Extra! Wave of fraud hits major industry

The Texas—based corporate giant has been caught red—handed, cheating its customers and lying to those entrusted with auditing its most important reports. Massive refunds to customers are due for overcharging them. Halliburton? Enron? Nope.

You have probably never heard of this particular malefactor. Its name is Belo Corporation, and it just happens to be in the business of news, publishing newspapers, running television stations and cable operations. Purely by coincidence, the news media is distinctly uninterested in publicizing its wrongdoing, much less demanding jail time for the responsible executives. Ken Lay went into the wrong business. If he had run a newspaper instead of an energy company, nobody would know his name.

Belo has admitted to inflating the circulation of its flagship newspaper, the Dallas Morning News. Higher reported circulation yields higher advertising rates, which are calculated on the basis of cost—per—thousand (cpm in industry parlance). For the fraud which it now admits, Belo is offering refunds of $23 million to advertisers who paid for reader impressions not delivered as promised. And certified by the Audit Bureau of Circulation (ABC), the industry watchdog.

An isolated incident? Not at all. Other major newspapers have also recently fessed—up to major circulation fraud. They include the Chicago Sun—Times, Newsday, and Hoy, a Spanish language daily. The latter two papers are owned by The Tribune Company, which also publishes the Los Angeles Times and the Chicago Tribune.

Something is rotten in the newspaper industry. While the press loves to impugn the integrity of energy companies in the wake of scandals at Enron, Halliburton, and Shell, proportionally, it would appear that the newspaper industry is subject to much more abuse. But don't hold your breath waiting for editorials and television news features denouncing the corporate criminals who sell newsprint—based products.

Newspapers are a declining industry, hard hit by technologically advanced competitors, one that is 'in serious trouble,' as I have previously written. Circulation managers, the hapless officials in charge of selling and delivering the actual physical copies, are the officials on the spot, fighting the relentless downward trend of single copy sales.

The ABC is supposed to keep them honest, but it is largely a toothless watchdog, one whose bark is not often even audible. Mickey Kaus of Slate does an excellent job explaining most of the systemic problems of ABC, many of them deriving from the fact that it is controlled by the very folks on which it is supposed to keep an eye. Although big advertisers have seats on its supervisory board, they have been surprisingly silent. Kaus speculates that they are reluctant to speak out and prove their own previous fecklessness in protecting their companies' advertising expenditures. I would add that making mortal enemies of those who buy ink by the barrel is not a recipe for favorable news coverage, either, even if they are buying fewer barrels these days.

Kaus properly points out that the ABC's rules for counting 'paid' circulation have been 'dumbed—down' so thoroughly that it is surprising they even need to cheat. For years, on most days I receive an unordered and unpaid copy of the San Francisco Chronicle. (Friends in other cities report the same phenomenon.) If the Chron's circulation department averages in my unpaid copy with the paid copies delivered to my neighbors, ABC rules allowing steeply 'discounted sales" allow my copy to be described to advertisers as a 'paid copy." Wow! I would never knowingly do business with an industry which allows such deceptive practices as Kaus describes. If they fudge the circulation numbers this much, imagine what they do to the 'news' they report!

America's newspapers still have not come to terms with the internet. For good reason. Not only is their circulation falling due to people going to the web for fresher news, but their most lucrative advertising revenue, classified advertising, is rapidly disappearing in the face of free or low—cost internet—based ads, on sites ranging from ebay.com to Monster.com, to the free Craig's List sites in many cities across the country.

The economic meltdown is being compounded by an ideological meltdown. Ever since Woodward and Bernstein bagged themselves a Republican President, the newsrooms of America have moved steadily leftward. In the newsrooms of most big city daily papers it would be hard to put together a volleyball time of Pro—lifers.

So don't expect to see many searing investigations of circulation fraud at major dailies. It will obviously be up to the web to uncover the gory details of the ongoing frauds perpetrated on the American public by its press 'guardians.'

Stay tuned.

The Texas—based corporate giant has been caught red—handed, cheating its customers and lying to those entrusted with auditing its most important reports. Massive refunds to customers are due for overcharging them. Halliburton? Enron? Nope.

You have probably never heard of this particular malefactor. Its name is Belo Corporation, and it just happens to be in the business of news, publishing newspapers, running television stations and cable operations. Purely by coincidence, the news media is distinctly uninterested in publicizing its wrongdoing, much less demanding jail time for the responsible executives. Ken Lay went into the wrong business. If he had run a newspaper instead of an energy company, nobody would know his name.

Belo has admitted to inflating the circulation of its flagship newspaper, the Dallas Morning News. Higher reported circulation yields higher advertising rates, which are calculated on the basis of cost—per—thousand (cpm in industry parlance). For the fraud which it now admits, Belo is offering refunds of $23 million to advertisers who paid for reader impressions not delivered as promised. And certified by the Audit Bureau of Circulation (ABC), the industry watchdog.

An isolated incident? Not at all. Other major newspapers have also recently fessed—up to major circulation fraud. They include the Chicago Sun—Times, Newsday, and Hoy, a Spanish language daily. The latter two papers are owned by The Tribune Company, which also publishes the Los Angeles Times and the Chicago Tribune.

Something is rotten in the newspaper industry. While the press loves to impugn the integrity of energy companies in the wake of scandals at Enron, Halliburton, and Shell, proportionally, it would appear that the newspaper industry is subject to much more abuse. But don't hold your breath waiting for editorials and television news features denouncing the corporate criminals who sell newsprint—based products.

Newspapers are a declining industry, hard hit by technologically advanced competitors, one that is 'in serious trouble,' as I have previously written. Circulation managers, the hapless officials in charge of selling and delivering the actual physical copies, are the officials on the spot, fighting the relentless downward trend of single copy sales.

The ABC is supposed to keep them honest, but it is largely a toothless watchdog, one whose bark is not often even audible. Mickey Kaus of Slate does an excellent job explaining most of the systemic problems of ABC, many of them deriving from the fact that it is controlled by the very folks on which it is supposed to keep an eye. Although big advertisers have seats on its supervisory board, they have been surprisingly silent. Kaus speculates that they are reluctant to speak out and prove their own previous fecklessness in protecting their companies' advertising expenditures. I would add that making mortal enemies of those who buy ink by the barrel is not a recipe for favorable news coverage, either, even if they are buying fewer barrels these days.

Kaus properly points out that the ABC's rules for counting 'paid' circulation have been 'dumbed—down' so thoroughly that it is surprising they even need to cheat. For years, on most days I receive an unordered and unpaid copy of the San Francisco Chronicle. (Friends in other cities report the same phenomenon.) If the Chron's circulation department averages in my unpaid copy with the paid copies delivered to my neighbors, ABC rules allowing steeply 'discounted sales" allow my copy to be described to advertisers as a 'paid copy." Wow! I would never knowingly do business with an industry which allows such deceptive practices as Kaus describes. If they fudge the circulation numbers this much, imagine what they do to the 'news' they report!

America's newspapers still have not come to terms with the internet. For good reason. Not only is their circulation falling due to people going to the web for fresher news, but their most lucrative advertising revenue, classified advertising, is rapidly disappearing in the face of free or low—cost internet—based ads, on sites ranging from ebay.com to Monster.com, to the free Craig's List sites in many cities across the country.

The economic meltdown is being compounded by an ideological meltdown. Ever since Woodward and Bernstein bagged themselves a Republican President, the newsrooms of America have moved steadily leftward. In the newsrooms of most big city daily papers it would be hard to put together a volleyball time of Pro—lifers.

So don't expect to see many searing investigations of circulation fraud at major dailies. It will obviously be up to the web to uncover the gory details of the ongoing frauds perpetrated on the American public by its press 'guardians.'

Stay tuned.