2 plead guilty to fraud in AOL pact

WASHINGTON — Two former executives of PurchasePro.com, a defunct Las Vegas software firm, pleaded guilty Tuesday to criminal charges stemming from advertising deals involving AOL Time Warner Inc.

The pleas by former Senior Vice President Jeffrey R. Anderson, 36, and former Controller Scott Miller, 44, are likely to help prosecutors in their yearlong investigation of improper accounting methods at Internet giant America Online, a unit of AOL Time Warner.

The pleas should also assist in a separate case against other top PurchasePro executives.

"Today's plea represents only the beginning of our effort to investigate and prosecute corporate fraud and to bring to justice those who purposefully deceive the financial markets and the investing public," Paul J. McNulty, U.S. attorney for the Eastern District of Virginia, said Tuesday.

The plea agreements do not specifically name America Online or AOL Time Warner, instead referring to a "major media company." McNulty would not identify the media company, but sources confirmed it was AOL. A spokeswoman for AOL Time Warner declined to comment.

Anderson pleaded guilty to conspiracy to commit wire fraud as part of a scheme to inflate PurchasePro's revenue. According to his plea, Anderson and other PurchasePro executives cut secret side deals with an unnamed employee of the major media company to provide that company with $30 million in warrants in return for help in enabling PurchasePro to artificially inflate its revenue figures during 2000 and 2001.

Last year, the New York-based AOL Time Warner said it would restate $190 million in advertising revenue related to the America Online unit, but did not identify specific deals.

In 2001, America Online Inc., based in Dulles, Va., fired Eric Keller, a senior vice president in the unit's business affairs operation, after an internal investigation alleged that he had back-dated contracts and cut side deals with some of the firm's advertising partners, including PurchasePro, sources said.

The company reported its findings to the Securities and Exchange Commission and subsequently became a target in the government investigation.

An attorney for Keller — who worked for fired AOL deal maker David Colburn — declined to comment Tuesday. Colburn's attorney did not return a phone call.

"The game here is to roll up PurchasePro and then roll up AOL," said an attorney close to the investigation, referring to the online unit. "If I were one of the officials at AOL, I'd hear footsteps."

Miller pleaded guilty to destroying PurchasePro documents sought by government investigators. "He made a rash decision to destroy some documents, realized it was an awful thing to do and then stopped and disclosed it to the government," said Robert Luskin, an attorney for Miller.

An attorney for Anderson declined to comment.

The maximum penalties are five years in prison and a $250,000 fine for Anderson and 20 years in prison and a similar fine for Miller.

On Tuesday, the SEC said the two men also had settled civil securities fraud actions they had faced.

Reuters was used in compiling this report.

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