US STOCK MARKET WATCHDOG the Securities and Exchange Commission (SEC) has filed civil fraud charges against eight former executives of AOL Time Warner for their roles in a fraudulent scheme that caused the company to overstate its advertising revenue by more than $1 billion.

The SEC alleges that between 2000 and 2002 John Michael Kelly, Steven Rindner, Joseph Ripp and Mark Wovsaniker oversaw and executed fraudulent round-trip transactions in which AOL effectively funded its own advertising revenue by giving purchasers the money to buy online advertising that they did not want or need.

Online advertising revenue was a key measure by which analysts and investors evaluated the company. The defendants made or substantially contributed to statements to investors that included the company's fraudulent financial results. Kelly and Wovsaniker, both certified public accountants, are also charged with misleading the company's external auditor about the fraudulent transactions.

The complaint charges Kelly, Wovsaniker, Ripp, and Rindner with multiple violations of the Securities Act and seeks "injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, civil monetary penalties, and officer and director bars" against each of them.

The Commission also filed a complaint against four former AOL executives who participated in the scheme to artificially inflate the company's reported online advertising revenue. The four defendants have agreed to settle that action, without admitting or denying the allegations in the complaint.

David Colburn, Eric Keller, James MacGuidwin and Jay Rappaport have agreed to permanent injunctions against future violations of SEC rules. All of them have agreed to pay disgorgement and prejudgment interest and civil penalties amounting to around $8 million. µ