$210m settlement in AOL fraud inquiry

Time Warner agreed to pay $210m (£108m) yesterday to settle criminal fraud charges related to its internet service provider America Online.

The media conglomerate was also expected to pay another $300m to settle similar allegations from the chief financial watchdog in the United States, the securities and exchange commission.

Under the terms of the settlement with the US justice department, charges of aiding and abetting fraud will be deferred for two years provided the company continues to cooperate in an investigation into how certain advertising deals at AOL were structured.

The investigation is one of the last hangovers of the disastrous merger of AOL and Time Warner that was completed in January 2001. The justice department settlement relates to advertising deals with several smaller companies around that time that allegedly allowed AOL to exaggerate its profits.

The parallel SEC inquiry has centred on the way that AOL accounted for a $400m payment from the German media group Bertelsmann, and whether the cash was improperly used to make the company's profits look better.

Time Warner is eager to get the affair behind it. The investigations have restricted its ability to do any deals that would require issuing new shares in the company.

However, it is not yet entirely in the clear. It is still facing a shareholder lawsuit related to the investigations, which alleges that Time Warner misrepresented advertising sales by $1.7bn between 1999 and July 2002.