SEC Said to Probe AOL-Oxygen Deal

The Securities and Exchange Commission reportedly is examining AOL Time Warner Inc.’s 2001 advertising deal with Oxygen Media Inc. to learn whether revenue received under the arrangement was improperly booked.

Citing unnamed people familiar with the matter, the Wall Street Journal said Monday that the probe focuses on whether the same revenue was “double-booked” at different units of the company, America Online and Time Warner Cable.

Such a focus would indicate that federal investigators have broadened their previously disclosed probes, the newspaper said.

AOL Time Warner spokeswoman Tricia Primrose said the accounting for the Oxygen Media transactions was proper.

“There is no double-counting issue,” she said.

“We are cooperating closely with the SEC and [Justice Department] in their inquiries but have no comment on the specifics of those inquiries,” Primrose added.

Oxygen Media, which runs a women-oriented cable TV channel, did not return calls for comment Monday.

The SEC, through spokeswoman Christi Harlan, declined to comment.

AOL Time Warner disclosed in July that the SEC had launched a fact-finding inquiry into the accounting treatment of certain advertising deals at its America Online unit.

Later that month, the company confirmed that the Justice Department had begun a criminal probe into the same issues.

In both cases, the company said the scrutiny was limited to America Online.

In mid-August, AOL Time Warner announced that it had learned of three transactions--again, all at the Internet unit--that apparently involved the improper booking of advertising and commerce revenue.

America Online, before its January 2001 merger with Time Warner Inc., was an original investor in Oxygen Media, along with Oprah Winfrey and Microsoft Corp. billionaire Paul Allen.

In April 2001, AOL Time Warner increased its minority stake and agreed to carry Oxygen’s channel in 10 million of its Time Warner Cable homes.

In exchange, according to the Journal, Oxygen agreed to spend $100 million on advertising with the company, mostly on America Online.

The newspaper said its sources contended that some of that revenue was improperly booked with both the Internet and cable units, perhaps misleading investors about the strength of those divisions.

On Monday, partly on investor fears that the scope of the federal probes is widening, shares of AOL Time Warner sank 61 cents, or 5%, to $11.20 in New York Stock Exchange trading. Although the stock has edged up from a July 25 closing low of $9.64, it is down 65% this year and down 76% since the merger.

The dismal stock performance is in large part responsible for the departures of two top AOL Time Warner executives this year: former Chief Executive Gerald M. Levin and former Co-Chief Operating Officer Robert W. Pittman, both cheerleaders for the merger. Several company directors also have put pressure on Chairman Steve Case to resign, although he has given no indication of leaving.