Why AOL’s Accounting Woes Continue
According to AOL, the SEC alleges that AOL improperly accounted for two advertising contracts, totaling $400 million, between AOL and Bertelsmann AG, a German media conglomerate. AOL and Bertlesmann were joint owners of AOL Europe. In 2001, AOL offered to buy Bertlesmann’s share for either cash or stock. Bertlesmann wanted cash and the two companies finally struck a deal when AOL agreed to pay cash in exchange for Bertlesmann buying ads that ran on AOL.
The SEC believes that at least some portion of the money for the ads should have reduced the purchase price. AOL stands by its treatment of the transactions, saying that it has "provided the SEC a written explanation of the basis for these transactions and the reasons why.”
April hasn’t been a good month for AOL. On the 14th, two major shareholders filed suit  against the company, current and former company executives, consultants who helped with the Time Warner merger, and auditor Ernst & Young. The University of California and Amalgamated Bank's LongView Collective Investment Fund claim that the defendants inflated stock prices through "tricks, contrivances, and bogus transactions.” The suit alleges that executives made off with $1 billion from insider trading deals.