U.S. to unveil deal with AOL on fraud charges

The U.S. Department of Justice (DOJ) will announce a settlement deal it has reached with Time Warner concerning accounting issues with its America Online (AOL) Internet division on Wednesday, according to a source familiar with the matter.

AOL has been the subject of investigations by the DOJ and the U.S. Securities and Exchange Commission (SEC) into its past accounting practices, including advertising arrangements with smaller Internet company partners and its methods for reporting subscriber numbers.

According to reports, Time Warner has agreed to pay around $500 million to settle all civil and criminal accusations resulting from the DOJ and SEC investigations. The DOJ will receive $200 million from Time Warner while the SEC would get around $300 million to close its parallel AOL accounting case, according to a report on the Web site of The Wall Street Journal newspaper. The New York Times newspaper is reporting on its Web site that the total settlement deal will be for $510 million.

Representatives from Time Warner declined to comment until after the DOJ press conference in Washington, D.C., scheduled for 3 p.m. local time.

While Time Warner would neither admit nor deny wrongdoing, a number of Time Warner executives could receive mild reprimands, according to the media reports.

Time Warner, which merged with AOL in 2001, publicly acknowledged in mid-2002 that AOL was the subject of an SEC inquiry into transactions made by the Internet company after July 1, 1999. The DOJ investigation soon followed.

Time Warner, based in New York, said last month that it had set aside $500 million to pay for any costs resulting from the investigations, which also included a probe into the manner AOL handled accounting for AOL Europe. Additionally, Time Warner said it may have to restate its financial results for 2002 in connection with the concerns at AOL Europe.