Googling AOL While the DOJ Probes

America Online on Wednesday lifted the wraps of its new search engine, announcing technology from search engine upstart Google would be digging for results for its millions of users.

The new AOL Search has been tweaked to provide results from Google’s massive index of billions of Web documents and from within AOL’s own system, the first time a search engine would index both at the same time.

A spokesperson for AOL said Google won’t have access to its proprietary system, which would continue to be indexed internally by AOL.

The search tool has also added a feature to allow AOL members to retrieve localized results, based on geographic mapping.

The new engine, which will be a key part of this fall’s launch of AOL 8.0, promises the easiest and fastest way for AOL members to run searches online but, more importantly, it’s a huge boost of Google’s ‘sponsored links’ advertising business as it finds millions of new eyeballs for its business partners.

Google swiped the AOL deal from under the nose of rival Overture in May and is now powering search results across AOL’s U.S properties, including Compuserve.com, AOL.com and Netscape.

Google now gets to push links to its own recommended partners and advertisers to America Online users.

For users of AOL’s dial-up and broadband ISP users, the company continues to use the ‘Keyword’ feature on the navigation toolbar but, instead of only searching within AOL properties, AOL Search will now return everything that Google indexes.

AOL Search also includes a Sherlock plug-in for user’s of Mac operating systems.

AOL’s launch of the new Google-powered search engine comes on the same day news emerged the Justice Department would investigate accounting practices at AOL Time Warner.

According to published reports, U.S. prosecutors at AOL’s Virginia headquarters are working along with investigators from the Securities and Exchange Commission (SEC) to look into certain transactions at the company’s Internet division.

AOL/TW chief executive Dick Parsons said the company would cooperate with the SEC probe. In a statement Tuesday, AOL/TW said it would also cooperate with the DOJ. “If the Justice Department wants to look at the facts, of course we will cooperate with them too, as we would with any other appropriate government agency,” the media giant said. “Our accounting is appropriate and in accordance with generally accepted accounting principles, and our auditors, Ernst & Young, have repeatedly confirmed that,” the company added.

Reports say investigators are believed to be focusing on accounting questions raised by a recent Washington Post study of the company’s Internet division. The newspaper’s study reported that AOL had booked revenue from ads sold for eBay and renegotiated long-term advertising contracts to recognize revenue more quickly.