SEC Drops Charges Against Former AOL Exec
Bringing an end to another chapter of AOLs long running saga over its alleged revenue inflation during its merger with Time Warner, securities fraud charges against former AOL executive John Tuli were dropped earlier this month.
The Securities and Exchange Commission on Nov. 3 dismissed all of its claims against Mr. Tuli, a former vice president in AOLs NetBusiness unit. In January 2005, the Justice Department had charged Mr. Tuli with ten counts relating to allegations of securities fraud as part of a broader inquiry into the dealings between AOL and Internet concern PurchasePro.com.
Mr. Tuli and other former executives were charged in connection with their alleged role in a scheme to fraudulently increase revenues at PurchasePro.com and AOL. According to the indictment, the wrongdoing included conspiring to make false and fraudulent entries in the books of both companies, providing auditors with altered and backdated contracts, and signing secret and undisclosed side deals.
The SEC pursued Mr. Tuli civilly after hed earlier been acquitted of all criminal charges following a three-moth jury trial in the Eastern District of Virginia.
The Commissions decision to dismiss its claims against Mr. Tuli, coupled with his prior acquittal, validates what we have stated since the government investigation began some seven years ago John Tuli did nothing wrong, Mark Hulkower, an attorney for Mr. Tuli said in a statement.
Time Warner declined to comment.
Separately, U.S. regulators in May concluded an investigation and filed civil-fraud charges against eight former executives, including onetime Time Warner Chief Financial Officer John Michael Kelly and AOL’s high-profile former deal maker David Colburn. The executives were charged with helping to overstate advertising revenue by more than $1 billion from 2000 to 2002.
Four of the former executives, including Mr. Colburn, who headed AOL’s business-affairs unit, agreed to pay a combined sum of $8.1 million to settle the Securities and Exchange Commission suit. The other four, including Mr. Kelly, are contesting the SEC’s charges, filed in a separate suit, and face trial in federal court in New York.
The case is starting its discovery period, with a trial date set for late 2010, says Mr. Hulkower, who is representing Steven Rindner, a former executive in AOL’s business-affairs unit charged in that case.
The SEC’s investigation, which came to light in mid-2002, helped cripple the Time Warner-AOL merger, at the time the biggest deal in U.S. corporate history. The companies already were struggling with cultural clashes between AOL and Time Warner executives, and allegations of the accounting fraud helped sweep most AOL executives out of the company they had briefly run. Since then, AOL’s business has gone into a deep decline. Inundated with litigation and a shareholder rebellion, Time Warner dropped “AOL” from its name in 2003, just three years after the combination was unveiled.
- Emily Steel
Source: WSJ.com: Business Technology