AOL Time Warner might have to restate its financial results by as much as an additional $400 million because of the government investigation into accounting improprieties at its America Online division, according to a company filing Friday.
In a filing with the Securities and Exchange Commission, the media conglomerate said it had been notified that the SEC believes that two transactions involving America Online and Bertelsmann AG were accounted for improperly. Those transactions involve advertising revenue and the dispensation of Bertelsmann’s stake in AOL Europe.
Such a restatement would be on top of the $190 million adjustment the company announced in October that it planned to make because of incorrect accounting practices at the online division.
The company said in the filing that it believes the Bertelsmann deal was done correctly, and is “engaged in ongoing discussions” with the SEC. But the filing also said the SEC “continues to investigate a range of other transactions principally involving the America Online unit.”
The SEC declined to comment, as did an AOL spokeswoman. But in a memo to AOL Time Warner employees, chief executive and chairman-elect Richard Parsons defended the transactions and said the company is cooperating with investigators.
“It is not possible at this time to predict how this issue will ultimately be resolved, or for that matter, to predict the ultimate outcome of either the SEC or DOJ investigations,” Parsons wrote. “What I can tell you is this: We are committed to dealing with these questions forthrightly and as expeditiously as possible.”
AOL Time Warner announced last summer that it was under investigation by the SEC and Justice Department for transactions at America Online. Since then, AOL Time Warner’s stock has tumbled as investors, already unsure about the wisdom of the 2001 merger between America Online and Time Warner, became further disillusioned.
In the fourth quarter of last year, the company took a $45.5 billion charge to account for the its plunging value. For the full year 2002, it lost $98.7 billion.
Also Friday, AOL Time Warner released its proxy statement, which included 2002 compensation figures for its top executives. Parsons and outgoing chairman of the board Steve Case each received a salary of $1 million. For the second straight year, neither received a bonus.
Additionally, the company announced that board member Daniel Akerson was retiring. Akerson, who heads XO Communications, was a board director at AOL before the merger. He will not be replaced, bringing the total number of board directors to 13.