On Lisa Rein's Radar: Justice Dept and SEC Join Forces to Nab AOL

August 26, 2002

Justice Dept and SEC Join Forces to Nab AOL

U.S. Opens Criminal AOL Probe
-- Justice Dept. to Focus On Unusual Accounting
by Alec Klein and Dan Eggen.

Also of interest is the cooperation of the SEC and the Justice Department on these investigations.

The two federal agencies have worked concurrently in the past, in part because their investigatory powers are different. The SEC brings civil cases only, a process that can be quicker in bringing enforcement actions and punishments than a criminal case. The Justice Department can bring both civil and criminal cases, but the department's ability to prosecute criminally -- and use grand-jury subpoenas to compel testimony -- augments what the SEC does, lawyers say. The Justice Department also has access to vast investigative resources, including those of the FBI. The SEC also has subpoena power, but it requires the specific authorization of its commissioners.

Here is the complete text of the article in case the link goes bad:

http://www.washingtonpost.com/ac2/wp-dyn/A28756-2002Jul31

The U.S. Justice Department has opened a criminal investigation into the
accounting practices of AOL Time Warner Inc., focusing on the business deals
of its Dulles-based online division, officials familiar with the matter said.

The investigation coincides with a civil probe of the world's largest media
company by the Securities and Exchange Commission disclosed last week by the
company's chief executive, Richard D. Parsons.

The Bush administration, seeking to restore investor confidence after a
string of business scandals, recently formed a corporate fraud task force to
pursue criminal and civil cases against several high-profile companies and
their executives.

"In the current environment, when anyone raises a question about accounting,
it's not surprising that the relevant government agencies will want to look
into the facts," AOL Time Warner said yesterday in a prepared statement. "As
we said last week, we are cooperating 100 percent with the SEC, and we will
cooperate with the Department of Justice as well."

New York-based AOL Time Warner said its accounting conforms to generally
accepted accounting principles, which it confirmed with its outside auditor,
Ernst & Young LLP.

The company declined to comment beyond its written statement. The Justice
Department and SEC also declined comment.

It was not known which AOL executives might be subjects of the Justice
Department's investigation. Prosecutors have "not ruled out anybody,"
including top AOL executives, a source said.

Sources familiar with the investigation said the Justice Department is
focusing on transactions cited in a recent Washington Post report that
examined how America Online recorded revenue through a series of
unconventional transactions from 2000 to 2002.

The Justice Department investigation was first reported by USA Today.

The U.S. attorney's office for the Eastern District of Virginia in Alexandria
is handling the case, the sources said. The main Justice Department office in
Washington also is involved, and people in its New York division may assist
in gathering evidence, the sources said.

The U.S. attorney's office for the Southern District of New York issued a
subpoena to AOL initially but withdrew it when the case was transferred to
Virginia, where AOL is based, sources said. There is no current subpoena of
AOL.

U.S. Attorney Paul J. McNulty in Virginia did not return calls.

Paul T. Cappuccio, AOL Time Warner's general counsel, is spearheading AOL's
legal response to the Justice Department and SEC, sources said. Myer Berlow,
a former AOL advertising executive who now is a company consultant, has
retained counsel in connection with SEC investigations of companies that did
business with AOL, sources said. So has David M. Colburn, executive vice
president and president of business affairs and development for AOL Time
Warner's subscription services and advertising and commerce businesses, the
sources said. The company declined to make Berlow or Colburn available for
comment.

The deals examined by The Post included a transaction in which AOL inherited
an arbitration award from a British entertainment company and settled the
case by accepting an advertising deal instead.

In another deal, AOL served as an advertising agent for eBay Inc., the giant
online auctioneer. AOL sold ads for eBay, but AOL booked the revenue from the
sale of eBay's ad space as AOL's own revenue. AOL has said it accounted for
these transactions properly.

Sources said the Justice Department has notified AOL of its investigation and
requested documents, but it has not yet interviewed company officials. The
SEC also has requested information from AOL, including some the company
provided in response to questions related to articles published by The Post,
the sources said.

The two federal agencies have worked concurrently in the past, in part
because their investigatory powers are different. The SEC brings civil cases
only, a process that can be quicker in bringing enforcement actions and
punishments than a criminal case. The Justice Department can bring both civil
and criminal cases, but the department's ability to prosecute criminally --
and use grand-jury subpoenas to compel testimony -- augments what the SEC
does, lawyers say.

The Justice Department also has access to vast investigative resources,
including those of the FBI. The SEC also has subpoena power, but it requires
the specific authorization of its commissioners.

The Justice Department and SEC have cooperated on several inquiries recently.
The Justice Department is reviewing WorldCom Inc., and it has brought
criminal charges against former cable-television executives at Adelphia
Communications Corp., and the co-founder of biotech company ImClone Inc. The
SEC has filed civil cases against WorldCom and Adelphia.

The two agencies also cooperated in the investigation of Enron Corp.'s
collapse. The corporate-fraud task force recently created by the president
also is an illustration of interagency cooperation. It is headed by Deputy
Attorney General Larry D. Thompson, and SEC Chairman Harvey L. Pitt also can
be brought in to assist the task force. It is not clear what role if any the
task force might play in the AOL investigation.

The SEC staff complains that personnel shortages have hurt the agency's
ability to police securities markets.

Congress has authorized -- but not yet funded -- a $776 million SEC budget
for fiscal 2003, a 77 percent increase from the current year. Congress also
passed a supplemental budget that would give the SEC $30 million in emergency
funding immediately, including $5 million for technology and $25 million for
as many as 150 new hires.

"We are absolutely stretched, and I'm happy at the prospect of getting new
resources," said the SEC's chief of enforcement, Stephen M. Cutler.

In addition to the government investigations, AOL Time Warner must deal with
class-action lawsuits alleging that company executives misled investors about
America Online's financial condition.

The company's stock has been pummeled. AOL Time Warner stock fell 90 cents to
$11.50 in heavy trading on the New York Stock Exchange yesterday.

AOL Time Warner has moved to bolster investor confidence. Chief Operating
Officer Robert W. Pittman recently left and Colburn relinquished his
day-to-day responsibility for the online division's business affairs
division.

One of the leading candidates to take over the online unit is Jon Miller, a
former executive of USA Interactive, according to sources.

Meanwhile, AOL Time Warner overhauled its corporate structure, making the
online division part of a unit that also includes Time Inc., Time Warner
Cable and the AOL Time Warner Book Group.

The reorganization is a stunning turn of events for the Internet division,
which acquired Time Warner about a year and a half ago in what was then
considered a triumph of new media over old media.

Staff writer Kathleen Day and staff researcher Richard Drezen contributed to
this report.

Posted by Lisa at August 26, 2002 08:57 AM | TrackBack

Me A to Z (A Work In Progress)

Comments

Dear Sirs,
Just to let you know that AOL is still billing me although I have cancelled my internet account with them. They are billing me on a magazine subscription renewal. Also they also hooked me up with the AOL shop direct when I requested only an internet account. When I left my computer with my sister and her 3 kids I was suddenly getting things in the mail. So much for accounting practices!! I wish I could do something about it!!

Thanks-Jeff

Posted by: Jeff Knight on October 25, 2002 02:22 PM

Thanks-Jeff

Posted by: Jeff Knight on October 25, 2002 02:22 PM

I to am being scamed by AOL they are double billing for services that I told them to cancel I am angry as hell as I will have to stop the bank from releasing money to them. I still want a refund for all of my money I don't even use AOL compuserve is better!

Posted by: Renee Snow on December 27, 2002 10:34 AM

This aol is a total scam , they have been billing my credit card for the last 8 months even after canceling them . i use a cable subscriber to get on line which was so much faster than dial up in the past . I've tried to find a way to contact the billing dept of aol and find out what is going on . If you can help please send e-mail to me They should be put in jail for this. If you went out and took someones money without their permission you would be sitting in jail so way are they being allowed to do this . Someone has to stop this act .

Posted by: James Thompson on January 13, 2003 07:24 PM

AOL bites they always have don't have it never did but they are still pulling money out of my bank so I have to close my account that I have had for over 15 years but they will pay for I have a big mouth and thank you for letting me reach out to a few more decent people who might otherwise fall for such an immoral scam thank you and stay very far away
BE AFFRAID!!!!!!!!!!!
BE VERY AFFRIAD!!!!!!!!
Thank You
David Lage

Posted by: David Lage on February 14, 2003 08:15 AM

AOL is still billing my account after I closed it last june. When I called last year to close the account a service rep advised me that I was 1 day into the "NEW billing cycle" and I would have to wait the "29 days" before the account can offically close. I now find out that: "You were supposed to call us (AOL) back to cancel after the 29 days are up". Come ON GO FIGURE! Who in the world do you belive? What a FRAUD and Rip off they have going. Can you imagine IF they do this to several customers? It appears so! I am a producer. Any body want to do a story on AOL for television?

Posted by: Don Black on February 24, 2003 08:38 PM

I am emailing for a friend-plus my (X-AOLee)opinion included - AOL besides ripping their customers off are next to impossible to get rid of--my friend quit twice--the last time she was so bombarded by them she said she would take the two free months---since the end of the two months anD for The last 5 months they have been charging her for two accounts--SHE IS WITH AND USING ANOTHER CO.--she quit again but when she gets on her computer AOL is right there interfering with everything she does. She has not received a refund and does not know yet if they stopped billing her bank account.
What does it take to get some attention into this AOL's ripoff and control CRAP...............Read around there are thousands of complaints.
THIS HAS GOT TO STOP----HELP..........??? They are like a bunch of ROBOT COMMIES....

Posted by: Shirlee Taylor on February 25, 2003 09:12 AM

AOL has been double billing my credit card for 8 months now and will not stop. According to my credit card company, they've had so many complaints of this that they now only allow AOL to charge someones credit card only twice per month. When I called my credit card company I was told AOL has tried 8 other times to bill me. Thank goodness my credit card company has this policy or AOL would have billed me three times per month. Help. What can a consumer do to stop this unfairness?

Posted by: Wanda Dudley on February 27, 2003 03:43 PM

I NEED HELP AND CAN NOT GET IT. AOL HAS DRAFTED MONEY OUT OF MY ACCOUNT FOR SOMETIME, I HAVE JUST FOUND OUT AND THEY WILL NOT PAY ME BACK BUT FOR TWO MONTHS I DID NOT EVEN HAVE AN ACCOUNT WITH THEM. IS T HERE ANY BODY THAT CAN HELP ME. THE BANK CANNOT DO ANY THING, AND THE POLICE CAN NOT UNTIL THEY GET AN ADDRES. THANKS
JH JACKSON

Posted by: HOPE JACKSON on June 7, 2003 03:07 PM

Same story here...double billing and unauthorised credit card charges for months after an account is canceled. Unauthorised charges are FRAUD and THEFT. We really need to address this - I will send a letter to the justice dept...and everyone else should too.
How about a petition? We could do it online and send it! Mail me if interested!!!!

Posted by: Lorian Weston on June 23, 2003 09:29 AM

Posted by: Lorian Weston on June 23, 2003 09:31 AM

AOL is a lying, useless, criminal company. My AOL bill was 121.70 & $873.00 + my usual charge of $23.90 and an additional charge of $23.90 (for good measure?)over two months time. It is obvious that some sort of hacking into my account took place. The Fraud Dept as of yet will not take any responsibility. I have received a note stating that I owe all fees or onto my credit report (perfect to this point) it will go. Of course the usual trying to charge after I closed my account occured as well!

Posted by: Kathleen Smith on August 3, 2003 05:24 PM

Posted by: Kathleen Smith on August 3, 2003 05:25 PM

I too have been getting billed for un-subribed service. Not twice, but three times each month and they won't stop!! Criminal actions should be undertaken immediately!!! I have contacted Justice Deaprtment, BBB, States Attorney. I want arrests and a refund!!!

Posted by: Warren Baker on August 18, 2003 05:18 PM

Unbelievable, I am sitting on hold after reading all of your postings. When I typed in AOL billing and searched, this is what came up. Glad I have the info but what can I do? They have continued to bill me as well for 4 months after cancelling. If I were to steal money from someone.

Posted by: Sonia on August 19, 2003 07:25 PM

Al in all I averaged paying 166.00 per day for internet service from Lying, cheatin, coniving scheming, AOL.
PLEASE HELP!!

Posted by: Terri` on November 22, 2003 11:39 PM

Am inquiring about AOL billing fraud. Can anyone stop them, they charged my business checking acct. over 2000.00 within 4 months, causing bounced check fees, over 800.00 . This has devistated my business cash flow, and am now being forced to close.
When I called AOL , they claim I signed up for 4.95 per min. after 60 min. 2.50 per min.
No way,, I would never agree to that since I stay online an average of 7 hrs per day.
Al in all I averaged paying 166.00 per day for internet service from Lying, cheatin, coniving scheming, AOL.
PLEASE HELP!!

Posted by: Terri` on November 22, 2003 11:40 PM

Posted by: Terri` on November 22, 2003 11:41 PM

I am also wanting info on the AOL Billing fraud,I had Cancelled, but I'm still being billed for, when calling to find out way I was still being bill they said the servse was never cancelled in the first place. Is their a way to get back the money which AOL has stolen from my bank acount for serves I don't have anymore. When tring to cancell my serves they refused to untill I tried AOl again. What is going on with AOL and how are they still operatting

Posted by: Lynn on December 11, 2003 12:38 PM

Posted by: Lynn on December 11, 2003 12:39 PM

Posted by: lynn on December 11, 2003 12:40 PM

I have canceled aol twice in the last year and they told me I would get four months free for my troubles. After the four months I was to call if I still wanted to cancel.I did still want to cancel. I called and with the number I have on my bank statement the recording is telling me that I can no longer cancel over the phone. They told me to go to aol billing and this is where it brought me. This has been going on for a year now or more. I don't know what to do!!!! Can someone help me? My parents had the same problem and my dad ended up canceling his credit card and they still tried to get money from him. I guess I will close my bank account soon if I don't get anywhere but I have established friendships with the people at the bank and I really didn't want it to come to this. I AM SO FRUSTRATED!!!! I am a single mom trying to survive and that extra 23.90 a month is alot to me. Can someone respond to me and give me some direction? Thankx www.LShear100@netzero.com

Posted by: Lenora on January 17, 2004 07:45 AM