SEC charges eight ex-AOL TW execs with civil fraud
Inflating ad revenues
For two years, between 2000 and 2002, AOL execs cooked the books, bigtime.
They inflated revenues by more than $1bn, through artificial barter deals, by booking one-time gains as advertising income, and by booking the entire gross amount of advertising contracts instead of just the commission element. The Washington Post exposed the con in mid-2002. The US Securities and Exchange Commission (SEC) then went to work.
In 2005, Time Warner, AOL's parent company, got itself off the hook by paying the SEC $300m to settle securities fraud charges.
Now the SEC is gunning for the AOL Time Warner execs said to be involved in the advertising monkeyshines.
Today, it filed civil fraud charges against eight ex-execs. It has divided them into two groups of four: those it has let settle, and those it is pursuing through the court. Headed for a New York courtroom are John Kelly, former CFO of AOL Time Warner; Steven Rindner, a former exec in the company's business affairs Unit; Joseph Ripp, former CFO of the AOL division; and Mark Wovsaniker, former head of Accounting Policy.
According to the SEC, they "engineered, oversaw, and executed fraudulent round-trip transactions in which AOL Time Warner effectively funded its own advertising revenue by giving purchasers the money to buy online advertising that they did not want or need. Online advertising revenue was a key measure by which analysts and investors evaluated the company".
The four who have settled are all former employees in AOL's business affairs unit. They are not admitting or denying the SEC allegations, but they are collectively paying fines and penalties of more than $8m.
More at the SEC. ®
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