HOME




Bob Johnson Takes Over Private US
2003-05-19 15:23:39

AVN.com fluffs Johnson and Private USA:

Besides video production, highlights of Johnson's 15 year career in adult include a stint as VP of Editorial at Crescent Publishing, which publishes High Society, Cheri and Playgirl, among others, and establishing the Web operations of Vivid Entertainment.

"Basically, I'm a triple-threat. Print, Web and video. That fits very well with Private North America," Johnson said.

[A few months later, Johnson was fired and he went to work for Playboy.com.]

...............................

From the archives of l-keford.com for January 19, 2001, an interview with someone who worked for Bob Johnson:

XXX says: Bob Johnson, from Brooklyn, is now a project manager for Vivid's internet operation. He's an interesting story. He's a Satan worshipping former editorial director for High Society aka Crescent. He's a Hallmark Satanist. He would quake in his boots if he ever ran across an honest to God Satanist. But he had all the Satanic accoutremont at his office.

It made people wonder if there wasn't something to worshipping Satan because the guy did absolutely nothing. He never lifted a finger. He did no work. People who worked for him would actually write on the galleys that people would send round, and everybody would sign off on it, that "Bob Johnson is a scum bag and he will never read this." And he would just sign off on it. A very lazy guy.

He moved from the editorial director's position to the head of the internet (1998) when they first broke the internet off and made it a separate entity on a separate floor. He is credited within the company, by most employees, of thinking up the scheme of the free tour. Getting people's credit card numbers to supposedly verify age. Promise the surfers the tour was free and they would not get charged. Then charge them up the yazoo.

Bob Johnson, his real name, possibly implemented a similar scam at Vivid in April - June 1999.

He's an avowed worshipper of Satan, but only in the most superficial way. Almost as if someone said, 'I'm going to be a punkrocker.' And they get their hair cut, and they get the jacket, and the boots and they go to the concert. But next week they could be Britpop fans.

Every Halloween was his High Holiday [Rosh Hashannah, Yom Kippur]. He would decorate his office and give out free donuts.

His big coup was when he interviewed Satanist Anton LaVey. That was the one piece of work that anybody could attribute to him. He got on a plane because he wanted to meet his hero Anton LaVey. A two part interview that appeared in High Society and the numbers on those issues tanked. They put an inset of LaVey's face on the cover and they sold about half the normal amount of newsstand copies. And not only did those two issues tank, but they affected the numbers for the next half dozen issues that came out.

Anton LaVey wrote "The Satanic Bible" which to this day rakes in tons of money. He had an affair with Jayne Mansfield. He had the affair with her and supposedly put a curse on her that resulted in her deadly car accident. He litigated to have Satanism recognized as a religion that deserves the same constitutional protection as other religions. He's based in San Francisco and heads the American Satanic Church. He's the self proclaimed pope of Satanism in North America. He's well traveled along the fringes of Hollywood celebrity.

Bob Johnson was editorial director at Crescent from 1984 to 1998, when he moved to the internet.

I had Vivid sources swear to me, Luke, that Bob Johnson had nothing to do with Crescent's internet operation when in fact he was the evil mastermind behind the ripoff.

XXX says: "Johnson's such a natural fit for devising the free tours scheme. Every time there was a questionable photograph of topless celebrity taken by paparrazi that may or may not have been ripped out of a European magazine, any time there was questionable material, do we have rights to the picture? His standard operating procedure was, 'Just run it.' He was a known photo thief.

"What's he good at? He's good at developing relationships with people like Bruce Chew and Carmine Bellucci, to be well liked..."

There were layoffs at Crescent a year ago. But six months prior, many people in the internet division were shifted around. They were sitting in offices not doing much of anything. Then after the FTC story broke, they got scared. And they started saying, 'We don't know what happened. We had people working for us that we let go... They must've gone too far.'

Bruce Chew's concept meetings would get interrupted and Bernstein, the CFO, would say, 'We're having problems with VISA. They found another one.' And Chew would respond, 'f-ck 'em. We'll go to Guatemala. And if they find us down there, we'll move someplace else.' There's enough anecdotal information like that to put the smoking gun in Bruce Chew's hands. He knew exactly what he was doing. He was willfully avoiding VISA. American Express cut them loose early on.

Luke: So what is Bob Johnson good at? What's his talent? How does he run these things?

XXX says: "That's the joke. It's a real mystery to anyone who's worked with him on a daily basis. Maybe there really is something to worshipping Satan because look how far this guy's gotten with no talent, no skills and no work ethic."

Luke: "And no morals either."

XXX: "Maybe that is what he's good at. Cutting corners and screwing people over. Maybe that was recognized by his superiors there. He only had two - Carmine Bellucci and Bruce Chew (real name). Maybe his underhandedness was something they recognized."

Luke: "I hear that Bellucci and Chew are ruthless people."

XXX: "Extremely. Carmine fired somebody for breaking his chair. This guy was a little overweight and he broke Carmine's chair. That was it. He was fired the next day. Bruce Chew was famous for threatening people with strangulation in concept meetings. There were the terms, 'I really got Brucified,' or 'I really got chewed out this time.'"

Luke: "Bob Johnson's been at Vivid almost two years."

XXX: "When we heard about that, everybody was saying, my god. They probably just want to keep him for six months, find out everything he knows and then cut him loose. Vivid, that's top of the heap. It doesn't get any better than that."

Luke: "They were running that free tour scam in May of 1999."

XXX: "They're not still doing it, are they?"

Luke: "No."

XXX: "Even after the FTC story broke, Crescent was still doing it."

The numbers for Crescents magazines, like High Society, are in the toilet. They made a conscious decision a year ago to go more hardcore and introduce pissing, penetration and transvestites, thinking it would bring the numbers up.

In 1995, Crescent published about 300,000 copies of High Society, of which about 40% sold on the newsstand. They're run has been reduced to 86,000. A lot of the copies would wind up getting destroyed. They did big print runs to impress their advertisers etc.

Their distributor was Cable who had a liberal return policy.

The big hit was when they got taken off the military bases.

If you look at their magazines now, it is poor. There are no serious articles. The design is cheap.

Cheri's always been the little sister to High Society. But now their numbers are better.

.............................

Born in October, 1941, secretive secular Jew Carl Ruderman owns a huge porn empire that stretches from the internet, to magazines like High Society to phone sex.

A prolific womanizer, he once dated actress Victoria Principle.

Ruderman, the November 1983 Hustler "Asshole of the Month," maintains posh residences in Florida and New York.

In 1976, the publisher of High Society and other sex magazines, New Yorker Carl Ruderman, wanted "a twist on an old theme," says Gloria Leonard. "He wanted a female publisher of a mens magazine. I was chosen because I had a strong background in PR and journalism. We [porn folks] also have other lives besides porn. I worked on Wall Street for many years. No one ever asks me my advice on the market. When the word 'porn' comes up, it's as though that's all you have ever done or will do…and I resent that. One of the reasons that I can successfully call myself a survivor is that I did not let the adult business be the be-all and end-all of my life. I still go to the theater, I still listen to jazz… I have friends who work outside the industry. It is part of my life, it is not all of my life. I'm sure that you [L-ke F-rd] and others would like to think that… We are compelled to live a certain lifestyle 24 hours a day to fulfill a certain fantasy."

Phone sex took off in 1983, with Gloria Leonard and High Society magazine leading the way. "We tried to figure out how to make some money off our phone lines. At first we simply used them to announce the contents of our coming issue. Then we wrote sexy scenarios [jerk-off routines] which the centerfolds recorded." On special days, like Christmas or Valentine's Day, Gloria recorded her own masturbatory fantasies.

Although Carl Ruderman is widely known in smut circles as 'The Father of Phone Sex', in point of fact he pilfered the idea from the true originator of dial-a-porn, editor Jeff Goodman, whom Ruderman fired when the idea took off.

Goodman writes Luke 7/3/01: I actually got the idea of paid phone sex when I worked for David Zentner as an editor. He used to spend long hours on the phone having masturbatory conversations with women he would meet through his publications. I always wondered that if David loved to do this so much, so would millions of guys.

We first set up phone sex with 2 ordinary answering machines in the High Society office when I went to work there. Ruderman claimed no one would call, I insisted they would. We put a number on a centerfold in one issue saying you could "hear the girl"...the answering machines BURNED OUT before the issue hit the stands from guys working at the presses calling and telling their friend. Then we bought 9 commericial heavy duty machines and they ran off the hook 24 hours a day with more phone lines being put in weekly. Still no revenue from it though.

Pretty soon the phone company was calling...."What are you doing there? Our Manhattan switches can't handle the call levels....millions of calls!"

I negotiated a way to get paid a few cents per 976 call. Everyone at phone company said they could not pay us, impossible, never done before, but finally met with someone with a brain who realized the potential and a way to set it up. Ruderman had his first million dollar check copied and framed on his office wall at Drake Publications.

There is a video tape, made to document the company at the time around 1982, which actually shows me explaining, inventing, and setting up the first phone sex lines...a dubious honor. "Jeff, I'll take care of you", was Ruderman's speech to me. I was 22, dumb, believed him. He went on to make many tens of millions, I indeed got the dump when it took off, never got a cent. I was a stupid kid, should have signed a binding contract with royalties. Many, many more interesting facts if you are interested.

I was in porn business for many years as editor, packager, publisher with virtually every player. Now am in other business. I have a new idea which will be many times bigger than phone sex, am looking for venture capital...it will be expensive, but, if I must say so myself, will be the biggest thing since sliced bread (another fav phrase of Carl Ruderman).

10/26/99

Deep Throat tells Luke: Well it seems you have a relationship with Serge Birbair already. The guy is brilliant, a story unto himself. He's made millions of dollars by working the adult webmaster chatboards through charm, intellect and bully boy tactics. I think he's a thief in that he herds up cattle (innocent web surfers) and hands them over to be slaughtered by the company he provides clicks for. Maybe you don't think this is illegal or a scam but I don't have any doubts that one day the rumors will come true and Multimedia Forum the company Serge works for will be charged by the FTC.

Serge claims he doesn't give a sh-t because he is only an advertiser for the compay. I'm no lawyer but I think his role is more, legally anyways, and he has known all along about the fraudulent way his bosses do business. Here's how Multimedia Forum does business and remember that of all the major players in the online sex industry they are the ONLY one who does business this way. Why? Because all the others know they could lose their businesses running the same scam bullsh-t.

Serge refers to his boss as Yishai [Habari], Israeli? Anyways they publish the glossy girly mags High Society and Celebrity Skin amongst others [publisher Carl Ruderman, a king of phone sex and possibly credit card churning]. Here's how they work their scamming Luke. Serge provides them with 1 million, give or take, fresh victims a day. check out http://www.pcdataonline.com , they are the Nielson ratings of the online world, SergesLinks the site that Serge redirects his traffic from ranks usually about 50, right up there with the big boys of the Net, among adult sites he is 4th now in terms of traffic.

Usually when a surfer winds up on the doorstep of an adult website, they are offered a tour, along the tour there is always a join button/link, often there is some sales shpiel about a FREE TRIAL or a FREE WEEK. The big credit card companies have mostly put a stop to the free trials, those sites with their own merchant accounts and with the right processing company still do them. Ok, when a surfer thinks he'd like to take advantage of this FREE or 1.95 trial he's taken to a join page, legally at this point BEFORE a customer enters his credit card info there is a link to the Terms and Conditions of this business transaction.

The credit card processors usually demand this to protect themselves too. The terms and conditions usually tell the surfer that he is getting a free or cheap trial for 3 or 7 days BUT if he doesn't cancel the subscription before the time period expires the membership will RECUR at 30 bucks a month until he does cancel. RECURRING BILLING is the lifeblood of the industry, there are real concerns that the government is going to pressure the credit card companies to outlaw it.

Half the adult online businesses would fold up if this happened. Responsible companies like CEN run by Joe Elkind have been warning that companies like Serge's bosses are going to bring government heat via the FTC, Joe just posted a warning last week or so on Netpond, of course he xxxx'd out the site names but everyone knows the ones he's talking about.

Ok, here's what happens when Serge sends you to one of Yitzhai's sites, say http://www.cun-tv.com ....... the surfer sees it, it looks slick and he's intrigued by the FREE SEX TOUR graphic, so he clicks on it and he's whisked away to an html page with a form on it to input his info, at the top of the form is a shpiel that tells the surfer that he must enter his credit card information to prove he's of legal age to view the material BUT that his CREDIT CARD WILL NOT BE BILLED, at the bottom of the page in BIGGER letters it is repeated. THERE ARE NO TERMS AND CONDITIONS ON THIS PAGE.

So the surfer at this point sees no harm in entering his cc info he's so horny to see the naked girlies for free. Once he submits his information he is taken to a page where they ask him to choose a nickname and password to enter the site, buried on this page there may be a link to some terms and conditions BUT it's way too late, the surfer thinks he's getting a free tour. If the surfer is smart enough and he does find some terms and conditions he will see that he's about to become a member of the most expensive website on the Net, they don't quote a per month fee like 99% of other adult sites do, the sleazballs quote their fees on a per day basis, i've seen Serge's bosses sites at 1.99/day, not illegal but a definite attempt to confuse the consumer, nobody else does it.

A month later the surfer opens up his Visa statement and he finds out that FREE TOUR for which he would NEVER BE BILLED just cost him from between 50 and 80 bucks. I know ....... they got me twice about two and a half years.

By the way, the sites suck. They are bad for the industry, I can't even tell you how many people who don't know I am in this business have told me they were scammed, they are amazed when I tell can tell them the name of the site they were scammed on. Now it's a fact that 97% of people will NOT refute a porn purchase, most people don't even know what rights they have with the credit card companies and most men are embarassed to report that they were purchasing porn so they write it off as a bad experience. They also don't join another website because Yitzhai and Serge burned them :( Hurts the rest of us porn peddlers.

With recurring billing, some of these memberships get rebilled for months before the customer realizes something's wrong. Here's the scope of how much money is involved. Serge sends them I million fresh surfers per day, industry average is 1 in 500 surfers decide to join, with Serges bosses sites its probably higher because of the FREE tour and the GUARANTEE YOUR CARD WILL NOT BE BILLED scam, also notice that when you attempt to leave any of these sites in succession no less than 10 new browser windows will open with 10 other new sites owned by Yitzhai and High Society. Some people will bite on one of those sites.

So let's say that 1 out of every 350 people are sucked in by Yitzhai. That makes 2857 new members of Yitzhai's website everday of the week, 365 days a year. Multiply by that exorbitant 60 buck membership fee that 170,000 dollars a day flowing in, multiply that by 365 days it's over 62 million per year, work in recurrings and its easily over 100 million........and this has been going on for nearly three f-cking years.

Serge Bribair is a straight shooter with webmasters who send him clicks, he pays for raw hits at a decent rate because it doesn't matter how 'good' the quality of the traffic is when the sites he's sending the traffic on to has such a good scam waiting for it.

Now when Vivid announced that they were entering the online biz in a big way and were going to offer webmasters 35 dollars per signup they could send I was pretty excited. I like their stuff, the only porn I watch is the stuff with Vivid type girls, gorgeous chicks who you can't believe would be f-cking on video. When I got to there site to check it out I couldn't believe the web design was EXACTLY done in the same style as Serge's bosses, the same mousetrap, wording etc........... they have either used Yitzhai's operation as a blueprint or are in some kind of deal with him, I haven't been able to find that out.

There is a slight difference in how Vivid Video is running their sites, probably an attempt to walk the line of legality on advice of their lawyers. On the page where they ask you to enter your cc info and of course remind you THAT YOUR CREDIT CARD WILL BE BILLED there is a link to some terms and conditions. Totally confusing, on one hand they're telling me to go and enter my cc number and on the same page they're telling me if I go one step further I owe them 60 bucks. Thats why I sent them two emails trying to find out as a naive little surfer what the real deal is.......... no response to either letter :) It looks like Vivid is using the same scam that Yitzhai/highsociety is.

Here's what I know about the cc scam. As "Serge [Berbair] " described, the "free" tour actually charges you $50. There's now an entire floor of the Crescent building (201 2nd Ave) devoted to customer service, answering calls and cancelling accounts. A ton of money comes from first time users. Crescent (formerly "Drake") owns some 150 web-pages and have already been fined by the FTC. They are also the publishers of High Society, Playgirl, Cheri etc. It's the porn half of a publishing company that also puts out Travel Agent and Unique Homes. You never see or hear from Carl Ruderman, whose precise relation to the company now is mysterious (although the assumption is that money goes to him first). The important names in the day-to-day stuff are Bruce Chew (President), Carmine Bellucci (V.P.) and Steve Loshiavo (editor of H.S.). Bob Johnson, now at Vivid, was for a long time at Crescent. I know nothing about genuine criminal activity, only rumors of mob involvement. The funniest part of the company, I think, is Playgirl. Since they're homophobic, they have to pretend that the magazine is really for women, while they really know that it's read by gay men only. They only allow a female staff to run Playgirl, to keep the illusion going.

8/23/00

Crooks At Crescent Creamed

Luke: Here's a story I've been following for over a year. Check out my links to Serge Birbrair and this story here.

From the AP: WASHINGTON (AP) - Owners of scores of adult Web sites have been charged with billing thousands of Web users for supposedly free services, and billing other consumers who have never visited the Web sites at all, the Federal Trade Commission announced Wednesday.

Both the FTC and the New York attorney general's office filed suit in U.S. District Court seeking to halt the billing practices and have asked the court to freeze the defendants' assets in order to reimburse consumers. Crescent Publishing Group, Inc., based in New York City, and its owner, Bruce Chew, as well as David Bernstein are named as defendants in the complaint, along with 64 affiliated corporations that operate the adult Web sites, which include Playboy.com and Highsociety.com.

According to the complaint, the "Free Tours" generated income of $188 million between 1997 and 1999 - $141 million of which was generated in the first 10 months of 1999 alone. The FTC said the defendants operate the Web sites and promote them as free, saying that consumers' credit card numbers are required solely to prove that the visitors are of legal age to view the material - a common practice on adult Web sites. The sites say that the credit cards will not be billed, but thousands of customers were charged monthly membership fees from $20 to $90, the FTC said.

"I never saw any terms or conditions regarding how to become a paying member of the site," one consumer stated to the commission in the complaint brief. "During my time on the Web site, I never thought that the free tour had ended or that my credit card would be billed for visiting the site."

The complaint says that while consumers enter their credit card information, they view adult pictures in the margins of the page. Once the consumer presses a "Continue" button at the bottom of the page, the card is billed, although no Web page says the tour has ended or that their cards will be billed. Consumers who tried to dispute the charges were thwarted, according to the complaint. The defendants used billing names different than the names of the Web sites, so consumers often had no idea who was billing them.

In the complaint, the FTC cited one consumer who visited Highsociety.com and had no idea why he received five subsequent $49.95 withdrawals from his checking account by companies named Split Back, Romulust, and Arachne. The corporations, 65 in all, were all owned by Chew and have the same business address, the FTC said. Also, the consumers had difficulty contacting the defendants.

Bruce writes Luke: Is there a Vivid video angle to this FTC investigation of Crescent ??? A guy [Bob Johnson] who used to work at Crescent has been running Vivids site under similar methods........... wouldn't be surprised if Vivid was under investigation as well.

Lensman writes on Netpond: The hypocrisy. I don't know of a SINGLE major freesite/TGP/freehost that wasn't sending traffic to Crescent. The only thing that matters to webmasters is money. Now that they are gone, it easily makes Amateur Pages the largest conversion free program on the web.

Raw Alex writes on Netpond: As for Cresent... well... let's just say that gravy train is obviously over. Programs that depended on them to buy traffic are basically going to have problems paying their bills.

Anne Marie writes on Netpond: Interesting article about Crescent. I suppose they had to have 64 companies to have been able to maintain merchant accounts, opening new firms and new merchant accounts as the old companies' merchant accounts were closed. What amazes me is that one guy owned all the companies and used the same address and raked up 188 million in transactions. Either the credit card companies don't read applications or use any due diligence or those penalty fees are proving to be profitable enough to turn a blind eye.

Mutt: I never 'looked the other way'. Others who didn't publically and I assume privately, JoeE, MikeAl, Brad Shaw. I gave up discussing Crescent/Yishai/Serge on the boards long ago. Dirty filthy money all of it. The one thing you can't call Serge is a hypocrite. He basked in the glory of sending the sheep to slaughter. Who looks the most ridiculous in this? The self anointed saviour of online porn, Andy Edmond. I'm sure the politicos he's been busy dazzling will be thrilled to know that the Jesus of Porn sold millions of hits and victims to Crescent knowing full well the scam they were running.

Hmm writes: What I would like to know is how did Crescent manage to get away with it for so long without being shut down? If I did what they did I would have enormous chargebacks, I would loose my merchant account, and I would probably not be able to get another merchant account. It makes me think that people in high places at banks or Visa were in on the deal, maybe getting big pay for approving new merchant accounts.

Justice writes on Netpond: Ok, it is time for Serge Birbrair to go down! We've all seen him brag his childish f-cking mouth a thousand times about how he got rich as a part of the Crescent/Yishai scam. Always bragging about making $30 million last year from the scam etc etc. Well, I will tell you all this right now. If just 1 or 2 of you takes the initiative and talks with the FTC, within a matter of DAYS all of Serge's assets will be frozen and taken by the GOV'T most likely. Goto this FTC article, and use the contact info at the bottom: http://www.ftc.gov/opa/2000/08/crescent.htm

Make certain the FTC knows about Serge being so proud of making $30 million off this scam last year alone. Believe me, I have assisted in busting scams before, and one or two helpful people calling the right person can quickly bring these scum to justice. These people are destroying our business, and we must put a stop to it. Brad, this is your chance to destroy Serge once and for all. For all our sake, pick up the phone and help. In no time, we can all be here laughing about them taking Serge's cars and houses and every penny he has, which is justice!!!

Luke says: An FTC source says they know about Serge and Yishai Habari but did not charge them with any crimes because he solely functioned as a click broker, and not as an operator of the Crescent scams.

1/19/01

Crescent Publishing Lays Off Third Of Workforce

XXX writes: "Crescent just laid off 1/3 of their workforce today in a Black Friday situation. Supposedly the move was necessitated by the price of lawyers to keep company president Bruce Chew of jail."

The layoff mights mean action in the FTC case against Crescent soon.

The Crescent Publishing employees know the company is an incredibly sleazy operation with dishonest billing practices. High Society got frequent letters from disgruntled customers who'd been ripped off by Chew's sleazy operation.

Carl Ruderman is the real owner of Crescent, not this Bruce Chew frontman, who may own a big stake in the company.

Ruderman has a bronze bust of himself on the 16th floor of his building located a stone's throw from the United Nations on 901 Second Avenue between 42nd and 43rd Streets in Manhattan. Crescent takes up most of the building with the exception of half a dozen floors. NPR has their national office on one floor. And then there are a few non-profit groups.

Ruderman's father started High Society in 1973 and Carl inherited it. Initially the company specialized in technical manuals such as "How to rebuild your '67 Mustang." Carl vastly expanded the company's porno operation.

ThePosition.com named Ruderman one of the 100 most important people in sex. "The most famous unknown pornographer in America. Co-publisher of High Society and other sex magazines. The first to mass-market phone sex."

Ken Kimmel knows the history of Crescent well. He served for years as the executive editor of Cheri until a corporate shakeup in July, 2000. Then he ran the young girl books. The guy who ran the young girl books [magazines], took over the internet operations of Crescent, just a week before the FTC's big bust of Crescent in August, 2000.

One day, Ruderman's limo got a flat tire in front of a McDonalds. The limo driver said, 'Mr Ruderman, we have a flat tire. Why don't you just a seat in McDonalds? As soon as I get it taken care of, we'll move on.' The limo driver goes in there an hour later and says, 'Ok Mr Ruderman. We have the tire fixed. We can go now.' And Carl replies, 'But the waitress still hasn't taken my order yet.' He'd never set foot in McDonalds.

Ruderman has several homes around the world and he stocks them all with the same CDs, the same books, and the same furnishings, so that whenever he goes from one house to another, he won't have to feel out of place. Supposedly he's next door neighbors with Phil Donahue in Connecticutt.

XXX says: "I've often heard the receptionist on the 16th floor say, 'Oh no, Mr. Ruderman isn't associated with us in any way.' He's concerned about his yacht club acquaintances."

When the FTC busted Crescent, it took pages of legal briefs to list all Crescent's aliases.

1/28/01

FTC's Injunction Against Crescent - What It Means

Click here to read with Acrobate Reader the Federal Trade Commission's Preliminary Injunction against Carl Ruderman's Crescent Publishing.

Here are excerpts from the PI:

Defendants operate pornography web sites that have offered viewers "free tours" of parts of the contents. In order to take a "free tour," however, a visitor was asked to enter his or her credit card number. The visitor was assured that the card "will not be billed" during the free tour and told that the card number was necessary so that the defendants could verify the user's age. Once the visitor entered a valid card number, the visitor was permitted to begin the "free tour." At some point, however, the "free" part of the tour ended, and the defendants began billing the visitor's credit card...

Defendants Bruce Chew and David Bernstein, together with an allegedly passive investor, Carl Ruderman, and their corporate entities, own and operate "adult content" web sites... The practices of these web sites are a moving target.

Defendants have long been identified by credit card and related companies as having strikingly high levels of "charge backs"...

Defendants high level of charge backs caused related problems with Card Service International (CSI) and Heartland Payment Systems (HPS), businesses that help set up merchant accounts. CSI opened several merchant accounts for Crescent and affiliates between late 1996 and mid-1998 , and for a few months in 1999, both times eventually closing the accounts because of consistently high charge back rates. Likewise, HPS processed more than $22 million in bank card transactions for eight of the Bernstein - Chew businesses in 1998, but later that year closed all eight of the accounts because of excessive charge backs.

Crescent and affiliates had an average charge back rate of 10.51 percent in 1999. High in itself, this figure does not reflect the full extent of customer dissatisfaction as it does not include the additional 28 percent of sales that the companies credited back to customers during the same period...

...[D]efendants did not provide the name of Carl Ruderman, Crescent's "investor and economic beneficiary," in either of their voluntary disclosures to the FTC. This late-breaking news that defendants' have a silent partner makes defendants seem less than forthcoming...

Here's an exclusive picture of Ruderman with his arm around a black man.

Martin Finklestein writes: The effect of the opinion should be obvious to the reader, but a brief overview is warranted.

The suit was filed under two different laws by two parties: A suit under the FTC Act (unfair and deceptive practices) by the FTC, and a suit with identical allegations under NY law very similar to the FTCA filed by the NY attorney general's office.

The issue was whether or not to grant a Preliminary Injunction. A PI is an order that a party do or not do something, granted soon after filing a case, after a highly abbreviated showing of evidence. The purpose of a PI is to maintain the status quo or remedy on ongoing wrong before the lengthly trial process. It is not a final disposition on the case.

Many of the details of the PI issued by the court are not contained in the decision. Crescent offered its own version of the PI, which was identical to the one offered by the FTC/AG in nearly all respects. The judge's opinion therefore dealt only with the areas where the two parties differed: Largely, the questions of whether or not to protect Crescent's assets/profits to pay off a future judgement or settlement, and if so how to do so.

The judge granted the FTC/AG's request to prevent Crescent's owners from taking money out of the company. He granted the FTC/AG's request for a very large bond to be posted against damages. He denied the FTC/AG's request to place Crescent into receivership, saying that he was reluctant to order such a severe remedy on the basis of the incomplete evidence presented in a PI hearing. He also ordered Crescent to move all its money back to the US, except what had to be foreign for business reasons (presumably, offshore merchant accounts.)

Interesting question at this point: What, exactly, did Crescent mean when it said that their money just happened to pass through a bank account in Guatemala on its way to the US? Why would anybody do that? I mean, did their money just need a South American vacation before being put hard to work back in NYC?

The judge's refusal to grant receivership is interesting only because the opinion drips with indications that the judge is suspicious of the defendant's intentions and behavior. The answer is that Kaplan is known as a very cautious judge, many judges are wary of governmental power and reluctant to grant extreme remedies on the basis of incomplete evidence, and the judge apparently felt that the other restrictions he placed on Crescent and its owners' behavior were sufficient.

Two significant questions are evident from the opinion: 1) There's $113M or so that Crescent took in and claims it doesn't have; where is it? and 2) What is the impact of the fact that attorney generals are now bringing FTC-style suits against internet companies?

1) According to the opinion, they had something like $188M in revenue over two years, but weird net assets. The opinion says that they describe their net worth at $16M, but include in that a debt from Ruderman of $10M (from an "advance" paid to him) and "inventories" of $18M. (It's difficult to imagine what possible "inventories" the company could have, without that its net worth would be negative; but, accountants can legitimately do things that to the rest of us seem pretty odd) It also says that in 1999 they did a stockholder distribution of $15M out of net income of $12M. A lot of the money (I think upwards of $50M) is tied up in bonds and letters of credit to satisfy Visa on chargebacks. So, where's the other $113M?

The opinion makes not-so-subtle points about a bizarre corporate structure, attempts to hide that Ruderman was a partner (the judge apparently was told, and did not believe, that Ruderman is a silent partner) and offshore bank accounts. It also says that Chew is the sole shareholder. (The $15M appears to have gone to him.)

So what's the relationship with Ruderman if he doesn't own any shares? Did he loan them money, if so for what compensation? Does he have a contractual relationship with Chew? Does he take some sort of salary from the company?

Let's take a look at the numbers for a moment. In the first 10 months of 1999, they took in $141M, had net income of $12M, and paid dividends to the single shareholder (Chew) of $15M. But how did Ruderman get paid, and if so for what? If his relationship to them is based on debt (he loaned them money) or a salary (he performs some service) then that would be deducted from the $141M before net income was counted, and be counted as a liability, which might be why they claim a net worth of only $16M (really, a negative net worth once you deduct the claimed inventories and the "advance" apparently to Ruderman.)

From the way they appear to be structured, it doesn't look like his "up" was stock options; draining $15M out of $12M in net income isn't a way to increase the value of the shares; they were maintaining this company to have _low_ assets. (There are legimate reasons for doing this in a non-public company; then again, there are also illegitimate reasons for doing it.) Many private companies with a single owner compensate the owner with a salary rather than dividends from the stock; this has legitimate tax purposes, and is an entirely wholesome way of structuring a company. But Ruderman doesn't own any stock, and Chew took out as dividends in 1999 more than the company's claimed profits! So how the heck were these guys being compensated? And for what was Ruderman being compensated?

Another possibility is that Ruderman had no direct relationship with Crescent; he had instead a relationship with Chew, who in turn owned all of Crescent. Chew would then pay Ruderman out of his salary or dividends as payment on a personal debt or contract rather than one of the company. That would have interesting implications for who could be held personally liable for misbehavior by the company. But if that's the case, why is the company giving Ruderman a $10M "advance"? Advance on what? (By the way, the opinion only notes that this was probably Ruderman, the company said it was their "beneficial owner"; if Ruderman isn't that beneficial owner, who is?)

Some of the $113M must have been expenses --- content, employee salaries, webmaster payments, hosting expenses, etc. But some of it must have been owner/controller compensation --- much larger salaries or other compensation paid out instead of shareholder distributions to Chew and Ruderman. But the court also says, when it says that Crescent can't pay out any disbursements, loans, etc. to its major beneficiaries so that the company's profits are retained as a fund against its liabilities, that salaries can be maintained at their present level, so the big-player compensation doesn't appear to have been in salaries.

One of the really interesting things about the opinion is that the relief doesn't talk about Ruderman. The court appears not to know very much about him, or the nature of his relationship to Crescent, and hints that the defendants were deceptive about it.

Where's the missing $100+M? One possibility is that a lot of it is with Ruderman. Another is that margins in web porn, once you pay for the content, the free webmasters, the bonds to Visa, the transaction fees, the legal fees, and the hosting costs, just aren't as large as the industry would have you believe. In other words, a lot of these guys are lying about how much money they're making. A third possibility, and note that Chew pleaded the 5th and refused to answer questions, has to do with foreign bank accounts like the one in Guatemala. The Crescent story appears far from over.

2) Another thing to keep in mind, in the context of the industry's present Ashcroft related fears, is that this wasn't a pure FTC suit. The state AG was also involved. That's not a good sign for the industry if they believe (you know I think its bullsh-t) that these suits are realy a cover for an anti-porn jihad.

First off, by the way, Ashcroft has nothing to do with the FTC, its an independent agency not part of the justice department. On the other hand, the FTC doesn't bring criminal cases, the justice department does; when an FTC case turns criminal, it has to hand it over the the justice department.

Second, the state AGs have started suing. New York, like many states, has state laws nearly identical to the one the FTC sues under. If they can bring actions independently of the FTC against websites under those laws, what happens to the justice department won't matter a wit. All of those Southern and Western states that the industry is so afraid of (like that stuff with the Cambria list) have AGs, many of whom make Ashcroft look like a liberal. Each of them can bring actions just like the FTC actions against these web porn companies. If they catch on (Spitzer is a very aggressive AG, but they've all been getting aggressive recently) what happens with the FTC is pretty irrelevant; you won't have one anti-porn jihad, you'll have 50 of them. And they won't be brought by independent agencies with long tenures like the FTC, they'll be brought by officials who have to run for reelection every four years, and satisfy their Southern and Western constituencies.

2/6/01

Luke says: I was just reading the July 19, 1999 issue of Screw magazine which featured this satirical article by Johnny Scorpio about his days working at High Society magazine, owned by Carl Ruderman's Crescent. Here are some excerpts:

The vice-prez [Carmine Belluci] was a tall fellow named Guinea, and he wore a silk shirt, unbuttoned to show off a bunch of gold chains and his graying chest hair. He wore diamond pinkie rings on each pinkie and he spoke with a lisp...

When we filed out of Guinea's office, a weirdo wearing a bathrobe and pajamas almost ran me down, and didn't even say excuse me. He was unshaven and muttering to himself like a shizo; he reminded me of some nut you'd see feeding pigeons in the park. He walked into the VP's office and slammed the door.

"Who was that?" I asked Morty, our editor-in-chief [Ken Kimmel]. "Oh, that's Mr. Rutterman [Carl Ruderman]," he said. "He's the owner of the company. He's a little eccentric. He comes by every so often to see how things are going."

So now I was admitted into the inner circle of the porn magazine's hierarchy; I had gang-f-cked a chick with the vice president and the editor-in-chief. That's when I was invited to take part in a kind of Satanic virgin sacrifice hosted by the reclusive executive editor, a man with a shaved head who rarely left his office and was allegedly a High Priest in the Church of Satan (I'll call him Chuck). [It's Vivid's Bob Johnson.] It took place at Chuck's Park Avenue mansion. Chuck comes from money and just works in the porn field for kicks.

...Each guy chose a girl and proceeded to tear her clothes off, and once they were naked Chuck began uttering some cryptic incantations and dousing their bodies with goat's blood...

JohnnyScorpio@hotmail.com writes Luke: I worked for Crescent as associate editor of CHERI in '95-'96. I heard that Marc Medoff used to work there, and I know that he knows a lot about the business... He writes and takes photos for lots of men's mags, or at least he used to. (I read on your site that he has his own business now, dealing with photos and editorial material. I wasn't clear what it was. Does he supply men's magazines with material? Is he like an agent who receives photos and stories from others and he markets them?) Once I met Medoff when he was editorial director for Gallery and Fox--he interviewed me for a job but didn't hire me. I've written porn freelance for SCREW and others for about ten yrs. But I only heard gossip when I worked in the Crescent offices. I sat in meetings with Bellucci and Chew, and Ken Kimmel was my Ed-In-Chief, and Bob Johnson was Executive Editor of all the mags. I am still writing stories for Live Young Girls (a Crescent pub) but maybe that's over after this big shakeup at the company.

BTW, I met Seth Warshavksy. in Seattle when he flew me out there (from NY) to interview me for a vacancy for executive editor of Club Love (in '96). Scott Schalin (who used to be with Hustler) had the position and was leaving. Seth promised to hire me and I quit Crescent. But then he ignored my phone calls, leaving me high and dry, without a job, 'cause I quit as associate editor at CHERI. He hired someone else for executive editor.

Crescent had 200 employees when I was there, and editors there went to different mags at different companies. Rick Hall was managing editor of High Society. He went to Hustler's Leg World when they started it, and he was ed-in-chief. He's not there anymore, he left 1 or two yrs. ago. Mike McPadden worked at Crecent and he went to Genesis and was its managing editor. Then Genesis was sold to Swank about 3 or 4 yrs. ago, so everyone there lost their jobs. Originally, McPadden was an editor at Barely Legal, when that magazine was still pretty new. The art director of SCREW worked with McPadden at GENESIS, then he went back to Screw. So it's a lot of the same people working at different publications. McPadden wrote a bunch of porn scripts for Gregory Dark, too. I like the world of porn magazines, it's interseting. I currrently contribute articles and stories to a funky San Francisco sex newspaper called YANK. It' s sold in street boxes in the Bay Area for one dollar and 25 cents. Mostly it has hooker ads in it, but it also has writing in it. Does L.A. have something similar?

Four or five years ago Crescent started with the young girls mags, because they noticed that Barely Legal was selling really well. So they changed LIVE magazine to LIVE YOUNG GIRLS. Then they put out a few other young girl titles--purely 18, candy girls, finally legal. And like you said, lately I noticed that CHERI is doing hardcore and raunchy stuff, penetration and pissing. Do they sell that in Canada, I was wondering? I attributed it (the ever raunchier content) to their trying to compete with the Internet. From what you're saying, that High Society's sales figures are way down from five years ago, it sounds like this may be the last gasp of men's magazines. Do you think that they are going to die out before too long?

You're welcome for the Screw story. The sex part was just bs (mostly). The Japanese amateur girl was true, but I did not share her with the rest of the guys. Colleen I think was an ex-stripper, but she didn't give bj's to the staff. Screwin' the woman on the conference table was made up--but the ed's would get girls (potential models) to strip down in the conference room. Never heard of any actual banging on the table. A couple of parties they threw I went to were pretty good. One was a bachelor party, for the art director. Took place on a Saturday afternoon, in a rented space on East 14th Street (NYC). About a dozen porn chicks and models doin' lap dances, getting nude, doing lezzie stuff. But no out-and-out f-cking and sucking. Maybe some guys got a blow job, but I didn't. X-mas party had a girl named Bella (I think she uses the name Sasha Sweet in X-vid's) dressed as Santa claus, and I was dressed as elf. China Lee was there, and another familiar chick (can't think of ! her name). This party was in the office. The girls strip down, there's a band playing, etc.

Morty in the story is Ken Kimmel, who was ed-in-chief of CHERI for a long time. Mr. Ruderman--no, he didn't walk in with a bathrobe. He would drop in occassionally. Once I happened to ride up in the elevator with him. He seemed a little nutty. He was with this middleaged lady who is like his assistant or something. They were communicating through signals in the elevator.He was dressed all in denim garb--jacket jeans cowboy boots and hat. Maybe bolo tie too.

Guinea is Carmine Bellucci (VP--but while I was there he got his title changed to Sr. VP). David Bernstein is the guy who signs the checks (CFO).

Reclusive exec editor character is Bob Johnson. But it's not true that he came from money and was working in porn for kicks. While I worked there he lived in Staten Island. (That's one of the five boroughs of NYC, the most suburban one.) He was pretty nice to me. When I moved into a new apartment he gave me some furniture-- a nice couch, an ottoman, a lamp, etc. I went by his house on a Saturday when I moved and loaded the stuff into the moving van. He showed me around his house; his wife and daughter were out at the time. He actually wanted me to stay and hang out for awhile but I told him I should be going because I had hired a van and two movers and I was being charged by the hour. In his office at Crescent he had a framed certificate that said he was a priest in the Church of Satan. That Church of Satan thing was no big deal. He was a regular guy, it wasn't like he tried to project an evil character. He told me that Satanism is basically Social Darwinism. I read the Satanic Bible but put it down halfway through. It's a common sense kind of book, it doesn't have to do with casting spells and magic. I read Johnson's Anton LaVey article and thought it was pretty good. Johnson seemed smart about the magazine business. He was aware of the big picture I think. He was very good at coming up with catchy coverlines. He knew the finer points of punctuation--editors would ask him questions and he knew the rules. The comments he made in meetings were insightful. Originally he was editor of HAWK magazine. I think he started Hawk. I noticed one time that the H in Hawk on the cover of the mag had an eagle figure on it--the German eagle that the Nazi's used as an insignia. I pointed this out to Bob and he said, "That's scary--you're the first person who ever noticed that." I had nothing against Bob Johnson, I thught he was basically a good-natured guy. Others seemed to resent his position of authority (executive editor), and were perhaps jealous of his paycheck. When I was there he was getting 86,000. The Satanic party in the story is all made up.

The dildo sucking photo shoot in amsterdam was true--it's called the "CHERI SUCKATHON" and it was an annual feature (this was before they started showing hardcore) in which models sucked on dildos. This was Carmine Bellucci's idea. BTW, many of the photo sets come from Europe.

Here's an exclusive picture of Carl Ruderman with his arm around a black man.

2/22/01

Crescent Publishing Scam

From CNET.com: NEW YORK--U.S. prosecutors are investigating allegations that X-rated Web sites owned by a New York man defrauded customers who spent $196 million viewing pornography online, according to court documents in a related consumer probe by state and federal authorities.

More than 20 sites owned by the man [Bruce Chew] offered visitors "free tours" if they entered their credit card numbers, purportedly as a way to verify ages, court papers state. But after people clicked past the fifth screen, the sites began billing them $1.50 per day.

The sites were enormously popular, generating revenue of more than $141 million in 1999 alone, court papers indicate. Even after refunds of nearly $100 million to customers who complained of improper billing, the sites earned at least $196 million over four years, according to a civil suit filed by the Federal Trade Commission and the New York Attorney General's Office.

The Web sites' owner, Bruce Chew, said in papers filed in response to the suit, that he'd been told by his lawyer that "there is a grand jury investigation being conducted" by prosecutors in Brooklyn, New York.

Attorneys with the FTC suspect the Web sites may have defrauded viewers out of as much as $120 million.

4/23/01

Zack writes: Hey Luke, Crescent Publishing may already be violating the FTC injunction. As you know, they are prevented from doing business on the web without posting a 10 million dollar bond. I'm sure they haven't posted that bond, since they claim not to have the money and since they appeared to have shut down all their sites. But, at least one or perhaps three (or more) of their sites is still up. Celebrityskin.com is still up and is definitely run by Crescent. Liveyounggirls.com is also up and is most likely run by Crescent, since they publish Live Young Girls Magazine. That site bounces you to 18n'Horny.com. They might be able to claim that Celebrityskin.com is not "doing business on the web," since it's not a pay site. It is however an advertisement for Celebrity Skin Magazine. Liveyounggirls.com and 18'nHorny are both pay sites and both ask for your credit card number for a "free five day memborship." Conspicuously, both Liveyounggirls.com and Celebrityskin.com were Crescent sites not named in the original indictment. Anyway, the FTC should be tipped off.

18Nhorny will bounce you to a rabbit warren of other pay sites: sugarwalls.com, puref-ck.com, orgasm.com. Each asks for your credit card number for a free 5 day membership. Puref-ck has the audacity to offer you a year for free and then claim that they need your credit card because the "government requires them to use it for age verification"! Are these all run by Crescent? Are they so stupid to think that they can simply change the names of their sites and get away with the same stuff?

03/20/1998 Media Daily

Playgirl editor Ceslie Armstrong has been fired following a row with the brass at Playgirl Inc. over their intention to run unauthorized nude photos of actor Leonardo DiCaprio in the magazine's July issue.

Armstrong said she "went ballistic" when she discovered that her bosses had undercut her authority and made a decision that "goes against everything I feel about people's privacy." She claimed she was going to issue a threat to quit but never got the chance -- she received a call last Wednesday from president Bruce Chew , who terminated her employment "over speaker phone ... after a very brief conversation," she told First Day.

"I was shocked and I am very sad that I was fired," said Armstrong, who vowed to "evolutionize" the 500,000-circulation title upon joining it in July. "There was no forewarning. I was never counseled or put on probation." She claimed she briefly resigned two months into her tenure following an argument over her bosses' wishes to publish a hodgepodge of other celebrity nudes. She won that battle and returned, convinced her "plan for the magazine was understood."

In a brief statement released on Monday, Playgirl contrasted Armstrong's claim, saying her "termination was in no way related to the publication of any photographs or editorial content in Playgirl." Spokeswoman Kathleen Giulini said, "It would be character assassination if we were to say anything else."

06/27/1989 The Wall Street Journal

NEW YORK -- Few champions of free speech are as tight-lipped as Sable Communications, the plaintiff in last week's landmark Supreme Court ruling that eased a congressional ban on dial-a-porn.

Operators at Sable's Manhattan office answer the phones with a cryptic "Good morning, 5100" (the phone number's last four digits). Asked to give his name, the company's publicist replies, "We don't have one," adding that he prefers to be identified as "public information." Asked a question about Carl Ruderman , the man who runs Sable, the publicist says, "I don't know the name."

Even Laurence Tribe, the Harvard Law School constitutional scholar who argued Sable's case, says he knows virtually nothing about the company and only dealt with it through another law firm.

Within the porn industry, however, Sable is known as part of a secretive and prosperous empire, Drake Publishers Inc. Drake publishes Playgirl, Cheri and High Society, a magazine known for unearthing nude photos of Hollywood movie stars.

Drake also made news last fall when it unveiled "SzexPress," a Hungarian publication that it billed as the Eastern bloc's first sex magazine. Just this month, it made a bid for mainstream readers, agreeing to buy Venture, a troubled monthly about entrepreneurs.