WASHINGTON -- Time Warner Inc. agreed yesterday to pay $210 million to settle criminal securities fraud charges brought by the Justice Department against the company's America Online unit. The media giant also is prepared to pay $300 million to end another probe by the Securities and Exchange Commission.
Under terms of the Justice Department pact, prosecution on charges of aiding and abetting securities fraud will be deferred for two years provided AOL and Time Warner cooperate in an ongoing investigation into whether AOL improperly helped smaller Internet firms artificially inflate their earnings.
An independent monitor will oversee AOL's compliance, and it must agree to a number of changes in its internal practices, Deputy Attorney General James Comey said. If AOL adheres to the deal, the criminal charges will be dismissed in two years.
Although no Time Warner or AOL executives have been charged with wrongdoing, the agreement does not provide them with immunity and Comey indicated some could face charges. However, four executives of Purchasepro.com, a now-defunct Las Vegas software company that had a partnership with AOL, have agreed to plead guilty. Documents filed in US District Court in Alexandria, Va., say the partnership allowed both firms to falsely inflate their earnings after expected revenues failed to materialize.
Time Warner also proposed a $300 million settlement with the SEC, which the company said the SEC staff has agreed to recommend for approval by the commission. SEC spokesman John Nester declined to comment.
The SEC has been investigating accounting irregularities at Dulles, Va.-based AOL. The probe is focused on the manner in which Time Warner accounted for a $400 million payment from the German media company Bertelsmann AG and whether that was used to inflate America Online profits.