- The Washington Times - Tuesday, May 20, 2008

ASSOCIATED PRESS

Federal regulators yesterday said eight former executives of AOL Time Warner Inc. fraudulently inflated the company’s online advertising revenue by more than $1 billion between 2000 and 2002.

Four of the executives agreed to settle the civil charges brought by the Securities and Exchange Commission by paying a total of roughly $8 million in fines and returning purportedly ill-gotten gains. They are David Colburn, Eric Keller, Jay Rappaport and James MacGuidwin, who was controller of the media company. The other three were in its business affairs unit.

The SEC charges are pending against the other four: John Michael Kelly, former AOL Time Warner chief financial officer; Joseph Ripp, ex-chief financial officer of the AOL division; Steven Rindner, a former senior executive in the business affairs unit, and Mark Wovsaniker, former head of accounting policy.

The world’s largest media company by revenue is now called Time Warner Inc.

New York-based Time Warner was roiled by the accounting scandal at its Sterling, Va., AOL unit, involving online advertising revenue and subscriber counts.

Time Warner agreed in late 2004 and early 2005 to pay $300 million in a settlement of civil fraud charges with the SEC and $210 million to resolve charges of criminal securities fraud in a separate investigation by the Justice Department. Time Warner also agreed to restate three years of financial results and to open its books to an independent examiner.

The restatements reduced Time Warner’s profits by about $1 million in 2000 and $161 million in 2001, while increasing its profits by about $62 million in 2002, $18 million in 2003, $30 million in 2004 and $16 million in 2005. For the first six months of 2006, the restatement raised its earnings by $15 million.

The SEC, in a civil lawsuit filed in federal court in Manhattan, N.Y., said the eight former executives either made or contributed to financial statements that distorted the company’s results.

The agency said the accounting scheme employed fraudulent transactions by which AOL Time Warner actually pumped up its own ad revenue by giving advertisers the money to buy online ads they didn’t want or need.

The SEC also said that Mr. Kelly and Mr. Wovsaniker, who are certified public accountants, misled the company’s outside auditors.