By Carrie Johnson
Washington Post Staff Writer
Wednesday, July 11, 2007
More than six years after America Online's troubled marriage to Time Warner, investors hurt by accounting tricks before and after the merger will begin to receive proceeds of the company's multibillion-dollar settlement in a huge class-action lawsuit.
Over the next 10 days, authorities will give more than $2.8 billion to 625,000 shareholders, bondholders and institutions that lost money in a scheme that helped AOL inflate advertising revenue from 1998 to 2002.
To resolve criminal and civil investigations of its accounting practices, the company two years ago agreed to hand over $300 million to securities regulators and $150 million more to the Justice Department. Separately, plaintiffs led by the Minnesota State Board of Investment recovered $2.5 billion, including $100 million from the audit firm Ernst & Young, in settling a long-running civil lawsuit.
Most of that money will be distributed by late next week, according to Dylan J. McFarland of Heins Mills & Olson, the Minneapolis firm that at one time dispatched more than 50 lawyers to review 15 million documents in the civil case.
U.S. District Judge Shirley W. Kram in New York held back $10 million in reserve after a technology company, BizProLink, argued that it deserved a share. Plaintiff lawyers said they will "vigorously contest" the BizProLink claim before the U.S. Court of Appeals for the 2nd Circuit.
The judge called the settlement "fair, reasonable and adequate" in a 2006 written opinion. She gave final approval for distribution of the money to Gilardi, a California firm retained to process claims and disperse funds, last month.
To receive money, claimants must have submitted applications by a February 2006 deadline and been vetted through a review process. Among those eligible were people who held AOL stock from Jan. 27, 1999, to Jan. 11, 2001; people who owned AOL Time Warner shares from Jan. 11, 2001, to July 24, 2002; and AOL Time Warner stockholders from July 25, 2002, to Aug. 27, 2002, according to a court allocation plan. Documents and more information about the case are available at http://www.aoltimewarnersettlement.com.
The distribution comes more than six years after the accounting issues surfaced and two years after the government settlement. Analysts said the delay shows how difficult it is to collect money and return it to investors harmed by fraudulent activity. Critics argue that the government needs to make the process more efficient and point to Government Accountability Office reports critiquing the pace of regulators.
SEC Chairman Christopher Cox told a Senate Appropriations subcommittee May 16 that he would establish an office to oversee settlement distributions and deploy technology to help authorities return money to investors more quickly.
Enron announced this month that more than 20,000 employees who received proceeds in a lawsuit filed by retirees who lost money in the Houston energy trader's collapse had been overpaid or underpaid because of a software problem.