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Some on AOL Board Said to Oppose Case

Media: Firm's chairman, architect of the merger with Time Warner, is fighting the ouster move, sources say. He may have votes to save job.

September 17, 2002|SALLIE HOFMEISTER | TIMES STAFF WRITER

A movement to oust Steve Case as chairman of AOL Time Warner Inc. is gaining momentum among board members and large shareholders of the media conglomerate, according to sources close to the situation.

Within the last month, Case was asked to resign by one of the company's largest shareholders, but he vowed to fight any effort to remove him, the sources said.

They said several AOL Time Warner board members, including Vice Chairman Ted Turner, have joined the campaign to push out Case.

The pressure on the company and Case in particular has mounted since the company was targeted this summer by the Justice Department.

Federal regulators are investigating accounting irregularities at America Online, the Internet service provider where Case served as chairman before orchestrating the merger in January 2001 with Time Warner.

Any campaign to unseat Case could be difficult because of the bylaws of the new company. Case cannot be removed as chairman without the approval of three-fourths of the company's 14-member board.

Sources close to the situation said Case probably would prevail in any vote because he has the support of several former AOL directors who joined the board of the new company after the merger.

"There is no basis to the rumors," said AOL Time Warner spokesman Ed Adler. "He's staying at the company."

Yet many large investors blame Case for the steep decline in their holdings over the last year.

Turner, for instance, has watched his stake in the company plunge in value to about $1 billion from about $8 billion when the merger was announced.

Other large shareholders lobbying against Case include Liberty Media Corp., the media portfolio controlled by John Malone, and Capital Research Group, a leading institutional shareholder that had supported the merger initially.

Together, Capital Research, Turner and Malone own 15% of AOL Time Warner stock.

Some analysts question whether Case serves any meaningful role at the company. Case leaves day-to-day operations to Chief Executive Richard Parsons, who succeeded Gerald Levin in May.

Case has characterized his role as mainly strategic. Yet institutional shareholders see Case as the architect, along with Levin, of one of the worst mergers in media history.

They also say Case cultivated a cowboy-like culture at AOL that gave rise to the practices that are now under investigation by federal regulators.

Many top America Online executives have already left the company, leaving Case a shallow base of support within the management ranks.

Many top executives from the Time Warner camp, whose options are under water, have channeled their resentment toward Case.

AOL Time Warner shares, which have fallen 70% since the merger, closed Monday down 22 cents at $12.67 on the New York Stock Exchange.

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