"Anything that falls within the scope of federal securities laws is appropriate for SEC inquiry,'' said Jacob Frenkel, a former Securities and Exchange Commission prosecutor.
The SEC and Justice Department began theirinto the online unit of AOL Time Warner last month. Many industry experts have said the probe may take some time and may widen to other areas.
"From my experience as an SEC enforcement lawyer," he added, insider share sales and projections by executives are "absolutely logical investigative courses for enforcement staff to follow."
The Financial Times reported on its Web site late Thursday that the SEC was set to examine a series of upbeat forecasts made last year by AOL Time Warner executives. It did not cite any sources.
SEC and AOL Time Warner representatives declined to comment.
AOL Time Warner's management lost credibility with Wall Street in September 2001 after it abandoned aggressive growth targets it had set at the time America Online completed its takeover of Time Warner in January 2001.
In that time, many of its peers were reining back forecasts as they suffered from a severe advertising slump.
The company's stock has fallen 70 percent this year as AOL Time Warner struggles to revive growth at its online unit, which has been hit with a management shakeup and government inquiries into its accounting practices.
A shareholder lawsuit filed recently by law firm Berger & Montague has also alleged that the company made false and misleading statements about its revenue since the third quarter of 2000 and that executives sold shares while knowing "material adverse non-public information.''
The suit cites share sales between February 2001 and May 2001 by former AOL Time Warner Chief Operating Officer Robert Pittman, who resigned last month under pressure, and former AOL dealmaker David Colburn, who was ousted last week.
It also notes share sales by AOL Chief Operating Officer Mike Kelly, who was formerly chief financial officer of the entire company.
"If any share sales by insiders were outside governing regulations under securities laws, such share sales could certainly be a problem,'' Frenkel said.
The company has been the subject of class-action suits since The Washington Post raised questions last month about whether AOL had inflated its online ad revenue.
AOL had stood by its accounting and for weeks said it was appropriate, but the companylast week that the online division may have overstated revenue in three ad deals totaling about $49 million.
It had declined to comment who those deals were with.
The Washington Post reported on its Web site Thursday that one of the deals was done with WorldCom, which filed for the world's largest corporate bankruptcy.
"We can't speak to accounting issues at AOL,'' WorldCom spokesman Brad Burns said. "AOL is a very important customer. Our business dealings with them have been no different than deals other corporations make every single day. Obviously, our own accounting is under review and we're cooperating with all of the investigations."
AOL Time Warner said last week it is conducting an internal review of AOL's ad and commerce deals, which it plans to complete by the end of the third quarter.
As it conducts its own inquiry, the company is likely to look at almost all of its deals that were struck in the last year and half with companies as varied as eBay to PurchasePro.com.
Investigators have been looking on deals where AOL may have used a practice known as "round-tripping," which sometimes results in artificially inflating revenue of both the buyer and seller.