AOL Invested Heavily in Key Advertiser

AOL Time Warner Inc. invested $30 million to $50 million in Oxygen Media Inc., a women-focused cable channel that agreed to buy $100 million in advertising on America Online, the Wall Street Journal said.

AOL Time Warner also arranged for Oxygen to be carried on its cable systems, the paper said, citing Lisa Gersh Hall, Oxygen’s chief operating officer. AOL Time Warner’s internal investigators are examining transactions with Oxygen and similar ones as part of an inquiry into possible accounting problems at the America Online unit, the paper said.

These types of transactions, in which America Online invested in a company or purchased goods and services in exchange for advertising business, aren’t necessary problematic as long as the company placed fair value on the assets exchanged, the paper reported, citing unidentified accounting experts.

AOL Time Warner may have inflated the revenue it got from a swap transaction with WorldCom Inc., the Journal said, citing unidentified people familiar with the investigation.

AOL Time Warner slid 46 cents to $12.30 on the NYSE.