Time Warner will announce today a $500 million settlement with the Dept. of Justice, according to news reports late Tuesday night.
The settlement would end a two-and-a-half year probe by regulators into wide-ranging allegations that primarily focused on accounting irregularities at America Online, which merged with Time Warner in 2001. The payment would likely put to rest parallel investigations by the DOJ and the Securities and Exchange Commission.
A Time Warner spokesman declined to comment.
Investors will certainly cheer at a dissipation of the cloud that’s been hanging over the company and weighing on its stock. The shares have been slowly struggling to regain ground after being decimated by the disastrous merger. A settlement would probably mitigate the impact of multiple shareholder lawsuits that were filed against Time Warner — suits that some Wall Streeters had said could potentially cost the company billions of dollars.
The ongoing SEC inquiry has also limited Time Warner’s ability to issue stock, which complicates its pursuit of large acquisitions. Time Warner is currently in the running for Adelphia Communications.
An agreement at about this time wouldn’t be a surprise. Time Warner recently put aside $500 million for a possible settlement, although in recent weeks, a dollar figure of $750 million started circulating. Some on Wall Street said that sounded too high. At a media conference last week, Time Warner chairman-CEO Richard Parsons said the company was close to a settlement. He is said to have been actively seeking a resolution by year end.