Former AOL execs charged with US$1 billion fraud

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The US Securities and Exchange Commission (SEC) has filed charges against eight former AOL Time Warner executives..

The executives are accused of collaborating on a scheme to report more than $1bn worth of non-existent advertising revenue to investors from 2000 to 2002.

Charges were filed against former chief financial officer John Michael Kelly, former business affairs senior executive Steven E. Rindner, former chief financial officer Joseph A. Ripp, and former head of accounting policy Mark Wovsaniker.

The four are charged with overseeing a fraud which fabricated advertising revenues and inflated earnings.

AOL Time Warner allegedly provided money to advertisers to purchase surplus ads on AOL's network. The money was then given back to AOL and reported to investors as additional advertising revenue.

The SEC is seeking to collect any cash awarded to the executives through the scheme, as well as interest and further monetary penalties from each of the four executives.

The SEC also filed charges and agreed settlements with four other former AOL executives in the same case.

Former head of business affairs David M. Colburn, former business affairs senior managers Eric L. Keller and Jay B. Rappaport, and former controller James F. MacGuidwin all agreed to injunctions in the case.

The four will each pay fines ranging from US$750,000 to just over US$4 million. Colburn and MacGuidwin have also agreed to a clause which bar them from serving as officers or directors of a public company for seven to 10 years.

The filings do not affect AOL Time Warner as a company, which agreed in 2005 to pay a US$300 million penalty to settle its case with the SEC.
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