SEC probes Penthouse

Company's books for all of 2002, for 1Q of 2003 under scrutiny

NEW YORK — Just when things were looking up for Penthouse Intl. — its OTC stock, available since December, was trading high — the Securities & Exchange Commission slapped the House of Guccione with an investigation.

Add that to Penthouse’s already uninspiring situation — $43 million in debt, sinking revenue and magazine sales as skimpy as its models’ clothing — and things could be better for the 38-year-old company.

(Not that bad news is anything new for publisher Bob Guccione, who has been threatened by cancer and bankruptcy in recent years.)

According to an SEC filing, Penthouse’s books for all of 2002 and the first quarter of 2003 are being investigated. Also under scrutiny are the company’s accounting for a Web management agreement and its hiring of auditors over the last year.

Last month, Gotham-based auditor Eisner LLP terminated its contract with Penthouse after a dispute over a quarterly report.

According to the filing, the SEC has advised Penthouse, which is owned by General Media Communications, that “the inquiry should not be construed as an indication … that any violation of law has occurred.”

Penthouse said it will file an amended quarterly report and that any errors were inadvertent.

Last year Penthouse’s revenue fell almost 50% to $54 million from $101 million in 1998, due mainly to dipping magazine sales. Guccione has been vocal in his complaints that the availability of Internet porn has hurt business. Competitor Playboy also has voiced concern about the Web, but after some aggressive cost-cutting and an editorial shakeup at its flagship mag, the company recently posted its first quarterly profit in almost five years.

Penthouse’s hefty $43 million debt carries an equally hefty 15% interest rate.

Nevertheless, Penthouse’s bulletin board stock rose as high as $6.95 last month, up from $4.15 soon after it went public last December. On Wednesday it closed at $2.43, down 0.82%.

The Penthouse brand includes clubs, videos, fashion and games.