Penthouse International Inc., a Former Director, and a Former Shareholder Agree to Settle SEC Charges of Alleged Involvement in a Revenue Recognition Scheme

Penthouse International Inc., Charles Samel-a former Penthouse director and executive vice president-and former shareholder Jason Galanis have agreed to settle SEC allegations that they were involved in a revenue recognition scheme.

The SEC says the two men took part in accounting and financial reporting violations while at Penthouse in early 2003. Penthouse then allegedly improperly included in its financial statements revenue of $1 million. It had gotten the money as an up-front payment related to a five-year Web site management agreement. Including the amount on its statements, says the SEC, had increased the company’s reported revenue and changed a $167,000 quarterly net loss to an $828,000 profit.

The commission also cited other ways in which Penthouse’s Form 10-Q was materially misleading. The SEC says that the electronic signature of Penthouse’s principal executive and financial officer was included in the statements to meet Sarbanes-Oxley certification requirements for the publishing company’s 2003 quarterly report. Apparently, the signature made it seem that the officer, Robert Guccione, had looked at and signed the document when he actually had not, says the SEC. The commission also says that Penthouse’s outside counsel and auditors did not review the filing and that this lack of review was not revealed in the filing.

According to the SEC, Samel and Galanis have each agreed to pay $60,000. They have also consented to be barred from serving as a director or officer of any public company. Both men and Penthouse have consented to being enjoined from securities law violations in the future. None of the three defendants, however, agreed to or denied the charges.

Guccione, who resigned his post as chief executive at the end of 2003, settled SEC allegations of faulty financial disclosures in 2005.

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Related Web Resources:

Penthouse Settles with SEC, Webcpa.com, May 15, 2007
Penthouse publisher, executive settle with SEC, MSNBC.com, May 10, 2007
SEC v. Penthouse International, Inc., Charles Samel and Jason Galanis