Media giant AOL Time Warner CEO Richard Parsons said that federal regulators are probing accounting practices at the company's America Online division. Parsons said AOL is cooperating with a fact-finding probed launched by the US Securities and Exchange Comission.
The Commission's interest in the company's books was touched off by a July 18 report in the Washington Post reporting that AOL - the world's largest online media company - boosted online advertisement revenue through a series of 'unconventional' deals from 2000 to 2002, before and after its merger with Time Warner.
In response, AOL Time Warner said in a statement that all transactions reported by the Post were in accordance with generally accepted accounting principles.
The Post, citing AOL documents and interviews with current and former AOL staff, said AOL converted legal disputes into ad deals. It negotiated a shift in revenue from one division to another, bolstering its online business. The transactions cited by the newspaper comprised less than 2% of AOL's revenues during the period in question, the company noted at the time.
AOL Time Warner last night reported second quarter results, stating a downturn in advertising revenues continues to pound its online division. However, the company reported net income of $394 million for the quarter, or 9 cents per share, using standard accounting rules.
The media conglomerate showed a loss of $734 million, or 17 cents per share, for the same period last year. The company reported advertising and commerce revenue declined 11% to $2.1 billion. The company cited continuing 'weakness' in the online advertising market for the drop.
The company reported that its AOL division saw a 27% earnings decline in the quarter compared to the same period last year. Investors pounded the company's share prices, sending it to a 52 week low during regular trading.
On July 18 chief operating officer Bob Pittman, who was serving as interim chief of AOL Time Warner's online division, resigned after criticism that the traditional media divisions led by Time Warner were being dragged down by AOL's under-performance.
That was a far cry from when the merger between the two giants was hailed as the ultimate convergence between the media and the Internet world. Just before its merger, the combined market value of AOL and Time Warner was $290 billion. By Friday, the combined companies had a market capitalisation of just over $50 billion.
