SEC Charges Penthouse, Others With Fraud
The scheme, the SEC said in a suit filed in U.S. District Court, converted a $1 million quarterly loss to a profit.
Regulators said Penthouse issued inflated quarterly results in March 2003 with an electronic signature certifying they had been reviewed by Penthouse founder Robert Guccione, then the chief executive and chief financial officer.
But the SEC said the report was not reviewed by Guccione or the company's outside auditor and general counsel. Guccione resigned from the company in 2003.
The SEC said Guccione was hit with violating the Sarbanes-Oxley Act, a package of accounting reforms adopted by Congress in 2002. Guccione wasn't fined, but he agreed to cease and desist from future violations.
Regulators said Samel and Galanis filed the quarterly report and included a $1 million payment on a multiyear business agreement that wasn't signed until the following quarter.
The SEC's lawsuit seeks to fine Penthouse, Samel and Galanis, and bar them from future accounting violations. Regulators also want to ban Samel and Galanis from serving as officers or directors of a U.S. public company.
Samel, who lives in Sherman Oaks, Calif., owns about 4 percent of Penthouse’s common stock, according to court documents.
Galanis, of Santa Monica, Calif., owns about 8 percent of Penthouse shares through Molina Vector Investment Trust, where he serves as chairman and CEO.
Galanis is the son of white-collar criminal John Peter Galanis, who bilked investors of more than $400 million, and was arrested but not charged in a San Diego drug bust targeting ecstasy manufacturers and distributors.
Galanis and Garrett Bender, iBill’s former chief executive, created Media Billing, which was formed last year to purchase iBill.
Galanis told Forbes magazine last year that he was only acting as an intermediary for a “handsome fee” in the iBill deal, not as a principal, on behalf of Luis Enrique Fernando Molina, who was the majority stockholder of Penthouse International.
IBill is now owned by PHSL, a division of the Molina Vector Investment Trust.
At the time, Galanis described himself to Forbes magazine as a “part of the investment banking team” that took Penthouse magazine public in 2002, then helped Molina in a deal in November to put another $107 million into Penthouse in a real estate/equity swap.
Galanis was also identified in 2003 as the only person associated with Penthouse Financial, a separate company that controls Penthouse’s website. Galanis at the time said it was more of a licensing deal, and that the contract has since been terminated.
Penthouse is currently 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.