Investors' anxiety about the extent of the possible problems at AOL Time Warner is unlikely to end soon, however. In August, AOL Time Warner started its own internal investigation into three transactions that it said might have inflated its revenue by about US$49 million over 18 months, saying it hoped to determine the extent of the problems by the end of September. But people involved in the internal inquiry said Wednesday that it would not be completed by then, bogged down in examinations of millions of documents and hundreds of transactions.
People involved in AOL Time Warner's internal investigation said that the company first became aware of possible problems in its dealings with Homestore in the spring of 2001. The initial questions related to arrangements for AOL to sell advertising on behalf of other Internet companies, including Homestore and the Internet commerce company PurchasePro. Senior AOL Time Warner executives learned of agreements tying the amount of advertisements sold for PurchasePro and Homestore to the amount of advertising these companies bought from AOL, a potential accounting problem because it creates the possibility for round-trip transactions.
Keller, an executive in AOL's business affairs department, was put on leave in June and fired in August 2001 in connection with the matter, months before Homestore discovered its accounting problems, the person involved with the internal investigation said. This person said that at the time the company believed that Colburn, who was Keller's boss, was unaware of the problem. This summer, Colburn was also fired for his role in other questionable transactions.
The federal investigations into Homestore began several months ago after the company disclosed it had overstated its 2001 revenue by more than US$100 million, or more than 50 percent.
Roger Spaeder, a lawyer for Colburn, declined to comment. Keller could not be reached for comment.
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