Time Warner to settle AOL legal claim
$2.4bn fund for shareholders
Time Warner is to cough up $2.5bn to settle legal action lodged by shareholders dating back to its purchase of internet giant AOL.
In a statement Minneapolis law firm Heins Mills & Olson said the settlement "will benefit millions of shareholders who purchased or acquired AOL and Time Warner securities between January 27, 1999 and August 27, 2002".
The class action lawsuit relates to allegations that AOL inflated subscriber numbers and ad earning revenue in the early part of the decade.
In March, Time Warner settled a long running investigation by the US' Securities and Exchange Commission (SEC) into the fraud case. Without admitting or denying the allegations in the complaint, Time Warner agreed to pay $300m in civil penalties in a bid to draw a line under the matter
In a statement today Time Warner said it had "reached an agreement in principle for the settlement of the primary securities class action pending against it".
Its auditor Ernst & Young has also agreed to settle the litigation and agreed to pay $100m.
In a statement Time Warner chairman and chief exec Dick Parsons said: "Reaching an agreement in principle to settle this securities litigation and reserving for it and all other related matters mark important steps toward putting these matters behind us. By working to resolve these issues now, we're aiming to avoid the costs, risks and distractions of protracted litigation. Even after considering the reserve, our balance sheet remains strong."
Publishing Q2 results for the three months to the end of June the world's biggest media group reported that revenues dropped one per cent to $10.7bn compared to the same period last year.
And due to setting aside the cash sum to settle the legal action, Time Warner also reported an operating loss of $1.2bn. ®