May 10, 2007 / 10:02 PM / 13 years ago

Penthouse settles accounting fraud case with SEC

WASHINGTON (Reuters) - Penthouse International Inc. settled charges of accounting fraud and financial reporting violations, the U.S. Securities and Exchange Commission said on Thursday.

Two U.S. soldiers relax in the back of their Bradley fighting vehicle, with one reading Penthouse magazine, before going on a mission into Samarra, Iraq, in this December 17, 2003 file photo. Penthouse International Inc. settled charges of accounting fraud and financial reporting violations, the U.S. Securities and Exchange Commission said on Thursday. REUTERS/Stefan Zaklin/POOL

Former Penthouse executive Charles Samel and former shareholder Jason Galanis also agreed to each pay $60,000 to settle accounting fraud charges, the SEC said.

Penthouse, the adult magazine, was published by Penthouse International, a holding company which also had movies, online content and entertainment clubs.

Penthouse is today published by Penthouse Media Group, formerly known as General Media. Penthouse Media filed for Chapter 11 bankruptcy protection in 2003 and later reorganized under the majority ownership of financier Marc Bell.

The settlement resolves the SEC’s accusations that the company used an unauthorized electronic signature of Bob Guccione, the magazine’s former chief executive officer, to meet Sarbanes-Oxley law certification requirements in its 2003 first-quarter report.

The company, Samel and Galanis settled without admitting or denying any wrongdoing, the SEC said. An attorney representing Penthouse and the individuals could not immediately be reached for comment.

In the 2003 quarterly report, Penthouse International improperly booked as revenue a $1 million upfront payment in connection with a 5-year Web site management agreement, the SEC said.

The company also changed a quarterly loss of $167,000 to a net profit of $828,000, according to the SEC complaint.

Samel and Galanis prepared and filed the misleading report, knowing Guccione had not seen or approved it and Penthouse’s auditor had not done a proper review, the SEC said.

Reuters/Nielsen

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