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Company: AOL TimeWarner

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Excessive Spending

Date Class
20th Jun 2003 Questionable Business Practice
Dot-com boom begot obscene wealth and trouble

CALL it the privilege of wealth, AOL-style. The dot-com feeding frenzy was creating obscene riches at virtually every level of the company.

It was a simple calculus: dot-coms paid whopping fees to promote their wares on AOL.

AOL, in turn, reported whopping revenue growth, which spurred investors to buy up its stock, which continued to rise, which prompted employees to cash in their ever-building stock options.

Everyone, it seemed, was becoming an instant millionaire.

Twentysomethings and secretaries retired with sevenfigure bank accounts after a few years in the job.

“It was like, ‘Wow, I just made a few thousand dollars just by sleeping’,” said an official.

It was the logic chain of too much money: wealth begot parties. Parties begot good times. And good times, on occasion, begot trouble.

That was the case in early 2000 when a handful of AOL business officials took a spontaneous excursion to San Francisco on the corporate jet. They called it a “team-building trip”. The destination: The Gold Club topless bar on Howard Street.

Most reckless behaviour took place in a more evolved adult playground: Las Vegas. Company executives were sometimes greeted by a limo and a wealthy AOL business partner, who put them up at the Mansion at the MGM Grand, the exclusive province of the high-roller.

The businessman didn’t limit his largesse to grand suites. One of his close associates said he also “set them up on his own credit line” so that the AOL executives could gamble freely, to a point, without fear of losing their own shirts.

The businessman had his own reasons for being so generous: “He wanted to build their loyalty to him,” the associate said.

If the credit line didn’t work, he offered the AOLers another inducement: high-priced call girls.

AOL said it was unaware of such activities and did not condone them.

Some of its employees thought otherwise, saying the untoward behaviour had a socialising effect, a way of bonding AOLers.

“Everyone has dirt on everyone else,” explained a company official. “It’s mutually assured destruction.”




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