She received an anonymous phone call stating that nude photos of her taken by photographer Tom Chiapel prior to her pageant days had surfaced. Williams believed the photographs were private and had been destroyed. Days later, Bob Guccione, the publisher of Penthouse, announced that his magazine would publish the photos in their September 1984 issue, and paid Chiapel for the rights to them without Williams' consent. After days of media frenzy and sponsors threatening to pull out of the upcoming 1985 pageant, Williams felt pressured by Miss America Pageant officials to resign.
The title subsequently went to first-runner up, African-American Suzette Charles. In early September 1984, Williams filed a $500 million lawsuit against Chiapel and Guccione. According to a Williams family representative, she eventually dropped the suit to avoid further legal battles choosing to move on with her life. Williams is quoted as saying "the best revenge is success."
Although she resigned from fulfilling the duties of a current Miss America, she was allowed to keep the bejeweled crown and scholarship money and is officially recognized by the Miss America Organization today as "Miss America 1984" and Suzette Charles as "Miss America 1984b."