New York (July 26, 2002) -- Media giant AOL Time Warner Inc. this week disclosed that the Securities and Exchange Commission was investigating its accounting for certain transactions, sending its stock price sliding.In a conference call with investors Wednesday, chief executive Richard Parsons told investors that the SEC was conducting a "fact-finding" inquiry into transactions reported on last week by The Washington Post. In afternoon trading on the New York Stock Exchange Thursday, AOL's shares were down $2.47, almost 22 percent, to $8.93.
The Post articles said AOL made "unconventional deals" from 2000 to 2002. One article published July 18 said AOL "converted legal disputes into ad deals," negotiated a shift in revenue from one division to another, and sold ads on behalf of online auction site eBay Inc., and booked the ad sales as AOL's own revenue. The report said AOL "found ways to turn the dot-com collapse to its advantage, renegotiating long-term ad contracts it risked losing into short-term gains that boosted its quarterly revenue."
Parsons said the company notified the SEC before the articles were published, and that the company was cooperating fully with the SEC. He also noted that AOL's auditors, Ernst & Young, had signed off on all of the transactions and that they all conformed with generally accepted accounting procedures.
"In the current environment, any such allegations will necessarily and appropriately draw inquiry from the appropriate regulatory authorities even where, as here, they are without merit," Parsons said.
-- Electronic Accountant Newswire staff
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