Porn in the USA

Internet smut peddlers reaped millions from unsuspecting credit-card holders. Their partner in slime was right here in the heartland.

Heartland Bank bills itself as a paragon of Midwestern values.

Chartered as a savings and loan in 1887, the bank is one of the oldest in Missouri and brags that no customer lost money during the Great Depression. With 13 offices in the metropolitan area, the Clayton-based bank has $539 million in assets and a commitment to the community. Heartland sponsors local Christmas parades and School Supplies or Shoes, a charity that outfits needy schoolchildren with crayons, pencils, glue and other necessities. Bank executives tout Heartland's commitment to the community on the bank's Web site: "Heartland has strong, long-standing ties to St. Louis," says president and CEO John J. Wuest. "Building on that history we hope to expand our business with entrepreneurial vision and energy, while serving the individual needs of our customers."

Heartland is owned by some of St. Louis' most prominent citizens, who purchased the then-failing thrift in 1985. The partners include brothers John and James McDonnell III, heirs to an aerospace fortune; real-estate tycoon Andrew S. Love Jr. (once a law partner at Bryan Cave); and Love's top lieutenant, Laurence A. Schiffer, who is president of Love Savings and Holding Co., Heartland's parent company. Love and Schiffer control the bank. Under their leadership, the bank has branched out from its core business and formed subsidiaries that lease office equipment, collect consumer debt and make loans to car buyers who can't get bank loans.

Founded in 1997, Heartland Payment Systems is now the largest privately held credit-card-processing company in the nation.
Founded in 1997, Heartland Payment Systems is now the largest privately held credit-card-processing company in the nation.

One of the bank's most successful subsidiaries has been Heartland Payment Systems, a credit-card-processing company born in 1997. HPS last year handled $7.8 billion in transactions for 32,900 merchants across the country, making it the nation's largest privately held credit-card processor. HPS president Robert Carr expects to hit $10 billion this year. "We are a huge processor, and we always planned on being huge," he says.

HPS outgrew the bank in 1999 and switched to a larger Ohio bank to provide the capital needed to back its credit-card transactions. Heartland Bank cashed in on HPS's success in May, when it sold the business to the subsidiary's managers. "That's really our business model on some of these investments: Get them started, get them up to speed and then sell our interest or sell the company in total," explains Heartland Bank senior vice president David Minton. Asked whether the bank's relationship with HPS proved profitable, Minton answers "Absolutely."

There is a dirty little secret behind this success story. Two years ago, HPS jumped headfirst into Internet pornography, a swamp most banks dread. With the full approval of the bank, HPS signed deals with online pornographers who raked in millions of dollars in less than a year, with the bank collecting a percentage. It was a chance to make a lot of fast money. As Carr once said, adult Internet business was the secret to HPS's growth.

But that growth came at a price to thousands of innocent credit-card holders. The Federal Trade Commission says HPS did business with pornographers who ripped off consumers by charging credit-card accounts without permission. In one instance, HPS handled nearly $40 million in transactions for a California pornographer the FTC says was the mastermind behind the largest case of credit-card fraud in U.S. history.

HPS says it had no idea that its porn clients were cheating anyone. But the company ignored numerous warning signs while it processed transactions for smut peddlers no other bank would stomach.


While Heartland was going into the credit-card business three years ago, Brian Shuster and Mario Carmona were on the brink of the big time. The two California natives had known each other since 1992, when Shuster hired Carmona to be his personal trainer. Not yet 30 years old, the men were ambitious.

Shuster, an entrepreneur since high school, had sold everything from candy bars to T-shirts. He had a passion for theater and appeared in several community productions in Fresno, where he grew up. While still a student at UCLA in the late 1980s, Shuster created a cartoon called Chaos that drew comparisons to The Far Side -- like Gary Larson, Shuster had a dry sense of humor reflected by animals with human qualities that dominated his one-panel strip. Demand for Chaos skyrocketed after Larson retired. By 1995, Chaos appeared in 220 daily newspapers, including the St. Louis Post-Dispatch. Shuster was just 26 years old, supporting himself with comic strips he invented while blasting the Grateful Dead in his Los Angeles apartment. All he had to do was come up with the ideas and captions. He hired artists to draw the pictures.

But success in the cartoon world wasn't enough for Shuster, who dreamed of making it big on the then-fledgling Internet. With $85,000 in borrowed money, Shuster formed a company called World Wide Internet Networks, which signed up thousands of webmasters who agreed to run advertising solicited by World Wide, says Joe Jacobson, Shuster's attorney. But Shuster couldn't find any advertisers except online pornographers, whose business he rejected. "Brian said, "No, our policy is, we don't have adult ads,'" Jacobson says. "So he's got all these people willing to run the ads but no one willing to buy."

By 1996, Shuster was desperate. His borrowed money was just about gone, and he had nothing to show for it. And so he went into the online-porn business himself, taking on Carmona as an equal partner in a company called Xpics Publishing Inc. Meanwhile, Shuster abandoned Chaos. The reason was simple. "There was more money in Xpics," Jacobson explains.

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