The SEC filed civil fraud charges against former AOL Time Warner CFO Mike Kelly, ad sales quarterback David Colburn, and 6 other former executives today, concluding an ancient investigation into behaviour at AOL during the peak of the tech bubble (TWX). Four of the men settled (without admitting or denying the charges) and paid $8 million in fines and penalties. The others, including former AOL and Time Warner CFO Mike Kelly, vigorously deny the charges and will continue to fight.
The charges stem from ad deals in the last couple of years before AOL’s collapse (2000-2202). The SEC alleged that the eight execs participated in a scheme that overstated revenue by more than $1 billion. David Colburn (above), long perceived as the architect of the alleged schemes, settled the allegations, paying about $4 million and accepting a 10-year ban from serving as a public-company officer or director. WSJ:
The SEC claims the scheme inflated online ad revenue, a key measure for analysts and investors evaluating the company, from at least mid-2000 to mid-2002. In a civil lawsuit, filed in federal district court in Manhattan, the SEC named former AOL Time Warner Chief Financial Officer John Michael Kelly; Joseph Ripp, former CFO of the company’s AOL division; Steven Rindner, a former senior executive in the company’s business affairs unit; and Mark Wovsaniker, former head of accounting policy
The SEC reached settlements in a separate lawsuit, also filed in federal court in Manhattan on Monday, with former controller ames MacGuidwin, and three former officials from the company’s business affairs unit. All four agreed to pay fines and return allegedly ill-gotten gains, with interest. Mr. MacGuidwin agreed to be banned from serving as a public company officer or director for seven years, and David Colburn, the former head of the business affairs unit, agreed to a 10-year ban, the SEC said. Mr. Colburn will pay disgorgement and prejudgment interest of $3.2 million and a $750,000 penalty while Mr. MacGuidwin will return $2.1 million and pay a $300,000 penalty, according to the SEC.