In 1997, Internet surfers looking for a good time on sites like www.sexygirls.com, www.erotic2000.com and www.1adult.com learned that they could access "MORE SEX for FREE" and "ALL NUDE ALL FREE PICTURES" simply by downloading special image-viewer software identified as "david.exe." But while the porn seekers were getting "FREE XXX IMAGES," the specially designed software secretly turned off their computer's modem volume, disconnected them from their Internet service provider, and reconnected them to phone numbers in Moldova. Each line would stay connected to a number in the former Soviet Republic -- collecting charges in excess of two dollars per minute -- even after the user had migrated from the site. In fact, the long-distance link would stay connected until the computer was turned off.
Tens of thousands of consumers in the United States and Canada began complaining about the huge charges they were finding on their phone bills. Investigators at the Federal Trade Commission traced the complicated long-distance chain to two web companies based in New York City: NiteLite Media and Audiotex Connection. When the FTC filed official legal complaints in October 1997, Peter Knobel was named as a party because his company, Cayman Islands-based Beylen Telecom, owned the Moldova numbers. Knobel told the FTC that he was unaware that the telecom's clients were involved in any illegal activity, and said he had the audiotext phone numbers shut down as soon as he learned they were being used improperly.
The FTC negotiated a settlement with Beylen and NiteLite in which the companies admitted no wrongdoing. Knobel signed the deal in November 1997, agreeing to pay a portion of the $800,000 that was to be returned to consumers. The FTC reached a separate settlement with Audiotex Connection that totaled nearly one million dollars.
That year, Paul Luehr of the FTC's Bureau of Consumer Protection told CNET's News.com that Beylen had acted as the technical mastermind for both companies. "We have alleged that Beylen provided all the companies with the instruments to carry out this scheme, from the phone numbers to the download program," Luehr said.
Knobel denies that Beylen was involved with the pornography industry in any way, saying that rumor was started by enemies of his Crossroads project. But the FTC settlement isn't the only place where Peter Knobel's name has been linked with the adult-entertainment business.
A 1996 lawsuit filed in Florida District Court lists the defendants as "Beylen Communications, Inc, W.K.P. Inc., Seth Warshavsky, Peter Knobel and Ruth Parasol." According to attorney J.B. Grossman, Beylen and W.K.P. -- a company that dealt in "international audiotext" or "10XXX" technology enabling callers to access various "live informational and entertainment services, similar to 1-900 numbers" -- were unfairly charging his client, Telecard Marketing Center, for use of its telephone-sex hotlines. Telecard ran out of money to pay for legal representation and the case was dropped, but Grossman stands by the information gathered for the initial complaint, which identifies Knobel as a registered officer of W.K.P. "We vetted our allegations very carefully," he says.
Knobel says he doesn't know anything about the Florida lawsuit, and adds, "You're fishing for bullshit."
The name more commonly associated with W.K.P. belongs to Seth Warshavsky, a man Wired called the "Prince of Porn" in 1999. Two years earlier, the tech-focused publication had printed a 9,000-word profile of the young entrepreneur, a scrappy pioneer of the online pornography industry. Warshavsky started his business in Seattle in the early '90s, using phone-sex numbers like the profitable 1-800-GET-SOME to build a multimillion-dollar operation. "Then, realizing that he could run calls through Canada and bill customers $3.99 a minute in long-distance charges that cost about one-tenth of that, he opened an operation in Vancouver," the article said. "Eventually he went in with two partners and formed a company called W.K.P. Inc. to build his own long-distance network."
One of those partners was the drop-dead gorgeous Ruth Parasol, another infamous phone-sex entrepreneur. According to the London Guardian, the California "porn princess" got her start when her father gave her a piece of the family business -- phone-sex hotlines -- for her sixteenth birthday. In 1995, after the FTC began targeting 10XXX numbers, Parasol and Warshavsky focused on moving the business to the Internet. Along with other audiotext entrepreneurs, they also looked at transferring their operations overseas, to countries like Guyana in South America, where laws were lax and tax breaks substantial. Parasol was part of the founding of Warshavsky's most well-known venture, Internet Entertainment Group, which was thrown into the spotlight when it distributed the pirated Pamela Anderson and Tommy Lee sex tape in 1997.
Both Warshavsky and Parasol amassed huge fortunes in those years, but legal troubles forced the Prince of Porn to flee to Thailand in 2002. Similar litigation threats prompted Parasol to retrench, and she went on to found the revolutionary Internet poker site www.PartyGaming.com. Forbes now lists her as 164th on the magazine's list of the 400 Richest Americans, with a net worth of $1.8 billion.
That leaves only the K in W.K.P.
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Knobel's connection to the international telecommunications industry is hard to untangle. In 2001, telecom consultant Joseph Tyndall was commissioned by Guyana's utilities commission to write a report on Guyana Telephone and Telegraph (GT&T), which provided the small nation's phone service. Tyndall examined the company's connection to the audiotext phone-sex industry, which paid to use GT&T numbers, and determined that it resulted in higher rates for local residents. The report took special note of GT&T's connection to Beylen Telecom and its president, Peter Knobel. Knobel had been hired by GT&T as a consultant, it said, and "traveled on business by private jet, with GT&T paying bills on his behalf."
But in testimony before the Guyana utilities commission in 1998, GT&T representatives gave no explanation for why Knobel's fees were paid in such a roundabout way, or for the faxed payment-transfer requests from Knobel. "This does not have anything about the sender except 'from Peter Knobel,'" the commission chairman complained. "It doesn't say which Peter Knobel, which company, nothing. Just 'City Bank. 640 Fifth Avenue. N.Y. $500,000.' There is no signature, nothing. And you would just transfer $500,000 like that?"
Tyndall's report concludes: "At the previous hearing, the Chairman referred to Mr. Peter Knobel as a 'phantom gentleman,' presumably because none of GT&T's witnesses seemed to be able to give any significant information on him or the companies with which he was associated."
They must not ski Vail.