The Washington Post reports that Judge Shirley Wohl Kram has denied most of the motion to dismiss in the AOL Time Warner securities class action pending in the S.D.N.Y. The complaint alleges that the defendants, both before and after the 2001 merger of AOL and Time Warner, improperly inflated results through ’round-trip’ deals that in effect overpaid other companies for goods, services, or equity in exchange for advertising revenue. In 2002, AOL Time Warner restated $190 million in revenue.
Judge Kram threw out some of the plaintiffs’ claims, including those against former AOL chairman Steve Case and various bondholder claims, but found that the allegations in the complaint “established sufficient circumstantial evidence of misbehavior or recklessness for the case to move forward” against the company and various current and former officials. (The 10b-5 Daily has posted frequently about the case, most recently about a discovery decision issued by the court last October.)