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Players in Dazzling Deal Moved Into New Ventures

By Alec Klein
Washington Post Staff Writer
Thursday, December 16, 2004; Page E01

Nearly five years ago, several top executives involved in America Online's takeover of Time Warner were hailed as visionaries who had engineered the largest merger in U.S. history, a media powerhouse that would change our lives.

As it turned out, the merger did more to alter their lives. One of the men behind the $112 billion deal now is into new-age mental health. Another is spending his millions on a start-up travel company. A third is pitching bison burgers.

Time Warner Center in New York embodied lofty expectations for AOL, Time Warner leaders in 2001. (Daniel Acker -- Bloomberg News)

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Others continue to be the subjects of federal probes, apart from yesterday's announcement by the Justice Department that Time Warner Inc. has agreed to pay $210 million to settle charges that its America Online unit aided and abetted securities fraud. Time Warner has proposed paying an additional $300 million to settle civil charges.

The settlements are a far cry from the situation just a few years ago when, at the height of the dot-com mania, AOL was at the vanguard of the Internet revolution, and its Dulles headquarters was a feverish vortex of money, expensive toys and outlandish behavior.

Company secretaries were cashing out their highflying AOL stock and retiring as millionaires. Employees, fueled by lucrative stock options, pulled up in Ferraris, a not uncommon status symbol in the parking lot. When that wasn't impressive enough, some bought their own airplanes.

In one example that demonstrated how money had lost its meaning, a top AOL marketing official shipped her personal stair-climber machine to hotels when she traveled on business. When she forgot it on one trip, she bought another machine and, upon checkout, left it in her hotel room.

It was all part of the money machine that was AOL as its subscriber base and advertising revenue grew exponentially -- until early 2000 when the dot-com market began to collapse. Company dealmakers suddenly were under increasing demands to generate big advertising deals to meet Wall Street's rising expectations. And as the ad market hemorrhaged, AOL began to resort to unconventional methods to boost its financial numbers. In one instance, AOL converted a legal action into an ad deal; in another, it served as an ad broker for eBay Inc., the online auctioneer, but AOL booked the revenue as if it were its own.

Still, AOL managed to wrap up its deal for venerable media giant Time Warner in January 2001 to great fanfare. Melding the corporate cultures proved more difficult.

Egos occasionally clashed at what was then known as AOL Time Warner Inc. AOL's Stephen M. Case, then chairman, became petulant when Time Warner's Gerald M. Levin, its chief executive at the time, sent an e-mail to employees without including Case's signature. Levin, in turn, was disaffected when Case insisted on holding a board meeting after the Sept. 11, 2001, terrorist attacks. Levin thought it was inappropriate to discuss business in light of such a tragedy; as a compromise, they held a board meeting by telephone.

Eventually, Case plotted behind the scenes to oust Levin before Case himself was forced out as chairman after revelations that AOL had improperly inflated its advertising revenue at a critical time before and after its merger with Time Warner. The two men have denied any wrongdoing. The company eventually stripped "AOL" from its corporate name, becoming just Time Warner.

Today, Levin is far removed from the rough-and-tumble of office politics, serving as an adviser to Moonview Sanctuary, an upscale retreat in Santa Monica, Calif., that treats people's emotional and psychological issues. On its Web site, the retreat touts itself as a "sanctuary of calm and order in a world of chaos, pressure and fear." Among its services are treatment for "burnout" and "professional pressures." Levin did not return phone calls seeking comment.

Case has traveled a different road, recently buying a majority stake in Exclusive Resorts LLC, a two-year-old luxury travel company. Case, who remains a Time Warner board member, now is chairman of a small firm that sells memberships so people can vacation in luxury homes. In a video news release, Case said that the resort company is "poised to be a very significant, billion-dollar company." He found the travel company while surfing the Web. An Exclusive Resorts spokeswoman said Case declined to comment.

Meanwhile, Ted Turner, the former vice chairman who initially said he supported the AOL-Time Warner merger "as enthusiastically as when I first made love" and then later helped engineered Case's resignation as chairman, is involved in his wide-ranging philanthropies while also pushing bison burgers, which are sold by his expanding chain of restaurants, Ted's Montana Grill. Through a spokeswoman, Turner declined to comment.

Case's former No. 2 man, Robert W. Pittman, who was forced to resign as chief operating officer in the wake of the accounting scandal, has launched an investment firm, the Pilot Group. He did not return calls for comment. And David M. Colburn, AOL's ousted top dealmaker who was known for his aggressive business dealings, has maintained a low profile. Colburn, through his lawyer, Roger Spaeder, declined to comment.

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