Porn Valley- The $10 billion porn industry is at it again. If this story from September didn't convince you that iBill had major problems, http://adultfyi.com/read.aspx?ID=6155, maybe the fact that they haven't- at least allegedly haven't - paid their ad bills, might.
Xbiz.com, www.xbiz.com, reports that Cybersocket is suing iBill in Los Angeles Superior Court's Small Claims division for $10,000.
According to the story, Cybersocket co-owner Morgan Sommer has filed two legal claims against iBill for non payment of advertising. Two months's worth. According to what Sommer tells Xbiz, iBill doesn't appear too ready to settle up and that it's practically impossible to get a hold of anyone to resolve the issue. Sommer goes on to say that iBill has been deadbeating some companies for as much as $500,000 in back payments. Some of those companies have gone out of business as a result
"This company [iBill] has gutted the ability for some of the industry to function. It has made an enormous impact on the industry," Sommer tells Xbiz.
iBill, by the way is now owned by IBD which has business interests in Marc Bell's company. Marc Bell is the new publisher of Penthouse.
And if any of this smells rotten in the state of Denmark, check out this article from MSNBC:
For Boca Raton investor Marc Bell, the Penthouse name has great legs. It also does in neighboring Deer-field Beach, where Interactive Brand Development (AMEX: IBD) has a minority stake in the magazine publisher.
And it undoubtedly holds allure for a doctor in Mexico, whose PHSL Worldwide still publishes the magazine there and has a major stake in IBD.
But the SEC has a few words for PHSL and the American Stock Exchange is scrutinizing IBD.
The SEC on Jan. 24 charged two executives at PHSL Worldwide (Pink Sheets: PHSL), the magazine's owner before Chapter 11, with improperly booking $1 million in revenue.
After misreports about who owned the magazine, Bell's Penthouse Media sent out a press release saying it now owns the magazine and isn't the subject of the SEC action. And, by the way, Penthouse Media says it sent a letter to PHSL saying it didn't have the right to publish Penthouse in Mexico.
AMEX is threatening to delist IBD. The stock exchange has raised a host of questions surrounding a just-concluded deal that saw IBD give up a 49.9 stake to PHSL in exchange for Internet Billing Co. (iBill), another Deerfield Beach company.
While Bell has majority control and IBD has a minority stake in the famous Penthouse brand, that magazine has stumbled since 1979, when it had 4.7 million readers under publisher Bob Guccione.
Guccione was perceived as slow to compete with adult offerings on cable and pay-per-view television, which cut into the print market. He once claimed that credit card fraud hurt profit margins from the Internet, too. Some say the magazine's images went beyond cutting edge to crude.
In a 2003 restructuring reportedly approved by bondholders, Guccione, his two sons and a daughter were cut loose.
But, before Guccione left, PHSL allegedly improperly booked $1 million in first quarter 2003 revenue, according to the Jan. 24 SEC civil injunction.
The filing bore an electronic signature of Guccione, but he had not seen or approved of it. Penthouse's auditor and outside counsel also had not reviewed the filing, the SEC states.
In October 2004, Bell bought the magazine at a Chapter 11 sale.
"We were the largest creditor in the bankruptcy," said Bell, who held bonds.
Reached through his New York attorney, Arnold N. Bressler, Bell said his company now owns the Penthouse trademark licensing and publishing rights, including Internet rights.
Bell's NAFT Ventures, which bought the magazine, is located in a corporate park on Broken Sound Parkway in Boca Raton. There has been speculation that he might move the magazine to South Florida, but a hesitant Bell would not confirm or deny a move.
"We just signed a lease in New York," he said.
Meanwhile, the February issue of Vanity Fair says Guccione was saved from eviction from his East 67th Street home in Manhattan by Dr. Luis Enrique Fernando Molina, who controls PHSL.
The article says Guccione holds out hope that Bell might still put him in charge of a magazine.
Bell hasn't said much about what his plans are to resurrect Penthouse, other than to tell Vanity Fair it would be a new and softer publication, more like Maxim.
While Bell's company is privately held, Ken Gruneisen, a Lighthouse Point broker and publisher of the investor newsletter Canslim.net, said neither the publicly held IBD nor PHSL have very promising-looking fundamentals. Although they are low-priced stocks - 45 cents for IBD recently and 5.5 cents for PHSL - both would be considered gambles.
Hanging over IBD is the situation with AMEX.
"They are apparently well on the way to being delisted from the American Stock Exchange," Gruneisen said.
The deal to acquire iBill almost didn't happen.
In December, IBD announced it intended to terminate the iBill acquisition. IBill was having cash flow problems at the time, after its agreement to handle Visa card transactions with First Data fell through. That business represented the majority of iBill revenue.
"The fact that, months ago, iBill fell out of favor with First Data Corp. seems to be a big red flag in this case," Gruneisen said. "That was clearly a major setback."
But on Jan. 21, IBD did an about face. Although it conceded that the acquisition could constitute a violation of the AMEX listing requirements, the company said it was consummating the deal anyway. IBD was unable to obtain all of the investor consents necessary to terminate the acquisition of iBill or to extend the previously set deadline for closing the deal beyond Jan. 21.
According to IBD, there were also recent "positive and potentially favorable" developments in iBill's business.
One was that iBill had struck a new deal with Visa to handle transactions.
Sources from IBD, PHSL and iBill declined to be interviewed for this story, but PHSL is evidently happy the deal happened.
"We are very happy to have concluded a transaction we have been working on for several months," Executive VP Claude Bertin said in a news release. "PHSL shareholders will economically participate in the future of iBill and Penthouse Media Group through IBD's ownership in the two companies."
