Saying that the funds are "safely" in escrow at their new bank, beleaguered payment processor Internet Billing (iBill) has vowed to pay client webmasters within the coming three to nine months, "and closer to three months than nine."
That was the word given to AVNOnline.com November 1 by a highly-placed source close to the company who spoke on condition of anonymity.
"iBill appreciates that the default mode within this industry is to assume the worst and hope for something slightly better than the worst," this source said, "which is a function of, you know, the unfortunate incidents that have occurred in the past with other payment processors.”
iBill has "not taken, spent, stolen, squandered, or otherwise disposed of [its clients'] money," the source continued, “but the reality is that the bank has the webmasters' money. And iBill will at some point recover that money, and will pass the money directly on to clients. I would not want to speculate for certain but I think that it will be any time between three and nine months from now, and closer to three than to nine. If it was up to [iBill], it would be tomorrow."
The source said the bank in question – whose identity iBill remains legally bound not to disclose for now, in spite of previously published speculation – "has the right to withhold that money for a certain period of time, pending certain chargebacks which we all recognize, given iBill's track record regarding chargebacks, is not going to be a significant amount."
A major part of the communication problem that arose around iBill, the source said, involved Care Concepts, the media holding company that is buying iBill and also bought a 40 percent stake in what is now Penthouse Media Group. The source said Care Concepts was "terrifically distracted" by the "urgency" to finish that deal, mainly because being able to buy that a "bargain" price "was a way of underpinning the financial security of Care Concepts, assuring its value," and thus assuring iBill's own value in the long run.
But the source also said it was not "any secret that [Care Concepts] may have taken their eye off the ball with respect to communication with iBill customers."
Hence several rounds of rampant speculation in the Adult webmaster message board community, from almost the moment iBill's previous bank arrangement with First Data Bank ended in September. The company was scheduled to begin a new deal with a new bank in November and tried unsuccessfully to compel First Date to live up to a purported agreement to help it make a transition to its new bank.
Last month, iBill insisted it would not close its doors and that it was negotiating release of six-month client Visa reserves said to be held by First Data. Executive vice president Cathy Beardsley said at the time that iBill began releasing funds to webmasters, while ceasing Visa transactions pending "proper compliance for our U.S. merchants," involving the webmasters’ completing new iBill merchant agreements with the company's new bank. But the company also said they would continue processing for other credit cards and payment alternatives.
That was just about the last word from the company itself, prompting new speculation and new rumors.
"The important point to get across now is that iBill has not spent the [outstanding] money," the high-placed source said. "I would say that iBill recognizes a responsibility not only to pay money due webmasters and all clients, but to provide a plan to clients with some level of assurance that key dates will be met. And, that iBill hopes to propose a plan of repayment within a few weeks."
The source said iBill has spoken to "several key accounts" looking to find a way to make sure they get their money and "to make sure that [iBill manages] to at least have an opportunity to work with key accounts going forward, so they can see [their] ability to conduct business is unimpaired."
Care Concepts is not backing down in any way, shape, or form from finishing its acquisition of iBill, the source said, but added it was understandable – considering Penthouse's recent bankruptcy – why people might have feared trouble.
"Care Concepts is a publicly traded company whose assets include a 40 percent non-voting stake in Penthouse Media Group, and Penthouse has just come out of bankruptcy," the source said. "It is a company that in its 40-year history has never, ever, during any quarter, lost money. Now, those don't match up in most heads. But most people have to realize General Media (the former name of Penthouse Media Group) went bankrupt because [previous] management borrowed a significant amount of money… on real estate projects that had nothing to do with Penthouse as we know it. And General Media had to repay a large amount of money that had nothing to do with the magazine."
The source said the company decided it couldn't refinance the remaining amount on that debt on its own, and chose Chapter 11 protection to do it. "[Care Concepts] owns 40 percent in an extremely profitable business," the source said.
And Care Concepts intends to continue negotiating with the American Stock Exchange "to put them at ease with respect to the content iBill is dealing with," the source said, but reiterated a position Care themselves has taken in the recent past: that they would complete the buy of iBill no matter what the AMEX decision turned out to be in the end, even if it meant seeking another stock exchange listing. Care said in late September they would close the iBill buy regardless if AMEX did not approve the buy completion by January 21, 2005.
"AMEX is a very, very high quality institution," the source said. "They go to extreme levels of pain to ensure that individual investors are protected. I am always impressed by the level of due diligence they conduct on companies that would like to be, or are, currently listed on their exchange. And they have raised some perfectly understandable issues with respect to iBill's business and responsibility to the public for controlling the content that the webmasters are using us to bill for."
The source said iBill has a strong financial partner in Care Concepts and that Care is completely committed to their business going forward together. And now that Care has completed its Penthouse stake acquisition, Care is ready to put full focus on iBill, its bank situation, and clearing up all communication lines better than they had been done in the past.
"You can understand that there would be any variety of rumors because when there's nobody speaking from iBill, people are going to assume the worst," the source said. "And if there's not clear, concise, credible communication from iBill, the customer's going to assume the worst. And in any service industry, when you're dealing with people's money, communicating with them is always the best policy.
"And I would say a note of apology is in order," the source added. "Where it's difficult to apologize for the actions of an unrelated financial institution, we certainly recognize iBill has been lacking in communication. There's a new degree of humility in iBill. We understand we should have communicated in a more precise manner."
iBill is said to be rolling out a new domestic processing program called iBill Direct, offering the company's traditional services and infrastructure and also including direct payment and settlement by the bank on a daily basis.
The company has also launched a stored value debit solution for domestic and international clients and revenue sharers, partnering with G-kard for both single purchase and recurring subscriptions in using this stored value debit. With this program, clients and revenue sharers can have sales paid out to their own G-kard account weekly and then use it for immediate cash withdrawal at automated teller machines or for point-of-sale purchasing around the world.
