Media giant Time Warner will pay about $510 million to two US regulatory agencies to settle various fraud charges against its AOL unit, the company revealed this morning. Time Warner will avoid litigation by settling inquiries from the US Department of Justice (DOJ) and the US Securities and Exchanges Commission (SEC). However, the deals have several caveats, chief among them that the DOJ and SEC can further investigate company employees.
As part of the settlements, Time Warner will restate its earnings from 2001 and 2002, the third time the company has had to do so. The company will also open AOL's financial records from 1999 to 2002 to an independent accountant, who'll determine whether any of AOL's dubious financial transactions during that time merit yet another earnings restatement. Finally, the DOJ reserved the right to investigate other periods of Time Warner's business transactions and potentially pursue individual Time Warner executives if it finds any wrongdoing.
Time Warner's settlements are separate and at different stages of completion. The DOJ settlement, which is final, requires that Time Warner pay a fine of $210 million and covers criminal securities fraud charges. The SEC settlement, which covers civil securities fraud charges, will likely be completed in early 2005 at a cost of about $300 million. The deal is pending an SEC investigation into AOL's widely publicized accounting practices.
Time Warner merged with AOL in 2001 to form AOL Time Warner and later changed its name back to Time Warner when it discovered that the AOL unit was a financial albatross. The company will officially announce the terms of the settlements in a press conference today.