U.S. investigators examining accounting practices at AOL Time Warner Inc.’s America Online unit appear to be focusing on the actions of a former company executive, David Colburn, Friday’s Wall Street Journal reported.
The Securities and Exchange Commission has issued subpoenas to AOL seeking a variety of documents, some of which relate to transactions in which Mr. Colburn was involved.
Until last week, Mr. Colburn was an AOL executive vice president in charge of structuring many of America Online’s advertising and commerce deals. People with knowledge of the matter said that Mr. Colburn left the company under pressure last week — after one of his former employees in the business-affairs division told internal lawyers about a questionable transaction.
Meanwhile, AOL is planning a housecleaning in Mr. Colburn’s former department, business affairs, which arranged long-term sponsorships and marketing partnerships with advertisers. AOL executives said the division will likely shrink to a 10-person staff from its current size of about 90 employees. The former department members will be absorbed into other divisions. Online- advertising sales also likely will be separated from business-affairs deals. And transactions that involve multiple parties, such as AOL’s deals with Homestore.com Inc. and PurchasePro.com Inc. that are being scrutinized, could cease.
The overhaul is part of AOL’s larger efforts to turn around its ailing America Online unit. The Dulles, Va., division has been suffering from slowing subscriber growth and plummeting advertising sales. Much of America Online’s earlier advertising-sales growth was driven by the deals crafted by Mr. Colburn and his team during the dot-com era. The pact with Homestore.com alone, for example, was valued at $200 million in stock and advertising revenue.