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Fact-finding probe into AOL revenues signals shares slip.

Byline: Business Correspondents

MEDIA giant AOL Time Warner has said that the US Securities and Exchange Commission is looking into a series of transactions that may have improperly boosted revenue.

Chief executive Richard Parsons said in a conference call with investors that the SEC was conducting a ``fact-finding'' inquiry into several transactions that were reported last week in the Washington Post.

According to the articles, AOL allowed a British entertainment company to buy advertising instead of paying an arbitration award in a legal dispute, shifted revenue between two divisions and sold ads on behalf of on-line auctioneers eBay while booking the sales as its own revenue.

Mr Parsons said the company was co-operating with the SEC. He also said the company's auditors, Ernst & Young, had signed off on all transactions and that they conformed with generally accepted accounting procedures.

SEC spokesman John Heine declined to comment.

The probe follows US accounting scandals at Enron, WorldCom, Xerox and Adelphia Communications, among others.

Concern over corporate wrongdoing has shaken investors' confidence and led to calls for better regulation of accounting procedures.

``I'm aware that we are living through a time that merely complying with (generally accepted accounting procedures) may not be enough,'' Mr Parsons said. ``I am personally committed to doing all we reasonably can to promote clarity and transparency for investors.''

Despite a massive Wall Street rally yesterday, AOL Time Warner's shares slipped 15 cents to $11.40 (pounds 7.60) in regular trading. In after-hours trading they fell another 75 cents to $10.65 (pounds 7.10).

The stock has plunged this year on concerns about the flagging fortunes of the AOL division, the credibility of company managers who failed to deliver on promised growth and turnover in the executive suite.

Bob Pittman, the AOL leader who said the January 2000 merger with Time Warner would lead to synergy and growth, resigned as chief operating officer last week.

The company also released second-quarter earnings yesterday. Revenue at the AOL division fell 3pc and cash flow fell 27pc as on-line advertising continued to decline.

Mr Parsons said turning around the division was his priority and he expected a new AOL chief to be named shortly.

In the first quarter of this year, AOL Time Warner reported the largest quarterly loss for a company in the history of US business.

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Title Annotation:Business
Comment:Fact-finding probe into AOL revenues signals shares slip.(Business)
Publication:Daily Post (Liverpool, England)
Geographic Code:1USA
Date:Jul 26, 2002
Words:396
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