From forced dildocam accusations to charges of overcharging and financial hanky-panky - Seth Warshavsky has a public image problem these days.
Last week, the Internet porn emperor was listed at number 40 on Time's listing of the fifty most important technology faces. He even has hopes of taking his Internet Entertainment Group public in the near future - which would make him the sixth adult-oriented business to trade publicly. But this week, Warshavsky seems to be spending more time fighting accusations than fighting for his business growth.
Barely a week after current and former workers at IEG's Clublove complained to Washington state authorities over being forced to use dildo cameras as part of their online performances, other current and former IEG workers are accusing him in sworn statements of overcharging thousands of credit cards for memberships to Web porn sites.
The Washington Post also reports the same statements saying IEG revenues are "substantially less" than Warshavsky has boasted of in public.
Warshavksy tells the paper the multiple charging incidents were accidental, and overcharged customers were reimbursed, while standing by his statements that IEG revenues amount to near $50 million a year. But he did acknowledge cash flow problems and "an accounting mess" this year, the Post says.
"Our books aren't 100 percent in order," he tells the Post. "It's not perfect. We need to get it together."
The overcharging allegations came in connection with a lawsuit Warshavsky brought against two former IEG executives and a company attorney, accusing them of violating a non-complete contract clause and stealing a company e-mail list. The three denied the charges and Warshavsky settled the suit Monday, the Post says, in exchange for the two former executives - Evan Wright and Bert Reitsma - signing a statement saying information they gave the newspaper might be incomplete and could be inaccurate. The company attorney, Eric Blank, signed no such statement, the Post says.
Eight other current and former IEG workers signed statements before Monday's settlement about what they knew of irregular financial activity, the paper continues. Wright, Blank, Reitsma and a fourth worker told the paper they broke ties with IEG because "they did not want to be implicated in what they feared were illegal actions."
The paper says former chief technical officer Ron Chao gave an interview and an affidavit saying he quit after Warshavsky pushed him to overcharge credit cards. Chao also said the bank processing IEG credit card transactions withheld funds. The affidavit mentions between $400,000 and $2 million in forced billing system generation on several occasions, in addition to normal generation.
"At first, Seth told me that we would credit the people we were 'double-billing' (to generate revenues, we were charging credit cards that had already been charged for the same purchase); then later he told me not to credit anyone unless they called to complain," the affidavit continues.
The Post also says Chao's interview included a recollection of Warshavsky getting angry when he saw customer service crediting people. "He said, 'Don't you [expletive] do that. The paper also says witnesses confirm Warshavsky verbally abused Chao, including an ethnic slur, which Warshavsky denies making.
Reitsma took over Chao's duties and, the following Monday, he charged, Warshavsky asked him to overbill credit cards for $2 million. He responded he didn't know how to do that, the Post says, a response he intended to stall the IEG boss - Reitsma says he decided to leave the company as soon as he could.
Warshavsky himself says only that a problem emerged six months ago when an unspecified number of customers were mistakenly billed multiple times because of a computer glitch related to VoyeurDorm - the Florida-based Web site now facing shutdown thanks to a battle with Tampa zoning authorities. Those customers, Warshavsky tells the Post, were all reimbursed, after accidental billing up to five times apiece in a fifty-day timeframe.
Warshavsky's troubles don't stop there. Workers say in their sworn statements their paychecks often bounced in the past year, while other court papers show vendors suing IEG, with Reitsma and other former workers saying creditors often were not paid until they sued.
Reitsma also says that when his first IEG check ($20,000 for moving expenses, the Post says) bounced, Warshavsky simply told him to find another vendor. "There is always another vendor," Warshavsky is said to have told Reitsma, who says, "In many cases, he's right. Many times, there is another vendor. But it became a problem over time because word had gotten around about this. We were being blacklisted, like by recruiting agencies."
IEG reportedly has faced fifteen creditor lawsuits in Washington state since 1996, with other cases coming in small claims court as well as superior court. There are also said to be "several dozen more" nationwide, the Post says. Most, the paper continues, have been settled.
All this comes to light a week after Clublove workers were said to have complained formally to Washington state labor authorities that not only were they forced to use dildo cameras during their performances but that conditions at the Web site's facility were far too unsanitary. Those workers also were said to have feared making formal complaints because of both the nature of the adult entertainment business and fear of reprisals from Warshavsky.
Another Seattle-area sex business worker said to know many of the Clublove women has described Clublove as "a pussy sweatshop."
