As almost everyone knows, Playboy magazine founder Hugh Hefner believes in mixing business with pleasure.
But now those sober-sided attorneys at the Securities and Exchange Commission have put a crimp in Hefner's sybaritic philosophy, which they say he sometimes practices at the expense of the stockholders of Playboy Enterprises Inc.
In an administration action made public yesterday, the SEC alleges that Hefner and four other Playboy executives -- including his daughter, Christie, a vice president -- enjoyed some $2 million in perks from 1971 through 1978 that never were disclosed to company shareholders as required by federal securities laws.
Playboy Enterprises has settled with the commission by agreeing to take certain remedial actions, including hiring outside auditors to make sure Playboy executives separate business an nonbusiness expenditures in the future.
Simultaneously with the opening of the SEC probe, the Playboy board of directors established an audit committee to conduct its own investigation. As part of the SEC settlement, Hefner agreed to repay the company $796,413 which the audit committee concluded he owes for perks, plus interest. The other executives agreed to repay lesser amounts.
Hefner, who founded Playboy in 1953, is chairman and chief executive of Playboy Enterprises. He also holds 72 percent of the stock of the company, which publishes Playboy and Oui magazines and operates resort hotels and casinos.
According to the SEC, Hefner's life has been one extended expense account. Whether living in the Playboy-owned Chicago Mansion, the Playboy Mansion West or skipping round the world in his DC9 Big Bunny jet, Hefner viewed pleasure as business, and vice versa, the commission said.
He did pay annual rent of $7,800 for his lavish digs from 1964 to 1975, upping it to $36,000 thereafter, but the SEC said that the rental was insufficient.
The Internal Revenue Service apparently agrees with the commission. The IRS says $1.4 million in mansion costs between 1970 and 1976 were claimed as ordinary expenses by Playboy but should have been treated as income to Hefner. The IRS further asserts that fully 10 percent of mansion expenses were personal to Hefner, a claim that is in litigation at U.S. tax Court.
Hefner has maintained that it is virtually impossible to distinguish between personal and promotional expenditures.
The SEC notes that Hefner's lavish accomodations at the Chicago mansion included access to a "Roman bath," which the commission describes as "an elaborate bathing/sleeping area."
At Playboy Mansion West, the company spent $1.035 million refurbishing Hefner's quarters. Under a section of the SEC report titled "Hefner's Bacic Accommodations," the SEC says: "A staff of butlers functions 24 hours a day . . . In addition to food and beverage service . . . the butlers provided Hefner a large number of highly individualized services, including following detailed instructions in preparing food and arranging Hefner's recreational games in a specified manner."
Playboy has spent "substantial amounts on sophisticated video equipment, commercial films, blank films and tape cassetes for on-premise tapping," the SEC said, "and much of it is located in [hefner's] bedroom suite."