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Judge Orders Ex-Chairman of AOL to Face Civil Claims

Steve Case is accused of misrepresenting ad sales before the firm's merger with Time Warner.

August 13, 2004|From Times Staff and Wire Reports

A federal judge in New York has ruled that former America Online Chairman Steve Case must defend himself against civil allegations that he knowingly misrepresented the Internet firm's advertising revenue before the company's merger with Time Warner Inc. in 2000.

In May, U.S. District Judge Shirley Wohl Kram ruled that there was insufficient basis for allegations that Case intentionally tried to mislead investors to boost the company's stock price. But this week, the judge reversed that opinion after the Minnesota State Board of Investment, the lead shareholder plaintiff in the case, filed an amended complaint with more information.

Case has testified that he has made no false statements and had no advance knowledge of the firm's impending ad woes.

"Mr. Case did nothing wrong," his attorney Ron Klain said Thursday. "This procedural ruling simply means that the plaintiff can go back to square one. Mr. Case's conduct in this matter has been entirely appropriate."

A Time Warner spokesman declined to comment Thursday.

As part of her ruling, which was first reported by the Washington Post, Kram also reinstated civil claims against Joseph Ripp, who served as AOL's chief financial officer, and Gerald Levin, the former chief executive of AOL Time Warner and one of the architects of the merger.

Both Ripp and Levin have denied wrongdoing. Kram declined to reinstate civil claims against Time Warner Chairman Richard Parsons.

In her ruling regarding Levin, the judge cited the amended suit's allegations that he once portrayed concerns over the health of AOL's ad sales as "a kind of nervous Nellie manufactured issue." Kram rejected Levin's contention that he could not have known AOL's true financial condition because he was not privy to AOL's internal documents.

Investors lost hundreds of millions of dollars after AOL and Time Warner merged and the combined company's stock plummeted in value.

The class-action lawsuit is an attempt to recover funds and damages from Time Warner as well as current and former senior executives.

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