Probes Weighing on AOL Shares

Shares of AOL Time Warner Inc. sank for a third straight day Friday, as concerns about twin federal investigations into the media giant’s accounting continued to weigh on the stock.

The Securities and Exchange Commission is investigating whether the company’s America Online unit wrongly booked $27 million in advertising revenue in late 2000 and early 2001 from transactions with software company PurchasePro.com Inc., the Washington Post and Wall Street Journal reported Friday.

Las Vegas-based PurchasePro confirmed that it had been contacted by the SEC, the newspapers said. The SEC declined to comment on the case.

Shares of AOL Time Warner fell 71 cents, or 6.5%, to close at $10.30 on the New York Stock Exchange.

AOL Time Warner Chief Executive Richard D. Parsons disclosed the SEC’s “fact-finding inquiry” on July 24. This week, the company confirmed an apparently related criminal investigation by the Justice Department.

The probes reportedly were sparked by reports that America Online used unorthodox accounting methods to boost reported ad revenue while its huge merger with Time Warner was pending and it needed to persuade Wall Street that it was still growing strongly.

Parsons denied any accounting irregularities, saying the transactions have twice been approved by auditors Ernst & Young.

PurchasePro is a former dot- com highflier in the business-to-business sector whose shares closed at 32 cents Friday, down 1 cent in Nasdaq trading. The company used to buy advertising on America Online and used the Internet giant to sell its software.

In one transaction, AOL reportedly paid $9.5 million for $30 million in PurchasePro stock warrants, then booked the $20.5-million difference as advertising and commerce revenue.

“AOL Time Warner has announced previously that the SEC is looking into a number of transactions. It should be no surprise that one of the transactions is PurchasePro,” AOL spokesman John Buckley told Reuters.