Time Warner nears US$750m settlement over AOL scandal

1.00pm - By KATHERINE GRIFFITHS

NEW YORK - Time Warner, the world's largest media group, is nearing an agreement to pay up to US$750m ($1.1b) in a settlement with the US regulator over wide-ranging allegations of accounting irregularities at its America Online internet business.

The sum would be one of the largest settlements the Securities and Exchange Commission has extracted from a company, and US$250m more than Time Warner announced earlier this month that it was reserving to cover a possible payment.

The SEC began to investigate the disclosure, advertising arrangements and treatment of subscriber numbers at AOL in 2002. The investigation has also focused on transactions with Germany's Bertelsmann.

The SEC has insisted that Time Warner restate the way it accounted for transactions with Bertelsmann in the months following the AOL merger, a request that Time Warner initially rejected.

The SEC's chief accountant has accused Time Warner and America Online of improperly counting US$400m from Bertelsmann as AOL advertising revenue, when portions reflected payments for other purposes.

As part of the settlement, Time Warner would not admit SEC allegations that AOL improperly pumped up revenue and profit before or after the high-profile internet company bought Time Warner in 2001.

The deal would not end the continuing investigation by the SEC and Department of Justice into various individuals who worked for AOL. But by not having to admit guilt, Time Warner would be strengthened against a flood of shareholder class action lawsuits.

Richard Parsons, the chairman of Time Warner, has been involved in the discussions with the SEC, The Washington Post reported yesterday. He is trying to fast-track the process to give Time Warner flexibility in how it raises funds and pays for potential acquisitions.

- INDEPENDENT