Friday, January 18, 2008

'Newsday,' 'Hoy' Will Pay Feds $15 Million In Circ Fraud -- And Avoid Criminal Charges

By Mark Fitzgerald

Published: December 18, 2007 11:55 PM ET

CHICAGO Tribune Co. will pay $15 million to settle a federal criminal fraud investigation into a five-year scheme to artificially inflate the circulations of Newsday and the New York edition of the Spanish-language daily Hoy, U.S. prosecutors in Long Island announced late Tuesday.

"In light of, among other things, the newspapers' acceptance of responsibility for the fraudulent conduct in which they and their employees engaged, their ongoing cooperation with the government, the newspapers' payment of approximately $83 million in restitution to their advertisers to date, and the implementation of remedial management and internal auditing reforms designed to prevent circulation-reporting fraud from recurring, the government has agreed not to prosecute the newspapers for their participation in the scheme," said the announcement by federal authorities.

The settlement was announced by Benton J. Campbell, U.S. Attorney for the Eastern District of New York; Ron Walker, Inspector-in-Charge, United States Postal Inspection Service, New York Division; Patricia J. Haynes, Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation, New York Field Office; and Lawrence W. Mulvey, Commissioner, Nassau County Police Department.

As part of their settlement agreement with the government, Newsday and Hoy admitted that between 2001 and 2004, "senior managers and subordinates systematically inflated paid circulation numbers reported in the newspapers' books and records, under-reported the number of copies of the Newspapers that were returned unsold, and falsely represented to the Audit Bureau of Circulations (ABC) that the inflated numbers were accurate," the feds' announcement said.

Prosecutors noted that Tribune had terminated the employees who participated in the fraudulent scheme, including Louis Sito, the founding editor and publisher of Hoy who went on to become Tribune's first vice president for Hispanic media. Last year, Sito pleaded guilty to charges of mail fraud.

ABC concluded in 2004 that Newsday had, in the year before, overstated its daily circulation by 16.9% and its Sunday circ by 14.5%.

Earlier this year, Tribune sold the New York edition of Hoy to ImpreMedia, publisher of El Diario La Prensa in New York City.

Mark Fitzgerald ( is E&P's editor-at-large

No comments: