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Former AOL execs charged with fraud

Six former executives of AOL and its former business partner PurchasePro.com were charged with fraud and conspiracy to inflate revenues, prosecutors said Monday.
/ Source: Reuters

ALEXANDRIA, Va. (Reuters) - Six former executives of Time Warner Inc.'s America Online unit and its former business partner PurchasePro.com were charged with conspiracy to inflate revenues, prosecutors said on Monday.

A grand jury in Virginia indicted the officials, including PurchasePro's former chief executive officer Charles Johnson, with conspiracy, securities fraud, obstruction of justice, and wire fraud, among other violations.

The men were accused with engaging in a scheme to artificially inflate revenue reported to the U.S. Securities and Exchange Commission by engaging in secret side deals, back-dated contracts and revenue swaps, according to the indictment.

They forged contracts, lied to the public and destroyed documents during the investigation, U.S. Attorney Paul McNulty told a news conference.

"When you summarize it, it's a story of trying to create the appearance of success in business that's just not there," he said. PurchasePro filed for bankruptcy in September 2002.

Time Warner agreed last month to pay $510 million to resolve Justice Department and SEC charges that AOL had inflated revenue figures.

AOL spokeswoman Tricia Primrose Wallace said the announcement was "not unexpected."

"Pursuing individual prosecutions was the next logical step in the process that the (Justice Department) laid out after settling with Time Warner in mid-December," Primrose said.

Asked if there would be any further indictments, McNulty said, "This is a very active and ongoing investigation."

The grand jury charged former AOL Business Affairs Executive Director Kent Wakeford, who managed the company's relationship with PurchasePro, and John Tuli, who was a vice president in AOL's NetBusiness unit.

In addition to Johnson, the grand jury also charged PurchasePro's former senior vice president of marketing Christopher Benyo, chief technology officer Joseph Kennedy and Scott Wiegand, the company's general counsel.

All six are expected to report to the FBI and scheduled to appear in federal court in Alexandria on Tuesday, McNulty said.

The defendants and their attorneys could not immediately be reached for comment.