Just when things were looking better for AOL Time Warner, another unwelcome visit from Justice Dept. accounting cops sent the conglom’s shares south Wednesday.
The SEC asked the AOL online division to hand over documents pertaining to its bulk subscription program. The practice was used to bulk up subscriber figures by offering hundreds of thousands of heavily discounted subscriptions to big companies like United Airlines and Sears, which would then sell on the accounts to their staff for half the price of a normal AOL subscription. While the tactic itself isn’t illegal, investigators claim AOL Time Warner did not publicly disclose the practice in its earnings as required by law.
AOL Time Warner declined to comment.
Earlier this month, AOL TW conceded that dial-up subs were falling off faster than expected and that it was also actively pruning non-paying subs from its roster. Some of those 540,000 dropped accounts in the past year are believed to be from non-activated bulk accounts.
Depending on what SEC detectives find, the review could turn into a more detailed investigation that further drags out the yearlong investigations into AOL’s accounting practices that have been a continual cloud over the company’s share price.
In the 12 months since the SEC opened its probe into AOL’s allegedly devious ways, the company has restated just under $200 million in misstated advertising income for 2000 and 2001. The SEC also believes some $400 million in sales related to a deal with Bertelsmann and AOL Europe was inaccurately reported. AOL TW has denied its treatment of the two transactions in question was inappropriate.
AOL TW stock lost nearly 5% Wednesday to $15.10.