Former Penthouse Publishers Charged

Penthouse International Inc.
(Other OTC:PHSL.PK ) defrauded investors in a 2003 quarterly financial
report by improperly booking $1 million in revenues, U.S.
regulators charged on Monday.

The former publishers of Penthouse adult magazine also put
the electronic signature of former ex-CEO Robert Guccione on
the report, even though he had neither seen nor approved it,
regulators said.

The Securities and Exchange Commission brought accounting
fraud charges against Penthouse, former Penthouse officer
Charles Samel and Penthouse shareholder Jason Galanis in a
legal action filed in U.S. District Court in New York.

"Penthouse, Samel and Galanis engaged in accounting fraud
and financial reporting violations at Penthouse" in filing the
report for the quarter ended March 31, 2003, the SEC said.

Guccione, former Penthouse chief executive, entered into a
separate settlement agreement with the SEC, it said.

Penthouse is today 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.

"Neither Penthouse Media Group Inc. nor its predecessor,
General Media Inc., are the subjects of the SEC complaint filed
today or currently has any relationship with PHSL Worldwide
Inc.," the current Penthouse publishers said in a statement.

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

"That payment should not have been recognized in that
quarter," said the SEC in a statement.

The March 2003 report also bore an unauthorized electronic
signature of Guccione and made it look like he had reviewed and
signed the report, the SEC said.

"In fact, Guccione had not seen or approved the filing,"
the SEC said.

Samel and Galanis filed the misleading report, knowing
Guccione had not seen or approved it; that Penthouse's auditor
had not done a proper review; and that booking the $1 million
as revenue for that quarter was improper, the SEC said.

Penthouse later made two more SEC filings "that purported
to correct misstatements ... but continued to make material
misrepresentations and omissions," the agency said.

The SEC said it seeks injunctions and civil penalties
against all the defendants. Litigation is pending, it said.

Attorneys for Guccione, Samel, Galanis and Penthouse did
not return phone calls seeking comment.