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ACCT 647 601

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5/15/2000: AOL agrees to pay $3.5 million dollar fine for ... 15/2002: AOL admits accounting ... AOL Time Warner conducted an internal review of ... – PowerPoint PPT presentation

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Title: ACCT 647 601


1
ACCT 647 - 601 Yael Dunn Ted Liu Jared
Rogers Christy Waggoner
2
The Company
  • Worlds leading media and entertainment company
  • 2001 merger between America Online, Inc.
  • and Time Warner, Inc.
  • Dropped AOL from name in October 2003

3
  • Six Business Areas
  • America Online
  • Cable
  • Filmed Entertainment
  • Networks
  • Music
  • Publishing

4
Source www.timewarner.com
5
The Scandal
  • WHY?
  • Failing dot-coms were large portion of ad
    revenues
  • Merger of AOL with TimeWarner
  • WHAT?
  • AOL boosted revenue through shady deals
  • Converted legal disputes into ad deals
    MovieFone
  • Sold ads on behalf of eBay and booked as own
    revenue
  • Shifted revenues from one division to another
  • Bartered ads for computer equipment with Sun
    Microsystems
  • Booked short-term gains from renegotiated
    long-term contracts
  • Business Affairs (BA) group helped reach
    financial targets

6
Major Events
  • 5/15/2000 AOL agrees to pay 3.5 million dollar
    fine for improper accounting practices
    in 1995 1996
  • 1/12/2001 The FCC announces that it will approve
    the
  • TW-AOL Merger
  • 7/18/2002
  • The Washington Post raises questions about AOL
    exaggerating revenue in 2000 and 2001
  • AOL Time Warners COO , Robert Pittman, quits

7
Major Events
  • 7/25/2002 AOL Time Warner admits that its
    accounting practices are being investigated by
    the Justice Department (DOJ) and the SEC
  • 8/15/2002 AOL admits accounting inaccuracies
  • 10/16/2003 The company officially drops AOL
    from its name

8
(No Transcript)
9
  • Restatement of Prior Financial Information
  • AOL Time Warner conducted an internal review of
    advertising and commerce transactions at the AOL
    Segment.

10
  • Potential Penalties and Consequences
  • Continuing Investigation by SEC
  • Additional 400 million in Bertelsmann deals
  • Ongoing Investigation by DOJ
  • Shareholder lawsuits
  • Accusations based on insider trading by
    executives
  • Anticipated payouts of 1 billion

11
Questions?
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