AOL TW Accounts Probe: Vivendi Deal Under Scrutiny

24 April 2003

Federal regulators are investigating another suspect ad deal made by AOL Time Warner – the fourth such probe to come to light this week.

Yesterday it was reported that the Securities & Exchange Commission is investigating the way three advertising deals were entered in the media mammoth’s books [WAMN: 23-Apr-03]. Now a $25 million (€23m; £16m) agreement with Vivendi Universal made two years ago is undergoing similar scrutiny.

That deal was part of AOL TW’s $725m purchase of Vivendi’s 55% stake in AOL France in March 2001. As part of the pact, Vivendi agreed to buy $25m of advertising from its US rival.

The SEC is enquiring into whether AOL TW should have booked this as a rebate on the deal, rather than counting it as legitimate ad revenue.

The nature of these arrangements is very similar to advertising pacts worth $400m already under investigation. These deals – made around the same time as the Vivendi contract – related to the purchase of the AOL Europe stake owned by German media group Bertelsmann. In a probe launched last month, the SEC argued that the agreements should have been reported as a discount on the deal [WAMN: 31-Mar-03].

On its own, $25m is a drop in the ocean compared with AOL TW’s total revenues. But the seemingly endless stories of accounting irregularities are a major blow to the group’s attempts to convince investors it has put its problems behind it ahead of the flotation of a minority stake in its cable arm.

Data sourced from: New York Times; additional content by WARC staff