A Sad Chapter for Time Warner

It's a somewhat sad addition to the story line at Time Warner (NYSE: TWX  ) . But it's also one that tends to supply us with yet another perspective on how the company today is the product of a misstep in recent years.

Federal regulators have charged that eight former executives inflated the company's online advertising revenue from 2000 to 2002. We're not talking about minor tweaking here; the claim is that the revenue "adjustment" involved more than a billion dollars.

Shortly after the turn of the millennium/century/decade, Time Warner's then-CEO Jerry Levin allowed his company to be picked off by AOL, then a hugely successful Internet dial-up. In retrospect, Levin appears to have felt it was his duty to bring home a deal for his diversified media company, and the now-downtrodden AOL was still flying high and was happy to accommodate him.

Soon after the merger was consummated -- with AOL people having assumed most of the top spots in the combined company -- those of us who'd followed one or the other of the companies were treated to an analyst session in New York. There, management prattled on about the "new-media, old-media" synergies that they envisioned for the combination -- but which never really materialized.

Following that session, however, the air began to leak from the AOL balloon, as Internet subscribers looked to the faster speeds from the likes of Comcast (Nasdaq: CMCSA  ) , AOL's new sibling Time Warner Cable (NYSE: TWC  ) , Cablevision (NYSE: CVC  ) , and telco Verizon (NYSE: VZ  ) and its peers.

And as AOL began to fade, its former leaders -- who, in my rarely humble opinion, had set new standards for arrogance -- began to be peeled away from the top ranks of Time Warner in favor of the former leadership of the older company. Now, all that really lingers in the still-combined organization is the problematic hulk of what was once the high-flying dial-up.

Of the former AOL executives being charged, half have agreed to settle and pay fines totaling about $8 million. The rest, including the combined company's first chief financial officer, will fight the charges in court.

All in all, my advice to Fools with a bent for media investments is to give Time Warner something of a wide berth until -- as is likely to be the case before long -- AOL's remains have been jettisoned. At that time, the page can be turned from a sad chapter for a still-proud media company.

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