SEC launches probe into AOL Time Warner accounts

The Washington Post last week reported that the America Online unit had boosted revenues through unconventional deals from 2000 to 2002.

Parsons defended the company’s accounting during a conference call on Wednesday following the release of results. He said AOL was informed by the SEC of the inquiry after the articles were published. The SEC declined to comment on the inquiry.

Analysts said the SEC inquiry was likely to dominate Wall Street sentiment on AOL Time Warner even though the company’s quarterly results topped analysts’ expectations, as strength in its film and cable divisions offset weakness at its online unit.

‘‘Is it going to be a material change to its accounting? I doubt it. But it’s going to be a cloud over their shares for a while,’’ said SoundView Technology analyst Jordan Rohan.

AOL Time Warner executives said they would cooperate with the SEC inquiry and said they were comfortable with the accounting practices and policies in place. “We are comfortable with the accounting practices and policies in place at our company. Our accounting is appropriate for the businesses in which we operate,” Chief Financial Officer Wayne Pace told the conference call.

‘‘In the current environment, I wouldn’t expect the SEC to look the other way when anyone makes any allegations — if they have merit or not,’’ Paul Cappuccio, the company’s general counsel, told Reuters. ‘‘We are not only fine with (the inquiry) but we think it’s what they should be doing. We have been pro-active with the SEC.’’ AOL Time Warner’s shares, which have fallen 65 per cent since the beginning of the year, have also been hit by accounting-related jitters in the wake of scandals at Adelphia Communications Corp and WorldCom Group.

AOL Time Warner posted a second-quarter net profit of $394 million, or 9 cents a share, compared to a net loss of $734 million, or 17 cents a share, a year-earlier. (Reuters)