JUSTICE DEPARTMENT INVESTIGATING AOL TIME WARNER

Second Federal Agency to Probe Company's Accounting Practices

By Published on .

NEW YORK (AdAge.com) -- The Justice Department has begun looking into accounting practices at AOL Time Warner, which is already being investigated by the Securities and Exchange Commission.

USA Today reported that the Justice Department began its investigation after The Washington Post said AOL had manipulated revenue leading to the close of its merger with Time Warner in January 2001.

After the story appeared in the Post, AOL said the SEC was "conducting an inquiry."

The 'current environment'
In a statement today,

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AOL said it was not surprised by the Justice Department's probe, given the "current environment," and that it would cooperate with both government agencies. The company added that its outside auditors, Ernst & Young, "have repeatedly confirmed" that AOL's accounting is in accordance with generally accepted accounting principles.

A spokesman for the Justice Department said the agency would not comment at all on the published report.

AOL's stock was trading at $11.47 on the New York Stock Exchange, down 7.5% in mid-day trading.

Merrill Lynch & Co. analyst Jessica Reif Cohen continued to rate the stock neutral -- downgraded after last week's disclosure of the SEC probe -- but noted this latest inquiry will add even more volatility to the stock.

"We prefer to remain on the sidelines, given the uncertainty an investigation such as this creates," she said.

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