The U.S. Securities and Exchange Commission is preparing to formally accuse Time Warner Inc. of improperly booking more than $400 million in advertising revenue, The Washington Post reported today (Ap
The U.S. Securities and Exchange Commission is preparing to formally accuse Time Warner Inc. of improperly booking more than $400 million in advertising revenue, The Washington Post reported today (April 13).
The case alleges that Time Warner and its America Online unit misled investors about the financial health of AOL by pumping up ad revenue in numerous deals, and by inflating AOL subscriber numbers, the newspaper said.
Citing federal sources, the newspaper said the improperly booked revenue related mainly to an ad deal with German media company Bertelsmann AG following Time Warner's 2001 merger with America Online Inc.
AOL Time Warner booked as revenue a $400 million payment from Bertelsmann to America Online for advertising, around the time it purchased the German company's interest in AOL Europe. The SEC said part of the sum should be recorded as a discount to AOL Time Warner for the purchase.
The SEC plans to send a formal letter of notification to Time Warner by early summer, according to the newspaper. The report also said Bertelsmann is part of a broader case that SEC officials are putting together.
In the fall of 2002, Time Warner restated $190 million in revenue from a few AOL advertising deals affecting the 2000-2002 period. The Post quoted people familiar with the case as saying that the SEC has identified numerous other transactions that require additional restatements.
The SEC is also considering seeking financial sanctions against Time Warner for not cooperating sufficiently with the investigation, The Post reported, citing people familiar with the probe.
The Washington Post said Time Warner officials declined to comment on the investigations. Spokespeople for Time Warner and the SEC were not available for comment early today.