http://money.cnn.com/2005/01/24/news...ex.htm?cnn=yes
Penthouse Intl officer charged by SEC
SEC cites improper accounting in civil action against a shareholder, a former officer and company.
January 24, 2005: 4:30 PM EST
By Aaron Smith, CNN/Money staff writer
NEW YORK (CNN/Money) - Penthouse International Inc., a former officer and a company shareholder were charged with accounting fraud Monday by the Securities and Exchange Commission.
The SEC has filed a civil action suit against Charles Samel, a former Penthouse officer, Jason Galanis, a shareholder, and Penthouse International Inc., now known as PHSL Worldwide Inc.
Samel and Galanis are accused of accounting fraud and financial reporting violations on the company's 10-Q report for the quarter ending March 31, 2003. According to the SEC, Penthouse improperly recorded for that quarter a $1 million up-front payment in connection with a five-year Web site management agreement.
The recording of the payment was improper because it was not actually signed until the following quarter and should have been recognized as deferred revenue and amortized over the five-year life of the agreement, according to the SEC.
Also, the quarterly report bore the unauthorized electronic fingerprint of former Penthouse chief executive officer Bob Guccione, when in fact Guccione never saw or approved the report, according to the SEC.
The SEC has also settled a separate cease-and-desist action against Guccione.
PHSL and Guccione have nothing to do with Penthouse Media, a separate entity that is owned by Marc Bell Capital Partners, a private equity firm. Marc Bell owns the Penthouse trademark and the magazine, having acquired those assets as part of a Chapter 11 bankruptcy agreement in October 2004.