AOL TW Hit With Class-Action Suit
A shareholder has filed a class-action lawsuit against AOL Time Warner and four of its executives. The suit--filed this week by Jack McBride in U.S District Court in New York--alleges that AOL TW and chairman Stephen Case, CEO Richard Parsons, former CEO Gerald Levin, and former CFO Michael Kelly failed
to properly value more than $127 billion in goodwill generated when AOL acquired Time Warner in early 2001. Goodwill is the amount the purchase price exceeds the fair value of the acquired company's assets.
The suit says factors allegedly known by the executives--including declines in the advertising market and lack of "synergies" between the two companies--would have substantially lowered the goodwill value and AOL TW's stock price.
A spokesperson says AOL TW intends to "vigorously contest" the suit.
Meanwhile, AOL TW said yesterday that the Department of Justice has started an inquiry into accounting practices at America Online. The Securities & Exchange Commission opened a similar probe last week (Bulletin, July 26).
The suit says factors allegedly known by the executives--including declines in the advertising market and lack of "synergies" between the two companies--would have substantially lowered the goodwill value and AOL TW's stock price.
A spokesperson says AOL TW intends to "vigorously contest" the suit.
Meanwhile, AOL TW said yesterday that the Department of Justice has started an inquiry into accounting practices at America Online. The Securities & Exchange Commission opened a similar probe last week (Bulletin, July 26).
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