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Time Warner, SEC Settle AOL Fraud Charges

The company is pursuing a joint bid with cable giant Comcast Corp. for the holdings of another cable concern, Adelphia Communications Corp.

As part of the SEC settlement, Time Warner agreed to open its books to an independent examiner, who will review the company's accounting practices for deals it brokered with 17 other companies from June 2000 to December 2001. Further restatements may be needed after the examiner's review, Time Warner said in a recent securities filing.

Time Warner Settles AOL Cases For $510 Million (The Washington Post, Dec 16, 2004)
_____AOL Series_____
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Part II: Creative Transactions Earned Team Rewards (July 19, 2002)
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SEC Announcement
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Ex-AOL Executive Guilty Of Fraud (The Washington Post, Apr 8, 2005)
AOL to Introduce Internet Phone Service (The Washington Post, Apr 7, 2005)
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The company said it would not be able to deduct the $300 million civil fine for tax purposes or to cover settlements of related shareholder lawsuits. Time Warner faces 30 ongoing class-action lawsuits, according to an annual report it filed last week with the SEC.

Time Warner had outlined the terms of the SEC settlement in December, when it resolved a related criminal case filed by the Justice Department by agreeing to pay $60 million in penalties and $150 million to create a fund for shareholders. Time Warner could be subject to criminal prosecution if it violates the terms of the Justice Department deal in the future.

Securities regulators and federal prosecutors in Northern Virginia said they continue to probe individuals who may have taken part in the fraud.

James T. Coffman, an assistant SEC enforcement director, said in a written statement that investigators will turn their attention "to those primarily responsible for the company's fraud and improper reporting."

In January, the U.S. attorney for the Eastern District of Virginia, Paul J. McNulty, indicted two former AOL officials and four executives at PurchasePro, a Las Vegas software company. Several other former AOL employees remain under scrutiny.

Time Warner stock closed at $18.42 yesterday, down 28 cents, or 1.5 percent.

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