Report: AOL probed for aiding others financial fraud

Federal investigators' probe into America Online Inc.'s (AOL) accounting practices has been broadened to include "aiding and abetting" other companies in artificially boosting their revenue, according to a news report released Wednesday.

The Internet unit of media conglomerate AOL Time Warner Inc. (AOLTW) has been under scrutiny since it was revealed last year that both the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) are looking into whether AOL artificially inflated its revenue through a series of questionable advertising deals. Based on internal investigations, the company announced last October it was restating two quarters worth of financial results.

However, a report published in the Washington Post's online edition Wednesday and based on unnamed sources indicates that investigators are also looking into whether AOL helped other companies artificially inflate revenue through "sham transactions."

If true, the probe could potentially heighten AOL's liability, making it accountable for not only its own financial irregularities, but for those of others as well.

AOLTW spokeswoman Tricia Primrose declined to comment on the report Wednesday, saying only that the company "is continuing to cooperate with investigators."

AOL and its former dealmakers, David Colburn and Eric Keller, have already been accused of enabling other companies to prop up their revenue figures, most notably in the case of real estate site operator Homestore Inc., which is also under federal investigation.

In fact, AOL, Colburn and Keller were named as defendants in a California lawsuit that claimed that they aided Homestore in falsifying financial results. The judge in the case dropped AOL as a defendant last week, however, citing a limitation on the ability of parties to seek damages on those that aid wrongdoings rather than perpetrate them.

Given the decision, it seems investigators have focused on AOL's aiding and abetting role, according to the Post.

While AOL and investigators remain mute on details of the probe, the traders were vocal Wednesday morning with their calls to sell shares of AOLTW, which fell 3.96 percent to US$10.67 on the report.

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More about America OnlineAOLDepartment of JusticeDOJHomeStoreSECSecurities and Exchange CommissionTime Warner

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