AOL Confirms Lawmen Probing Its Accounting Practices

NEW YORK, July 31 (IslamOnline & News Agencies) - America Online, the Internet division of media giant AOL Time Warner, said Wednesday, July 31, it will cooperate with U.S. Justice Department investigators probing the company's accounting practices.

The statement follows revelations by the U.S. daily newspaper USA Today that the company was being probed by federal prosecutors about various AOL accounting practices, Agence France-Presse (AFP) reported.

The probe is the second recently launched by U.S. regulators at the company.

Last week, AOL Time Warner's chief executive officer Dick Parsons acknowledged an investigation was ongoing by the U.S. Securities and Exchange Commission.

That investigation was touched off by a series of stories in the Washington Post newspaper, which stated that AOL had inflated its advertising sales between 2000 and 2002 by 270 million dollars through a series of "unconventional deals."

"In the current environment, when anyone raises a question about accounting, it's not surprising that the relevant government agencies will want to look into the facts," said AOL in a statement regarding the U.S. Justice Department investigation.

"As we said last week, we are cooperating 100 percent with the SEC, and we will cooperate with the Department of Justice as well."

AOL added that it believes its accounting methods were "appropriate and in accordance with generally accepted accounting principles.

"The company said its outside auditor, Ernst and Young, has repeatedly confirmed the integrity of those audits.

AOL says it has 35 million subscribers. The company has been blamed for dragging down the whole of AOL Time Warner since the merger between AOL and Time Warner media concern in 2000, which created the world's largest media conglomerate.

This probe comes at a time when many American companies, including WorldCom and Xerox, are facing investigations over corruption and financial misconduct.

The Washington Post reported Sunday, July 21, that U.S. President George W. Bush had substantial information about the dire financial plight of a Texas oil company before he sold the majority of his holdings in 1990, triggering a federal insider trading investigation.

The president's business dealings have come under scrutiny as he tries to restore confidence in markets hurt by a spate of corporate scandals.

Citing records from the federal Securities and Exchange Commission (SEC), the Post reported that several weeks before Bush sold most of his stake in Harken Energy Corporation, he and other board members received a letter from management calling the previous year's profits disappointing and warning that the company would "continue to be severely limited in our activities due to cash constraints."

The failure of a deal involving a subsidiary had "left the company with little cash flow flexibility," said the documents, which indicated that much of the same information was covered at an earlier board meeting.

Bush sold the Harken stock for some 848,500 dollars on June 22, 1990, just days before Harken closed the second quarter with staggering losses.

The White House has said Bush knew the company would record losses but did not know how large they would be.

Most of the proceeds from the sale of the stock were used to finance Bush's 600,000 partnership stake in the Texas Rangers baseball team. Bush later made 14.9 million dollars when the Rangers were sold in 1998.

Bush has refused to authorize the SEC to open the full file on his investigation, but selected documents have been released under the Freedom of Information Act.

Bush has been forced to again defend himself for his often-scrutinized role as a board member for Harken, based in Grand Prairie, Texas, before he became the state's governor in 1995.

The questions about Bush's days at Harken - involving allegations of insider trading, the masking of company losses and late reporting on a stock deal - were aired extensively in three political campaigns, and Bush was effectively cleared in a SEC investigation.

The SEC's investigation of Bush was closed after officials determined he did not have enough insider information before his stock sale to warrant a case.

But consumer watchdog groups have maintained that Bush's past business dealings are similar to widely condemned practices exposed in recent investigations involving Enron Corporation and WorldCom, among others.

Meanwhile, Bush maintained his upbeat position on the strength of the U.S. economy Wednesday, despite new data showing a decline in the rate of growth.

"We are heading in the right direction. But the growth isn't strong enough as far as I'm concerned," Bush said at a cabinet meeting on the economy.

The U.S. economy grew at a tepid 1.1 percent rate in the second quarter of fiscal 2002 according to data from the Commerce Department. Analysts had expected a second quarter growth rate of 2.2 percent.

Despite revisions to first quarter gross domestic product growth, from its initial level of 6.1 percent to 5,0 percent, Bush insisted the U.S. economy "continues to grow," noting that the average of the two quarters was around three percent growth.