VITAMEDIAS
A steal? Lawsuits claim that the media merger [AOL + Time Warner] of the century was based on fraud
Indeed, several lawsuits claim that AOL was not merely a brilliant deal-maker; it may literally have stolen Time Warner.
To secure its prize, AOL offered a premium of almost $50 for Time Warner's stock, then trading at $65. Nearly three years later, and two years after the deal closed on January 11th 2001, shares of the now combined firms trade for 90% less than at their pre-merger peak. Over a dozen shareholder suits claim that what allowed AOL to support so lavish a price was fraud. The theory in each of the suits is that a series of “materially false and misleading” financial statements resulted in AOL's share price being far higher than would ever have been the case had more accurate data been disclosed. On October 23rd, the firm said it would restate its revenues for the past two years after an internal investigation into AOL's accounts.
No doubt an argument could be made that financial results were irrelevant to the euphoric prices paid for Internet shares. Still, the case poses a huge threat to the former boards of both firms, their accountants, bankers and other advisers.
Levin's Nightmare : Gerald Levin doesn't even work at AOL Time Warner anymore, but AOL's latest restatement could cost him $162.6 million.
Under a provision of the new Sarbanes-Oxley investor protection act, the SEC can force corporate executives to give back bonuses or profits from stock sales or options grants for 12 months after a financial report that is restated - if it finds that executive misconduct led to the revision.
AOL Time Warner said Wednesday it will have to restate earnings going back to the first quarter of 2000.