Anatomy of a circulation fabrication

From pressure to lie about numbers to staged sales to their own carriers, five Newsday agents detail the debacle

September 12, 2004

For four weekdays this past April, dozens of newspaper hawkers bearing "Newsday for Sale" signs took up posts at intersections in Nassau and Suffolk counties.

The street-side sales force was extremely effective, selling hundreds, even thousands, of Newsdays each morning to passing motorists, many of whom bought them in bunches.

But the operation was a sham - an elaborate ruse orchestrated by some circulation managers to fool auditors investigating claims that Newsday had fraudulently boosted its circulation, according to Newsday's independent home-delivery agents who participated in the scheme and two others who are familiar with it.

"They gave the auditors the actual street corners where the hawkers were selling the papers so they could see that the actual papers were being sold," said an agent who witnessed the hawker operation. "But what the auditors didn't know was that the agents' own carriers were coming by and buying papers. They were buying five and six papers at a clip and then coming back later in a different car and buying five or six more."

The sham hawker operation was perhaps the most dramatic revelation to emerge in recent weeks in an ongoing investigation by Newsday reporters of the newspaper's past fraudulent circulation practices and how the schemes were hidden from auditors. But five agents, who spoke on the condition of anonymity, said it was only the most recent example of the integral role they were forced to play in long-running efforts to artificially prop up Newsday's circulation.

In fact, the agents provided detailed descriptions of a variety of methods some circulation managers used to help fraudulently boost Newsday's reported circulation - by as much as 100,000 daily papers and as much as 122,000 Sunday papers based on new year-over-year figures Newsday parent Tribune Co. acknowledged Friday.

The scandal, which also involves circulation padding at Tribune's Spanish-language Hoy, has spurred federal investigations, led to a reshuffling of Newsday's top management and forced Tribune Co. to set aside as much as $95 million to settle with aggrieved advertisers, whose rates are often set by paid circulation. It also has helped to raise questions about the general reliability of circulation reporting in the newspaper industry, which has seen two other major dailies admit to inflating their figures in the last year.

The Newsday agents interviewed said they regularly carried hundreds of phony or non-paying customers on their delivery routes, and they said they were paid for their troubles with "incentive" credits that hid the fact that they were being compensated for free or undelivered newspapers.

The agents said some managers coached them to lie to auditors for the Audit Bureau of Circulations, an industry monitor, whenever they came to town for the annual examination of Newsday's books. They said partial-week subscribers were frequently upgraded to seven-day delivery, whether they wanted the papers or not. Such programs may have accounted for tens of thousands of the inflated circulation. And the agents said they were often reminded that their one-year contracts might not be renewed if they declined to go along.

As one agent put it, "For the past six or seven years ... every agent has been working with the threat over their head: 'If you don't want to play the game, we'll find somebody who will,' That's the way it went."

Asked to comment on the fraudulent practices detailed by the agents, Newsday executives declined interviews but said through spokesman Stu Vincent, "The ABC audit and our internal investigation at Newsday and Hoy had uncovered these situations and, as a result, we made appropriate changes to our circulation management and implemented tougher controls."

Newsday didn't identify who was involved and it's unclear how widely the improper practices reached through the circulation department.

The newspaper fired Bob Brennan, vice president for circulation, in July and five circulation managers in early September. Sources within the paper identified those managers as Robert Bergin, Robert Garcia, Dot McKillop, Dennis Springer and Gerry Schultz. None would comment on the scandal.

"We are determined that this type of behavior will never happen again," Vincent said in his e-mail response to written questions reporters submitted to Newsday executives early last week.

Covering up the scandal

The circulation scandal was sparked in February, when four advertisers filed a federal lawsuit claiming Newsday had fraudulently inflated its circulation. Although Newsday said the case had no merit, the lawsuit spurred investigations by Tribune Co., and ABC, the organization that collects and certifies publishing industry sales figures that are a key component in setting advertising rates.

The delivery agents said in interviews that the circulation padding has ended now that the department is under a microscope and Tribune, based in Chicago, has fired key executives, allowed others to retire early and brought in new leaders.

But they said before anyone was fired, and before Tribune's announcement in June, that Newsday had indeed inflated its circulation reports, several circulation managers turned to the agents one last time, enlisting them in a desperate attempt to throw investigators off the scent of the scandal.

One of the agents who took part in the sham hawker operation said he learned of the plan to fool the auditors on the first Saturday in April. He was summoned that day to an emergency meeting with five circulation managers and five other agents at the indoor batting cage of the Lindenhurst American Little League, he said.

The circulation managers had backed themselves into a corner by telling ABC auditors that Newsday sold thousands of papers a day with a street-hawker operation that didn't actually exist, the agent said.