AOL Accounting Inquiry Widened

Investigations into the accounting practices of AOL Time Warner have been widened to include the use of bulk subscription sales at America Online.

The securities and exchange commission, the US financial regulator, has asked the company to hand over documents related to the bulk programme, which accounted for almost a fifth of the internet service provider's subscriber growth in 2001 and 2002.

Under the little-publicised programme, partner companies including retailers Sears Roebuck, and JC Penny acquired thousands of subscriptions for as little as $1 each per month, and offered them at discounts to their staff. Other marketing partners included United Airlines.

The bulk programme allowed AOL to add 830,000 subscribers during the years in question. It is unclear how many of the accounts offered to workers were even activated. Most of the programmes have been discontinued.

An email from AOL's legal department was cited in yesterday's Wall Street Journal. It asked employees to "preserve hard copy and electronic documents, email and computer contents pertaining to bulk subscription arrangements, as well as any documents and other materials relating to the company's practices, policies and procedures for counting customers."

Spokespeople for AOL and the SEC declined to comment.

The issue of accounting for subscribers was highlighted at the end of last week when the company disclosed that its total had fallen to 25.4m in the US, from a peak of 26.7m.

Don Logan, the executive who oversees all subscription businesses in the group, said one of the reasons for the unexpectedly large fall was the "cleaning up of files".

America Online continues to blight its parent company, which has otherwise largely been returning to growth.

The internet division has been under investigation by the SEC and the US justice department for more than a year and has undergone sweeping management changes.