The Securities and Exchange Commission has filed civil fraud charges against eight former executives of AOL Time Warner, blaming them for causing the company to overstate advertising revenue by more than $1 billion via round-trip accounting transactions.
AOL Time Warner (now known again as Time Warner) funded its own online ad revenue by giving companies the money to buy ads they did not want or need, according to the SEC. The commission alleged that from mid-2000 to mid-2002, former AOL Time Warner CFO John Michael Kelly, former business affairs unit senior executive Steven E. Rindner, former AOL division CFO Joseph A. Ripp and former head of accounting policy Mark Wovsaniker oversaw and executed the round-trip transactions.
Kelly and Wovsaniker, both CPAs, are also charged with misleading the company's external auditor about the fraudulent transactions.
The SEC also filed a separate complaint against four former AOL Time Warner executives who allegedly participated in the scheme. These four have agreed to settle without admitting or denying the allegations.
Former business affairs unit head David M. Colburn, former business affairs senior manager Eric L. Keller, former controller James F. MacGuidwin and former senior manager Jay B. Rappaport have agreed to permanent injunctions and to pay disgorgement, prejudgment interest and civil penalties.
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