Time Warner Inc. has settled an Securities and Exchange Commission investigation into fraudulent accounting of AOL advertising revenue and subscriber numbers.
The company will pay a $300 million fine and incur other penalties as part of settlement, which was approved by the SEC today.
The SEC charged that, as Internet stock properties began to lose value in mid-2000, Time Warner "employed fraudulent round-trip transactions that boosted its online advertising revenue to mask the fact that it also experienced a business slow-down," according to a statement released by the commission.
Time Warner neither admitted nor denied any wrongdoing in the settlement.
In addition to the fine, Time Warner will reduce reported online advertising revenues by approximately $500 million (in addition to $190 million already restated) for the fourth quarter of 2000 through 2002.
The company agreed to comply with an SEC cease-and-desist order issued to AOL. Time Warner will also re-state accounting of a consolidation of the AOL Europe venture, which it co-owned with Bertelsmann.
Time Warner Chief Financial Officer Wayne Pace, Controller James Barge and Deputy Controller Pascal Desroches also settled SEC accusations that they caused the reporting violations, the SEC said, but they did not admit any wrongdoing.
"We're committed to cooperating with the independent examiner as well as fulfilling all of our other obligations under the settlement," said Time Warner Chairman and Chief Executive Officer Dick Parsons in a statement. "At the same time, we look forward to continuing to operate our businesses best in class and delivering sustained, superior growth to our stockholders."
Stephen M. Cutler, director of the commission's division of enforcement, said: "Some of the misconduct occurred while the ink on a prior Commission cease-and-desist order was barely dry. Such an institutional failure calls for strong sanctions."