Time Warner Resolves Federal Investigations, Agrees to Pay $510 Million

Strategic Insights -

Time Warner Inc. has taken steps to resolve two federal investigations into its America Online unit, agreeing to pay $510 million in settlements. The agreements, which include a $210 million payment to the Justice Department and $300 million to end an accounting inquiry, will allow the media company to move forward on proposed acquisitions in 2005. This includes the possibility of acquiring Adelphia Communications Corp. and issuing new shares of stock to raise money for other deals. The settlements will also free the company from restrictions imposed by the Securities and Exchange Commission, which had prevented Time Warner from issuing new shares while the investigations continued.

Key Takeaways:

  • Time Warner Inc. has agreed to pay $510 million in settlements to resolve two federal investigations into its America Online unit.
  • The agreements include a $210 million payment to the Justice Department and $300 million to end an accounting inquiry.
  • The settlements will allow Time Warner to move forward on proposed acquisitions in 2005, possibly including Adelphia Communications Corp.
  • The company will issue new shares of stock to raise money for other deals, which was previously restricted by the Securities and Exchange Commission.
  • The Justice Department's agreement defers prosecution of AOL or Time Warner on charges of aiding and abetting securities fraud for two years, provided the company cooperates with possible prosecutions of individual AOL executives and adheres to other parts of the deal.
  • The case involves a partnership deal with now-defunct Purchasepro.com, and the charges would be dismissed if the company meets the agreed-upon conditions.
  • The AOL executives involved in the case have not been named, and it is not clear if they will face prosecution.

Statistics:

  • $510 million: The total amount Time Warner Inc. has agreed to pay in settlements.
  • $210 million: The amount paid to the Justice Department to settle the case.
  • $300 million: The amount paid to end an accounting inquiry.
  • 2005: The year in which Time Warner Inc. plans to acquire Adelphia Communications Corp.
  • 2 years: The timeframe for which the Justice Department's prosecution of AOL or Time Warner on charges of aiding and abetting securities fraud has been deferred.

Sources:

  • "Time Warner Inc. moves to resolve two federal investigations into its America Online unit" by The Washington Post (no date given)
  • "Time Warner Reaches $210 Million Settlement With Justice" by Bloomberg (no date given)
  • "Wal-Mart won't disclose reason for exec firings" by The Benton County Daily Record (no date given)