Eight former AOL Time Warner executives have been charged with fraud of $1 billion by the US Securities and Exchange Commission (SEC).
They have been accused of collaborating on a scheme to report more than $1bn worth of non-existent advertising revenue to investors from 2000 to 2002.
It is reported that AOL Time Warner allegedly gave money to advertisers to purchase surplus ads on AOL’s network. This money was then given back to AOL which was reported to investors as additional advertising revenue.
Charges were filed against former chief financial officer John Michael Kelly, former business affairs senior executive Steven E. Rindner, former chief financial officer Joseph A. Ripp, and former head of accounting policy Mark Wovsaniker for overseeing a fraud which fabricated advertising revenues and inflated earnings.
David Colburn, former head of the company’s business affairs unit; Eric Keller, former senior manager in the business affairs unit; James MacGuidwin, former controller; and Jay Rappaport, former senior manager in the business affairs unit, settled with the SEC.
The four will each pay fines ranging from $750,000 to just over $4m. Colburn and MacGuidwin have also agreed to a clause which bar them from serving as officers or directors of a public company for seven to 10 years.
The SEC is seeking to collect any cash awarded to the executives through the scheme, as well as interest and further monetary penalties from each of the four executives.
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