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AOL ACCUSED OF 'AIDING AND ABETTING' SECURITIES FRAUD

But Federal Prosecutors Agree to Settlement

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WASHINGTON (AdAge.com) -- The Justice Department today accused Time Warner's America Online of "aiding and abetting" securities fraud in its handling of an ad contract, but announced a settlement that effectively
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ends any possibility AOL will be prosecuted even as charges are pursued against former AOL officials.

Under the arrangement announced today, Time Warner will pay a $60 million penalty and put $150 million into a compensation and settlement fund. As part of a "deferred prosecution" pact, the media giant also agrees to appoint an independent consultant to monitor AOL's compliance. In two years, if the company successfully meets the terms of the settlement, all charges will be dismissed.

'Collateral consequences'
"One reason we agreed to defer prosecution was to minimize the collateral consequences of an indictment, which would have been borne by innocent employees and investors," said Deputy Attorney General James B. Comey at a news conference in Washington today.

While declining to name the ex-AOL officials still under investigation, Mr. Comey hinted that one reason government officials agreed to the settlement was its conclusion that top officials weren't involved.

"It's fair to say that we know things about who was involved at the company and how high it went that you don't," Mr. Comey said.

'How did they react'
"But in making a charging decision about a company, we look at the company's cooperation: How did they react to the wrongdoing and how confident are we that they're not some sort of recidivist. ... We are convinced that the top management of Time Warner, [Chairman-CEO Richard] Parsons and others, are committed to making this right."

The charges at the heart of the case stem from AOL's effort to maintain its $70 million 2000 deal with PurchasePro, which hoped to develop a business-to-business Web site on AOL. When PurchasePro ran into trouble meeting its goals, AOL officials allegedly bought services from PurchasePro in a manner that inflated the apparent size of both companies' revenues. Four former PurchasePro officials pleaded guilty to criminal charges, joining several others who had entered similar pleas since the investigations began.

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