AOLTW Facing Justice Probe

The U.S. Justice Department is investigating accounting practices at AOL Time Warner Inc., the company confirmed Wednesday.

The company did not specify which practices were being looked at, but the SEC probe is focusing on several transactions that led to higher revenues at the AOL side of the company. Those transactions were originally reported in The Washington Post.

The SEC opened a fact-finding inquiry into AOL's accounting practices after the recent Post article raised the possibility that AOL may have inflated revenues in 2000 and 2001. AOL Time Warner disclosed the SEC inquiry last week.

The company released a short statement saying it was cooperating with the Justice Department as well as with the SEC, and that it stood by its accounting practices, which have been upheld by its auditor Ernst & Young.

"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," the company said the statement.

Company spokeswoman Tricia Primrose declined to elaborate.

Last week, chief executive Richard Parsons disclosed that the SEC was conducting a preliminary inquiry into the accounting of several transactions that boosted revenues at the AOL division.

The transactions were initially reported by The Washington Post, which described them as "unconventional" ways of accounting for revenues. They included selling ads to a British entertainment company in lieu of taking a cash settlement in a legal dispute and booking sales from ads that were sold on behalf of eBay. and AOL have a news content and business partnership.