Oded Aboodi, the leading financial adviser to Time Warner Inc. and a key architect of its 1990 merger, Thursday settled civil insider trading charges brought by the Securities and Exchange Commission and agreed to pay $931,000 in penalties.
In its complaint, the SEC alleged that two of Aboodi's family partnerships sold Time Warner common stock when Aboodi knew that Time Warner management had approved a controversial stock rights plan in May, 1991. When the plan was made public June 6, the price of Time Warner shares lost 10% of their value, declining $11.25 that day.
Time Warner spokesman Edward Adler declined to say whether Aboodi or his Alpine Capital Group will continue advising the company. The spokesman also declined to confirm published reports that a committee of directors has been formed to review Aboodi's role.
"It would be prudent to put an outside committee on this," said Eric W. Orts, assistant professor of legal studies at the University of Pennsylvania's Wharton School of Business. "If they think there really was insider trading going on . . . I think directors take this seriously."
Since the death of Time Warner Chairman Steven J. Ross in 1992, the board has shed some longtime Ross associates and attracted high-profile directors such as former Xerox Chairman David T. Kearns, former U.S. Trade Representative Carla A. Hills and former baseball commissioner Francis T. Vincent Jr., who once worked at the SEC.
Two sources said that a committee of directors has been formed. The panel reportedly includes Vincent as well as former Jewel Cos. Chairman Donald S. Perkins and Richard D. Parsons, chairman of Dime Savings Bank of New York.
Aboodi, 52, did not return a reporter's call Thursday. His attorney, Dennis Block, declined to comment on Aboodi's future role at Time Warner. In settling the charges, Aboodi neither admitted nor denied the allegations.
Aboodi was Ross' closest financial adviser from the mid-1980s until Ross died, and he developed a similar rapport with Ross' successor, veteran Time executive Gerald M. Levin. Aboodi and Levin were key negotiators of the 1989 plan to merge Time and Warner Communications Inc., a plan that was completed the following year, after Paramount Communications Inc.'s unsuccessful bid to break up the deal.
To ward off Paramount, Time took on billions of dollars of debt to acquire Warner, and Aboodi has been a key negotiator as the company sought ways to reduce its debt. Aboodi helped execute Ross' plan to find strategic partners, culminating in the sale of minority stakes in its entertainment business to ITOCHU Corp., Toshiba Corp. and U.S. West.
Aboodi has also been involved in negotiating sensitive contracts with key executives, one source said, such as Warner Bros. co-Chairman Terry Semel's in 1993.
Although Aboodi maintains an office in the Time Warner building, he is not an officer and his fees in recent years have not been disclosed--even from the 1991 rights offering that set the stage for the insider trading charges.
"We were not required to disclose that and did not," the company spokesman said.
In a recent biography of Ross, author Connie Bruck said Aboodi's son, David, was under investigation for trading in Time Warner stock. But David Aboodi--an executive at family-affiliated Berkshire Bank in New York--was not named in the SEC complaint filed in federal court Thursday, and Block, the attorney, said he does not expect further action against any family member.