From rumblings to a groundswell (AFP)

New York, Sept. 18 (Reuters): Investors are intensifying calls for the removal of AOL Time Warner Inc. chairman Steve Case, the main architect of the mega-merger that created a company which has failed to live up to its promise.

Removing the co-founder of America Online from his role as chairman at the world's largest media company, however, will be difficult and may take some time, investors and analysts said.

An AOL spokeswoman denied that Case was exiting. “There is no basis to this rumour. Steve Case is not leaving the company,” AOL Time Warner spokeswoman Tricia Primrose said.

Case helped engineer AOL’s $ 106.2 billion takeover of Time Warner, which had four times the internet company’s revenue, for AOL stock at the peak of the dot-com boom.

But the deal, initially heralded as revolutionary, has come under growing fire amid the 70 per cent slide in AOL’s stock since the merger was completed in 2001. Shares closed down 9 cents at $ 12.58 on the New York Stock Exchange.

AOL Time Warner has been struggling with sluggish growth at its America Online unit, federal probes into the division’s accounting practices and a management shake-up.

“I would like to see Steve Case resign or be forced to resign,” said veteran media fund manager Hal Vogel, head of New York-based Vogel Capital Management. “The sooner they get onto it the better. Others who have messed up get pushed out.”

Former AOL Time Warner chief executive Gerald Levin and chief operating officer Robert Pittman —also key architects of the deal—departed under pressure earlier this year. That leaves Case as the last key figure involved in the deal.

Question is when

Case may face a board challenge at its regular meeting on Thursday but he is likely to have enough support to remain.

“I don’t think the board will do anything in the next quarter or so,” said Doug Kass, a hedge fund manager that owns the company’s stock. “But Case is going —probably within the next two quarters —and everyone knows it.”

Kass said there is a lot of animosity among Time Warner veterans because they feel like they were had when they agreed to sell their company for overpriced AOL stock.

Time Warner veterans now fill most of the company’s top ranks under chief executive Richard Parsons, a former Time Warner executive himself who has spent much of the summer trying to regain investor credibility.

Investor anger has risen as America Online has not only failed to supercharge Time Warner’s traditional media businesses but also offset strength in cable networks and film. The recent disclosure that America Online may have improperly accounted for three ad deals has aggravated the situation.

The Minnesota state board of investment filed court papers this week, alleging the company issued false and misleading statements about its ad and commerce revenue and the benefits of its merger. The drop in AOL’s stock cost the pension fund at least $ 249 million, it said. Amalgamated Bank’s Longview Fund on also filed a motion in federal court seeking lead plaintiff status in class-action suits against AOL Time Warner, alleging illegal accounting practices among other things.

AOL Time Warner’s Primrose declined to comment.