InterCept Payment Solutions has sold iBill to a newly-formed Penthouse International subsidiary, Media Billing, LLC, Penthouse confirmed in a March 23 announcement. But a Forbes report published the day before has raised questions as to whether the actual buyers include the son of an imprisoned scam artist who bilked investors of over $400 million – and suggests the father continues wielding a strong influence over the son's business affairs.
Forbes said March 22 that Jason Galanis, the son of John Peter Galanis, co-led a group with iBill's former chief executive officer, Garrett Bender, in buying iBill from Intercept, which had bought the adult Internet credit processor in 2002. The magazine also said the elder Galanis "has had a heavy if not controlling hand on Jason's businesses, which have been involved in the spectacular blowup of a Colorado bank and millions in losses for commodity giant Cargill."
InterCept Payment Solutions said in their own March 22 announcement that they had sold iBill to Media Billing, LLC, which they described as a subsidiary of Penthouse International.
The rest of the InterCept operation, the company continued, was sold to Pay By Touch, which they called a "privately-held provider of biometric authentication and payment solutions." The iBill sale involved Media Billing taking on "all of the outstanding member interests of iBill for $700,000 in cash, an $800,000 short-term note, and assumption of a $22 million working capital deficit," InterCept said.
But an adult industry veteran who spoke on condition of anonymity told AVN.com the younger Galanis may have been more a business mediator or broker between InterCept and Penthouse International, "since he has experience with adult in the past. "I think he got in the deal to make money off the transaction but not necessarily part of the purchase," the industry veteran said. "Either way it's bad news to have his name involved with a big sale of an adult billing company based on what his dad is known for.
"And the fact that First Data would have to sign off on any deal that hands over a treasure trove of sensitive credit card data to Galanis, or whomever he purports to represent," the veteran continued, "probably doesn't sit well with the conservative Greenwood Village, Colorado company, which also owns Western Union, TeleCheck, and now Concord EFS. First Data is already said to also be looking to exit from the porn payments business."
Another industry source, who also asked not to be identified, told AVN.com that there may be questions in the industry as to just how a Penthouse International subsidiary, freshly formed, could make such a purchase when Penthouse only recently filed for bankruptcy protection "and they don't understand online operations." He said there could also be concerns that credit card associations might step in and say things are getting beyond control, especially given Galanis's actual or suggested role in the deal.
But Penthouse International seems anything but worried for now. "Our clients will have access to a range of new branded services designed specifically to make their online businesses more profitable," executive vice president Claude Bertin said in a statement. "We believe there is no more potent online combination for adult entertainment than iBill and Penthouse."
InterCept recently agreed to settle a number of class action lawsuits coming from their "understatement" of iBill's involvement in adult entertainment, Forbes said, and made plans to sell iBill "for a lowball $37 million" to a group of iBill management and outside investors. But InterCept switched and said it would sell iBill "separately to yet another buyer, whom the company never disclosed."
InterCept had told Forbes the names of the new buyers had not been made public, but "folks close to the deal" made the younger Galanis's identity as buyer "an open secret," the magazine's Website said.
An iBill representative did not return an AVN.com query for comment before this story went to press.
In early February, iBill became part of InterCept's planned sale to its chief executive officer and a management group, a move that pleased iBill at the time, with spokesman Al Dugan telling AVN.com that iBill was "very excited about the future and the synergies that are going to result."
InterCept also said at that time that the buyers included an unidentified third-party payment processing system. Dugan said that third party was putting up "some financing for the deal" but didn't want to be identified otherwise at that time.
"What I can tell you at this point is that the upper-level management team generated a desire to basically attempt a management buyout of IPS," Dugan said then. "And that was accomplished by virtue of this signed letter of intent which took place [Feb. 10]. There's a third-party business who’s a transaction payment processor who's supplying a portion of the financing to get that deal done. Based on their desires we can't identify them at this point, because this is strictly a letter of intent expected to close by the end of the month."
