SEC Concludes Tribune Circ Fraud Investigation

Four More Newspaper Execs Plead Guilty

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NEW YORK (AdAge.com) -- The aftershocks from circulation fraud at Newsday and Hoy may finally be quieting, as the Securities and Exchange Commission concluded an investigation begun in 2004 and, separately, six more people pleaded guilty to participating in the scheme.
Tribune's 'Newsday' and Hispanic newspaper 'Hoy' reported false circulation from January 2002 through March 2004, the SEC said.
Tribune's 'Newsday' and Hispanic newspaper 'Hoy' reported false circulation from January 2002 through March 2004, the SEC said.

The SEC said today that the Tribune Co. had reported false circulation for Newsday and Hoy from at least January 2002 through March 2004 and that the company had lacked the internal controls required to detect and prevent such inaccurate reports.

No fines or sanctions
But in a settlement with Tribune, the commission only directed the company to "cease and desist" from committing or causing similar violations; it did not levy fines or other sanctions, citing corrective actions and cooperation by the company. Tribune did not admit or deny the SEC findings.

"Circulation figures are important because they are one of the most reliable indicators of a publishing company's current financial condition and its future prospects," said David Nelson, director of the commission's Southeast Regional Office in Miami, in a statement. "As a public company, Tribune had an obligation to establish internal mechanisms to assure that the circulation figures and related financial information was reported to the public accurately."

The associate regional director of the Miami office, Glenn S. Gordon, cast circulation integrity as central to competing with other media. "Accurately reporting paid circulation figures is even more material to investors as competition with the Internet and other electronic media builds," he said. "Publishers must be certain that they have internal controls in place to facilitate accurate reporting of circulation information."

In a statement of its own, Tribune said it was satisfied with the result of the investigation. "We gave the SEC and other federal, state and local authorities our full cooperation and began communicating with our advertisers from the outset," said Dennis J. FitzSimons, chairman-CEO. "We're happy the SEC's findings are consistent with our own investigation results and that we have closed this matter. We are looking to the future at Newsday and Hoy, with a focus on readership and service to the Long Island community."

Federal court proceedings
In separate federal proceedings, six people including four former newspaper circulation executives have pleaded guilty in federal District Court in Brooklyn to helping boost circulation at Newsday and Hoy, bringing the total number of guilty pleas to nine.
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