Little-Known Banks Profit From Web Porn

— Porn buyers spend more than $1 billion a year procuring dirty pictures on the Internet, browsing the offerings of Housewife Harlots, Man Lover, Porky Babes and thousands of other naughty or depraved Web sites.

Hidden behind all that forbidden skin is the engine making Web porn possible: the banks that handle the credit card purchases. They are a secretive lot, mostly unknown for their porn patronage. Among the banks currently or previously facilitating the titillation trade: Minotola National Bank of Vineland, N.J.; Heartland Bank of St. Louis, Mo.; Benchmark Bank of Dallas; Amtrade International Bank of Atlanta; and First Data's First Financial Bank.

The banks' role is revealed in several lawsuits that have roiled the online porn biz. The main driver of two of those legal spats is a firm known mainly to porn peddlers: Paycom Billing Services of Marina del Rey, Calif.

Last month the firm, one of a few obscure processors of credit card purchases outside the mainstream, filed a lawsuit against MasterCard alleging antitrust violations and fraud. The suit is pending in U.S. District Court in Los Angeles. MasterCard denies the charges.

Before that, Paycom initiated another battle in the same court, suing middleman Payment Resources International, which used to line up banks for porn companies, alleging it schemed to rip off tens of millions of dollars in porn charges due to Paycom. PRI, of Newport Beach, Calif., countersued, claiming $60 million in lost business.

Bizarrely, the suit drags IBM into the mess, giving new meaning to the nickname Big Blue. Paycom accuses IBM's Denmark unit of taking part in the alleged rip-off. IBM has moved to dismiss itself from the case.

Sexy Returns, Ugly Business

Paycom's suit also targets Minotola National Bank, accusing it of "purposefully" bungling the billing for its account. Minotola, with $500 million in assets, characterizes itself as "a legend in hometown banking." It settled the Paycom complaint by returning the $1 million in credit card funds Paycom claimed Minotola was withholding. Beyond the $1 million, says Minotola's attorney, Thomas Robins, in Los Angeles, "Minotola was so clean in all of this that we didn't part with any money."

Robins, acting on behalf of a receiver, has sued a bank in another case related to porn peddling: Heartland Bank and its since spun-off credit card processing unit. The suit was related to Heartland's alleged role in a notorious porn scandal involving the theft of 800,000 credit card numbers from yet another former porn bank — Charter Pacific. The case was dismissed on summary judgment last year.

"We thought we understood what we were getting into, but we didn't," says Robert Carr, chief executive of Heartland Payment Systems, adding that the processor has stopped handling porn purchases altogether. "You're not dealing with the most ethical people in the world."

So why even try it? Because of sexy returns. Heartland was able to charge more than the fees it levied on other merchants — a 3.5 percent take compared with only as much as 2.25 percent typically. Paycom in turn charges its porn clients up to 15 percent. One porn peddler paid $3.6 million to Heartland for handling $72 million in purchases. Paycom, in its suit against IBM and the others, says IBM and the banks took 30 cents per transaction plus up to a 6.5 percent slice.

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