NEW YORK (AdAge.com) -- In the latest development in a federal investigation of circulation fraud in the newspaper and magazine industries, the government has accused two publishing executives with trying to falsely inflate the circulation of the niche title Laptop.
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Edward D. Brown, president and publisher of Bedford Communications, and John Jay Annis, his director of circulation, were charged with scheming to fraudulently boost the circulation of Bedford's Laptop by hiring a distributor to accept 15,000 copies that Bedford would claim as paid circulation regardless if they were delivered anywhere.
Tipped its hand
By filing arrest warrants for the pair, the U.S. attorney's office for the Eastern District of New York tipped its hand for the first time since the summer, when it subpoenaed Time Inc. for information on that company's bulk-distribution programs. Time Inc. disclosed the subpoena in September and said it was complying with the probe.
According to court documents, Messrs. Brown and Annis cut a deal this year with a man who said he was the financial backer of a new distribution company. The financial backer, however, was actually an undercover investigator for the Inspector General of the Port Authority of New York and New Jersey. His meetings with the Bedford executives were part of a sting.
The charges were first reported Monday by Newsday, which also reported Mr. Annis pleaded not guilty last week. Mr. Brown did not return a call seeking comment; Mr. Annis, whom Newsday said had not been arraigned, could not be reached for comment.
The U.S. attorney's investigation followed revelations of circulation fraud at Newsday that eventually cut the paper's circulation by about 100,000 copies and instigated plenty of advertiser lawsuits. Three Newsday employees were charged with fraud this past June.
Ongoing investigation
In an affidavit based on a statement by Scott Briggs, a postal inspector, the government's investigation seems to be ongoing. "Presently I am participating in an investigation into fraudulent practices of reporting circulation within the newspaper and magazine industry," Mr. Briggs says in the document, dated Oct. 17.
Mr. Briggs describes a tape-recorded meeting in which Mr. Brown suggested that the distributor did not need to actually deliver Laptop to public places as long as it provided paperwork that would satisfy the Audit Bureau of Circulations.
'Will 15,000 copies be gone?'
"Let me put it this way: can we assume that the 15,000 copies will be gone?" the affidavit quotes Mr. Brown as saying. "If there's a trail, a paperwork trail, and some sort of, of financial trail, um, regardless of how efficiently they're distributed or not, is that adequate to cover us? I would suspect that we would need representation that you're going to do something with these."
According to the affidavit, Mr. Annis then added: "And again, whether you do or you don't, we need to have something that says of where you're going to put these."
Bedford agreed to pay the distributor 20 cents for each Laptop copy that it accepted, according to the affidavit. Bedford says on its Web site that Laptop has a paid circulation of 125,000.
