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SEC Sues 8 Former AOL Officials
The civil lawsuits accuse eight former AOL executives of using illegal accounting practices.
(By Mark Lennihan -- Associated Press)
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Ripp "exposed fraud that led to two federal prosecutions," said his attorney, David Geneson. "In one of those cases, the federal prosecutor in open court called him a 'white hat' at AOL, who was fixing problems, not creating problems. There is no question this lawsuit is just plain wrong."
The executives, whose careers have been beleaguered by the six-year investigation, hope a trial would bring an end to their ordeal, their attorneys said.
"Steven Rindner is a decent and honorable young man who conducted himself appropriately during his three years at AOL. While he is disappointed that the SEC has decided to pursue this unjustified course of action, he looks forward to the opportunity to clear his name," said his attorney, Mark J. Hulkower.
The SEC said it has e-mails and other evidence to back up its allegations.
For instance, the agency cited a deal involving WorldCom, a telecommunications giant that allegedly agreed to an illegal advertising arrangement with AOL even though, according to one of the e-mails in question, it didn't need to place ads on AOL Web sites. "This has turned into a money changing scheme and it can't continue," a WorldCom official said in an e-mail to AOL, the SEC said.
Kelly and other executives touted the advertising revenue to analysts and the financial press, according to the suit. Those public comments were made despite evidence that Kelly was aware of the false advertising practices as acknowledged in a May 3, 2000, e-mail to Wovsaniker, in which he allegedly stated, "[w]hat other round trips do you have coming down the line?"
The roundtrip tactics became known among executives as "BA Specials," a reference to the business affairs group run by Colburn, an eccentric star lawyer who was the company's chief dealmaker. Colburn's attorney did not respond to requests for an interview.
In addition to Colburn, those who agreed to settle were a former senior manager of business affairs, Eric L. Keller; former controller James F. MacGuidwin; and Jay B. Rappaport, another former senior manager of business affairs. Colburn and MacGuidwin promised not to serve as officers or directors of a public company for 10 years and seven years, respectively.
