Donald Trump, who owns the pageant, said Katie Rees, 22, deserved to be dumped for pictures.
"Did you see those pictures?" Trump screamed to the Daily News yesterday. "Unlike Miss USA, who made some bad choices, Miss Nevada is a real problem. . . . It's a much different thing, and a much bigger problem."
Rees' lawyer Mario Torres said that she was wrong to pose for the salacious shots three years ago, when she was 19. But he said Rees deserves another chance - and may have grounds for a lawsuit.
"Ms. Rees clearly acknowledges that her actions were not appropriate and regrets that she failed to clearly think about the consequences of those actions," Torres said, adding, "We find it inequitable that Ms. Conner was able to retain her crown and that Ms. Rees is not able to do the same."
In a statement released Thursday, Paula M. Shugart, president of the Miss Universe Organization, said: "Katie Rees has been relieved of her duties as Miss Nevada USA 2007. First runner-up Helen Salas will assume the title and compete at the 2007 Miss USA Pageant on March 23 in Los Angeles, California."
The 22-year-old, who was crowned in October, was due to represent her state in the Miss USA Pageant next spring.
In a statement to TV's Extra, an attorney for the dismissed beauty queen says: "Katie Rees ... wants the public to know she was 17 (?) and had a lapse in judgment."
"The actions on that evening in subject are in no way indicative of the person she is or the person she has become - she is a law-abiding citizen and talented adult. This was an isolated incident that occurred more than five years ago when she was a minor."
Her attorney, Mario Torres, added in statement to PEOPLE: "We think it is inequitable that Miss USA was allowed a second chance for something she did weeks ago and Katie is being punished for something that happened five years ago."
Earlier this week Miss USA, Tara Conner, was nearly removed from her throne over her alleged hard-partying ways.
"I've always been a believer in second chances," Trump said at a press conference before announcing that Conner would go to rehab for alcohol abuse. "Tara is good person. Tara has tried hard. Tara is going to be given a second chance."
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