Miss California Carrie Prejean was demanding over a million dollars in compensatory damages from pageant officials in a lawsuit last month — that is, until Pageant attorneys showed Carrie they were in possession of her sex tape. According to TMZ

The video the lawyer showed Carrie is extremely graphic and has never been released publicly. We know that, because TMZ obtained the video months ago but decided not to post it because it was so racy. Let’s just say, Carrie has a promising solo career.

We’re told it took about 15 seconds for Carrie to jettison her demand and essentially walk away. She pocketed nothing in the settlement.

So when it happens to David Letterman, it’s extortion that merits FBI intervention and jail time. When Carrie Prejean is blackmailed out of a million-dollar settlement with a sex tape, it’s just “legal negotiations.” I see. I’ll have to remember that when I show that girl from HR the secret camera-phone footage I took of her on the crapper last week.

Annoyingly censored topless pics before she got the fake titties:

Meet “Late Show” assistant Stephanie Birkitt — the woman unknowingly at the center of the extortion case against David Letterman and the former girlfriend of “48 Hours” Robert “Joe” Halderman, the man accused of doing the actual blackmailing. Confused? Good. Radar Online says

Stephanie Birkitt met Halderman at CBS about 15 years ago. At the time, Halderman was in one of his two past marriages, and Halderman did not have a relationship with Birkitt.

Birkitt later got a job on Letterman’s show and has worked there for more than a decade, often appearing on air.

Our source [say] that Birkitt and Letterman slept together for a period of time before he married his girlfriend Regina had their son Harry. After Halderman divorced, the source says he got involved with Stephanie and she lived with him in Connecticut.

The source says Birkitt told Halderman that she had had sex with Letterman.

So it seems that while they were living together (and without her consent), Halderman went through Birkitt’s personal effects for proof of hers and Letterman’s affair to use to blackmail the talk show host, including

Copies of parts of a diary and correspondence belonging to Birkitt, [along with] documents, letters, emails and photos.

Jesus, I didn’t know anyone other than 8th grade girls kept actual diaries. What a stupid idea. I guess you never know when all your puffy hearts and triple-underlined “Mrs. Stephanie Lettermans” will come back to bite you in the ass.

Olivia Wilde arriving to The Late Show:

David Letterman admitted on CBS’ “Late Show” last night that he had been the victim of a $2 million dollar extortion attempt by a producer at “48 Hours” stemming from his sexual encounters with several women currently in his employ. Letterman, of course, has been married to Regina Lasko since March, after dating her for 23 years, but in his defense, she looks like she should be in construction, or the very least a member of the East German Hammer Throwing Team. According to Variety

On the show, Letterman sat down behind his desk and [said he had] received a package three weeks ago from someone who claimed to have information about alleged sexual relations he has had with female employees of the “Late Show.”

“I get to looking through it and there’s a letter in the package and it says, ‘I know that you do some terrible, terrible things. And I can prove that you do these terrible things.’ Sure enough, contained in the package was stuff to prove that I do terrible things,” Letterman said.

The host said the alleged extortion suspect claimed he planned to write both a movie screenplay and a book based on what he knew — that Letterman had engaged in sex with staffers.

Letterman said the individual threatened to go public with the allegations unless Letterman paid the person $2 million.

The host, under advisement of his attorney, met with the man on three different occasions. According to Letterman, the suspect even made it clear he knew what he was doing was illegal.

Letterman told his audience that he then contacted the Manhattan District Attorney’s Special Prosecution Bureau. The meeting with the D.A. led to a sting operation, in which Letterman met with the individual and handed the person a fake $2 million check. That person was arrested on Thursday.

$2 million? Are you kidding me? In this economy? If the extortionist had kept it reasonable, say, $500,000 and maybe the property rights to Paul Shaffer, he would have his money and his little muppet, too. Now all he’ll have to keep him company are Angelo the Serial Stabber and the nickname “Cream of Meat.”

Kim Kardashian on the show last night: