IBill Sold to Penthouse International Unit

ATLANTA -- IBill, the largest processor of credit card payments for the online adult industry, has been sold to Media Billing LLC, a 99 percent-owned subsidiary of Penthouse International Inc.

Media Billing purchased the unit of Atlanta-based InterCept Inc. for $700,000 in cash, $800,000 in a short-term loan and the assumption of $22 million in debt.

Media Billing, formed to purchase iBill, is owned by iBill’s former chief executive, Garrett Bender, and Jason Galanis.

Galanis told Forbes that he is 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 is the majority stockholder of Penthouse International, a Galanis business associate and Mexican hotel developer whose family controlled Pepsi-Gemex, the largest independent Pepsi bottler outside the United States. But Forbes said Galanis is more deeply involved than he lets on.

Galanis described himself to Forbes 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.

He is the son of John Peter Galanis, who bilked investors of $400 million before he was sent to prison. Jason Galanis has never been convicted of a crime, but served as chief executive in 2001 of EGX Funds Transfer (formerly known as Incubator Capital), a once-publicly traded financial processing outfit.

Jason Galanis and his brother and business partner Derek were arrested as part of a big Drug Enforcement Agency bust of a San Diego ecstasy manufacturing and distribution ring, Forbes said. Derek Galanis was convicted and sentenced to 11 years in jail, but charges were dropped against Jason Galanis.

Jason Galanis has also been identified as recently as last fall as the only person associated with Penthouse Financial, a separate company that controls Penthouse’s website. Galanis now says it was more of a licensing deal, and that the contract has since been terminated.

Forbes said that the fact that First Data, iBill’s merchant bank, would have to sign off on any deal that hands over a treasure trove of sensitive credit card data to Galanis, or whomever he purports to represent, doesn’t sit well with the conservative Greenwood Village, Colo., company, which also owns Western Union, TeleCheck and now Concord EFS.

First Data has been shopping around its more than $1 billion porn and high-risk merchant portfolio, made up mostly of iBill and a handful of other large adult online payment intermediaries like it, Forbes said.

The deal, announced late Monday, ends a chapter for credit card processor Intercept, which purchased iBill in 2002 for $104 million. IBill said that it shed the unit as part of a plan to focus on its core business of outsourced tech solutions to community banks.

After first telling investors that the online adult industry comprised just a minor amount of iBill’s business, $259 million in 2003 revenue, Intercept finally confessed that porn was actually responsible for 85 percent of iBill’s annual credit card transactions, which once amounted to as much as $720 million, according to Forbes.

The company also agreed last month to a $5.3 million settlement for various class-action lawsuits that resulted from the company’s understatement of iBill’s dependence on online adult entertainment.

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