Time Warner is safe now from the accusations that could be brought against it by the Justice Department in the AOL accounting case if it takes corrective measures and brings in an independent auditor to check on AOL’s financial operations in the past two years. Time Warner offered the Justice Department cooperation as part of the settlement. The finalization of the details may take weeks though. Under the conditions of the agreement, Time Warner may have to restate its accounting for advertising revenue.

AOL was suspected of pumping o revenue as well as engaging in other illegal practices before it merged with Time Warner in 2001. The settlement with Justice Department investigators will take up $60 million in fines and $150 million for a civil litigation fund and in coverage of other governmental costs from the probe.

"When the commission obtains a penalty against an entity, it provides a powerful incentive for companies in the same or similar industries to take steps to prevent and address comparable misconduct within their own walls," SEC’s enforcement chief Stephen M. Cutler Cutler said. "Thus, a single enforcement action has the potential to effect change on an enormous scale."

This agreement, together with the tentative deal with the SEC’s enforcement division that has yet to be approved by commissioners, may cost Time Warner about $510 million but is ultimately good news for investors as the settlements remove the uncertainty about the company’s prospects.

"Many large institutional shareholders are leery of buying stock in a company that is under investigation," said Richard Greenfield, a media analyst at Fulcrum Global Partners. "This removes a major obstacle. And now top management can focus all its energies on Time Warner’s businesses and long-term growth."

Now Time Warner’s CEO Richard D. Parsons has freedom to pursue acquisitions, something that he was prohibited to do before when the case was pending. Parsons has already expressed a wish to partner with Comcast to bid for Adelphia Communications, the bankrupt cable operator. Bids are expected in January. Another possible target is Cablevision Systems, if it is set for sale.

Investments in cable companies are also not without risk. "For Time Warner to move into regionally focused cable, while its competitors - News Corporation, Viacom, NBC and Disney - move toward national distribution and content, carries some risk," said Leo J. Hindery Jr., former chief executive of TCI and AT&T Broadband.