America Online's woes continued with reports showing that 2 million subscribers have left the service over the last year and news that the SEC has subpoenaed top company officials as an accounting probe moves forward.
The Securities and Exchange Commission reportedly issued subpoenas to Time Warner Chairman Richard D. Parsons and AOL founder Steve Case, seeking information about the booking of $400 million in revenue from dealings with German media company Bertelsmann AG after the 2001 merger of AOL and Time Warner, the Washington Post reported.
The subpoenas, reported by the New York Times, do not accuse the recipients of wrongdoing. Rather the government appears to be on a fact-finding mission. AOL's third quarter filing, which shows a drop of 688,000 subscribers for the period, acknowledges the ongoing probe into the Bertelsmann situation. In addition, the filing showed a drop off in AOL advertising revenue, to $178 million in the third quarter, down 33 percent from a year ago.
"In July 2003, the Office of the Chief Accountant of the SEC informed the Company that it has concluded that the accounting for these transactions is incorrect," Time Warner disclosed in its filing. "In addition, the Division of Enforcement of the SEC continues to investigate the facts and circumstances of the negotiation and performance of these agreements with Bertelsmann, including the value of advertising."
"The SEC staff also continues to investigate a range of other transactions principally involving the Company's America Online unit, including all advertising arrangements and the methods used by the America Online unit to report its subscriber numbers. The Department of Justice also continues to investigate matters related to these transactions."
The investigation is expected to last several months.