US SEC charges eight ex-AOL Time Warner execs

(Adds attorney comment, paragraph 14)

By Karey Wutkowski

WASHINGTON, May 19 (Reuters) - The U.S. Securities and Exchange Commission on Monday charged eight former executives of AOL Time Warner, now known as Time Warner Inc (TWX.N), in a fraudulent scheme that overstated company advertising revenue by more than $1 billion.

Four of the defendants settled with the SEC and the other four are facing fraud-related charges in federal court in New York.

The former executives participated in a scheme from mid-2000 to mid-2002 to artificially inflate the company's reported online advertising revenue, the SEC said in a statement. Online advertising revenue was a key measure analysts and investors used to evaluate the company.

The scheme involved fraudulent transactions in which AOL Time Warner effectively funded its own advertising revenue by giving purchasers the money to buy online advertising that they did not want or need, the SEC said.

The SEC settled charges with David Colburn, former head of the company's business affairs unit; Eric Keller, former senior manager in the business affairs unit; James MacGuidwin, former controller; and Jay Rappaport, former senior manager in the business affairs unit. The four neither admitted nor denied they were guilty of the charges.

As part of their settlements, Colburn agreed to pay almost $4 million, Keller almost $1 million, MacGuidwin $2.4 million, and Rappaport almost $750,000, the SEC said.