NEW YORK - AOL Time Warner Inc., the world's largest media company, said Wednesday that the Securities and Exchange Commission is looking into a series of transactions that may have improperly inflated the company's revenues.
Chief Executive Richard Parsons said in a conference call with investors that the SEC was conducting a "fact-finding" inquiry into several transactions that were reported last week in The Washington Post.
According to the articles, AOL allowed a British entertainment company to buy advertising instead of paying an arbitration award in a legal dispute, improperly shifted revenue among two divisions and sold ads on behalf of eBay and booked the sales as its own revenue.
Mr. Parsons did not elaborate on the transactions, but said the company was cooperating with the SEC. He also said the company's auditors, Ernst & Young, had signed off on all transactions and that they conformed with generally accepted accounting procedures.
SEC spokesman John Heine declined to comment.
The company's shares were off 75 cents, or 6.6 percent, to $10.52 in after-hours trading. The stock had fallen in regular trading despite a broad Wall Street rally.
The stock has fallen some 60 percent so far this year on concerns about the flagging fortunes of the AOL division and the credibility of company managers who promised growth that hasn't materialized.
Bob Pittman, the AOL leader who said the January 2000 merger with Time Warner would lead to synergy and growth, resigned as chief operating officer last week.
The company also released second-quarter earnings Wednesday. Revenue at the AOL division fell 3 percent and cash flow fell 27 percent as online advertising continued to decline.
Mr. Parsons said turning around the division was his top priority and he expected a new AOL chief to be named shortly.
In the first quarter of 2002, AOL Time Warner reported the largest quarterly loss for a company in the history of U.S. business as the company took a $54.2 billion write-off because of a sharp decline in its stock price.
For the first six months of the year, AOL Time Warner had a net loss of $53.8 billion.
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