SEC Charges Penthouse With Accounting Fraud

Adult magazine publisher Penthouse International Inc. (search) defrauded investors in a 2003 quarterly financial report by improperly booking $1 million in revenues, U.S. regulators charged Monday.

Penthouse also put the electronic signature of former ex-CEO Robert Guccione (search) on the report, even though he had neither seen nor approved it, regulators said.

The Securities and Exchange Commission (search) brought accounting fraud charges against Penthouse, former Penthouse officer Charles Samel and Penthouse shareholder Jason Galanis in a legal action filed in U.S. District Court in New York.

"Penthouse, Samel and Galanis engaged in accounting fraud and financial reporting violations at Penthouse" in filing the report for the quarter ended March 31, 2003, the SEC said.

Guccione, former Penthouse chief executive, entered into a separate settlement agreement with the SEC, it said.

Penthouse is today published by Penthouse Media Group, formerly known as General Media. Penthouse Media recently emerged from Chapter 11 bankruptcy protection and reorganized under the majority ownership of financier Marc Bell.

In the 2003 March quarterly report, Penthouse improperly booked as revenue a $1 million up-front payment in connection with a five-year Web site management agreement, the SEC said.

"That payment should not have been recognized in that quarter," said the SEC in a statement.

The March 2003 report also bore an unauthorized electronic signature of Guccione and made it look like he had reviewed and signed the report, the SEC said.

"In fact, Guccione had not seen or approved the filing," the SEC said.

Samel and Galanis filed the misleading report, knowing Guccione had not seen or approved it; that Penthouse's auditor had not done a proper review; and that booking the $1 million as revenue for that quarter was improper, the SEC said.

Penthouse later made two more SEC filings "that purported to correct misstatements ... but continued to make material misrepresentations and omissions," the agency said.

The SEC said it seeks injunctions and civil penalties against all the defendants. Litigation is pending, it said.

Attorneys for Guccione, Samel, Galanis and Penthouse did not return phone calls seeking comment.