A complaint filed Friday in a suit by a major shareholder against the online retailer Homestore.com makes new and detailed charges of financial fraud at AOL Time Warner, including descriptions of conversations between senior executives who were planning to improperly inflate revenue at both companies.
Federal prosecutors and securities regulators are investigating possible financial improprieties at Homestore and AOL Time Warner. The complaint sheds new light on the progress of the investigations.
The complaint, filed in Los Angeles District Court by the California State Teachers’ Retirement System, cites information from anonymous executives said to be involved in Homestore’s disputed deals. But people involved in the federal inquiries into the accounting said that much of the information came from statements made to prosecutors by three former Homestore executives who pleaded guilty and provided information to investigators.
The complaint portrays two former executives of AOL Time Warner’s AOL division, David M. Colburn, head of its business affairs department, and Eric Keller, a deputy in the department, as conspiring with their counterparts at Homestore to devise and conceal transactions that overstated the revenue of both companies.
AOL Time Warner has dismissed both executives, although it has not provided details. Kip Johnson, a lawyer for Keller, and Roger Spaeder, a lawyer for Colburn, could not be reached. A company spokesman declined to comment.
In recent weeks, AOL Time Warner has conducted an internal investigation into the accounting at the AOL division, which last month led to the restatement of about $190 million in earnings for eight months ending last spring.
