The second week of June brought news that federal agents had arrested three former circulation managers from Pulitzer prize-winning Newsday and charged them with criminal fraud. Those arrested were Edward Smith and Robert Garcia in New York and Richard Czark in South Carolina. In 2004, Newsday’s parent company, Tribune Co., acknowledged that circulation numbers had been inflated by as much as 20 percent at Newsday and as much as 50 percent for daily sales of the Spanish-language Hoy.
News reports indicate three deceived parties: Tribune Co., the advertisers, and the Audit Bureau of Circulation or ABC. They also reported that the affidavit outlined an “elaborate scheme” involving kickbacks, false accounting, and the creation of phony corporations. Federal investigators said the business models for Hoy and Newsday between 2002-2004 were based on “criminal fraud” which involved “sophisticated deception,” including the coaching of participants in how to lie to auditors. Six confidential sources are cited in the affidavit, and media report several are expected to plead guilty to criminal charges. National Public Radio said a confidential informant reported that defendant Ed Smith also staged a “complicated deception for visiting ABC auditors.” Smith was identified as a 30-year Newsday veteran who remained a circulation consultant after his retirement in 2002.
In the wake of the arrests, some credit should surely go to Newsday reporters, who turned their investigative resources on the business side of their own company. The American Journalism Review contrasted Newsday’s reaction with that of the Dallas Morning News, which was also caught in its own circulation controversy. We now know a great deal about the circulation fraud at Newsday, AJR noted, because a “team of Newsday reporters began an aggressive investigation soon after the story broke. The paper has published high-profile, deeply detailed articles over a period of many months, describing some of the same practices alleged in the Dallas suit-intense pressure to falsify numbers, papers delivered to people who never asked for them, papers thrown in dumpsters and so forth.”
The AJR also noted that the Newsday reporters’ stories revealed wrongdoing that went beyond what their company had admitted. By contrast, AJR noted the Dallas Morning News published very little about its circulation practices and “had not told its readers anything about the allegations in the shareholders suit.”
While it is a challenge for Newsday to regain the trust of advertisers, at least their reporters were allowed to go after the story. By contrast, morale at the Dallas Morning News is said to be very low.