, i sealed it, i stuck it in my bra, for god's sakes. >> what did you draw? >> five dots, 1073, it is a three -- three lines? >> reporter: five dots, three lines. >> how did you get my number? that's my number. wish you could see the look on my son's face. that is the classic jaw-dropping -- how did you do

that? >> i'm not a psychic. i take my notes, i create the illusion of a six. i use -- >> reporter: why do this? when banachek says psychics purport to have messages -- >> i think those people are scum. i really think they are scum. because grieving is a part of death. when you are going to convince them you can talk to their dead relative, i can crack to a junkie but that doesn't mean it's good their them. >> reporter: just mention "psychic kids" and he will tell you it borders on child abuse. >> i think that's a horrific show. i think you are taking advantage of children. >> reporter: the show purports to help kids troubled by their ability to see spirits. >> in the middle of the night, ghosts try to talk to me. >> reporter: every single episode, there's a possession, a demon in the house, a ghost dog something. >> usually taps on the window.

>> reporter: show me t . >> show me the proof. >eporter: the producers of "psychic kids" did not return our request for comment. but lisa miller, a professor at columbia university and former consultant to the show says these children are having valid psychic experiences. were any of the kids traumatized? >> the children i met were beautiful people. and they, overall, have very high i.q. thank you. i'd like to not comment on them beyond that because our work was between us. >> reporter: okay. but do you ever think that it's being used fraudulent lently or disingenuously? >> i think that any human faculty can be used for a broad range of purposes and things can be used positively --- i -- >> reporter: but surely you don't believe -- >> i'm sorry. i'm finding it hard to relate to this dits cushion. are we about done? >> reporter: we were done. but banachek isn't. tomorrow night, he offered $1 million to any self-proclaimed

psychic who can pass his test. >> ready? >> repeporter: for "nightline," i'm juju chang in new york. >> and tomorrow night, we will have the full story of banachek's million dollar psychic challenge for our special "primetime nightline" beyond belief, psychic powers, at 10:00 p.m. eastern, 9:00 central. stay with us. [ man ] behind every business is a "what if." what if we designed an electric motorcycle? what if we turned trash into surfboards? whatever your what if is, the new sprint biz 360 has custom solutions to make it happen,

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be getting all of our information, and much of ore entertain, from our mobile devices. in fact, google announced yesterday it's betting $12.5 million with a deaea to acquire motorola. the smartphone wars just got more interesting. here's abc's neal karlinsky with tonight's "sign of the times." >> navigate to the museum in new york city. >> reporter: if case you hadn't noticed, at some point in the last few years, a phone stopped being just a phone. if you believe the hype, getting an iphone, an android phone or a windows phone can be a life-changing experience. the internet is filled with spoofs of the competition and love for all things iphonon >> nothing can compare to the iphone. the guys over at the apple store assured me of this. >> reporter: and if you think the battle for cool between the mac and pc guy is intense. >> future pc.

have they figured out how to make us -- >> future pc just froze. >> reporter: you're miss iing o on the fight for the future. the people that put the google in google see those long lines outside the apple store for the new iphone and want a piece of the action. what's google doing in the phone business? >> we're in the phone bususess, and i'd like to say that we're in the portable internet state. >> reporter: this is one of the heads of google's android unit. android is google's answer to the iphone. and our cameras were the first to be allowed inside android headquarters, where every version of the google phone made worldwide is proudly on display. >> so, this is the nexus s. the latest and greatest, at this point in time, android device. i'm excited about this device, yes. >> reporter: can i touch your phone? >> you can touch my phone any time. >> reporter: it's no joke to google. they may differ with their

neighbors from apple on some things, but on this, they agree. >> note to self. brush teeth before abc interview. >> reporter: the future is mobile. does google have to be in mobile? is it do or die? >> it's cheap computing power. it's portable. it's personal. it comes very natural that for many markets, they want to make sure the fwoogle services are available on these devices. i think the google board really signaled very early that mobile will be very important and we should bet on this. >> reporter: for years, the iphone dominated google-powered phones. but as the apple faithful scoffed,d, google grew and grer and by the beginning of this year, took over the top spot. the stakes are extremely high, but the phone and all the information it provides, not to you, but about you, are the future of commerce. >> this is a major battleground for the future of computer. >> reporter: karen is the executive editor of the influential silicon valley blog "all things digital."

>> a lot of monon is being put into commerce, which is hugely location gives you a lot of information about where you are and what you're doing. >> reporter: some analysts see one piece of good news for google in apple's history. by putting android on as many different kinds of mobile phones as possible, google is taking a page from microsoft's windows back in the '90s, which dominated apple by getting on many different computers, while apple, back then, just like the iphone today, stuck with its own system run only by its own device. >> i mean, google is not stupid to want to be on as many choices as possible. people like choice. walk into a supermarket, there's 400 kinds of cereal. so, apple is making their bet that this is what you want. android is making the opposite bet. >> reporter: to give you some perspective on how important getting android right is to google, consider this. it is essentially gichb away free to mobile phone makers just to get it out there and bring google to your pocket. how much pressure is there on

someone like you here, mobile? i mean, google's got to be playing big, big, big time in mobile. >> i think we have -- we are getting a lot of attention and focus. it's both positive and negative. there's a lot of pressure, obviously. people have very high expectations. >> reporter: after all, a phone is no longer just for making calls. >> navigate to nearest grocery store. >> reporter: and at google, searchchs not enough. i'm neal karlinsky for "nightline" in mountain view, california. >> the phone of the future. that's our report for tonight. thank you for watchingng abc ne. we hope you'll watch "good morning america" in the morning. weaver always online at abcnews.com. have a great evening, america. >> dicky: up next on an all-new "jimmy kimmel live" -- jamie foxx. >> jimmy: that's xaps when you wear a cheetah print sheet. >> you got it, baby. >> jimmy: obama continues his