DOW JONES NEWSWIRES (NYSE:DJ)
Tribune Co. (NYSE:TRB) (TRB) will pay $15 million to the federal government to settle charges that its Long Island, N.Y., newspaper Newsday and New York Spanish- language paper Hoy misstated circulation in 2004.
Tribune, which owns Newsday and Hoy, also will set aside $90 million for restitution payments to affected advertisers.
The Chicago-based media company reached an agreement with the office of the U.S. Attorney for the Eastern District of New York that includes acceptance of responsibility for the circulation problems caused by several former Newsday and Hoy employees.
In agreeing not to prosecute Newsday or Hoy, the government cited the companies' "commitment to full cooperation" with the appropriate government agencies and "numerous remedial actions" taken by current management. Among those actions were firing all employees involved in the circulation misstatements, instituting a mandatory employee code of conduct and mandatory employee ethics training, and implementing a 24-hour, seven-days-a-week ethics hotline for reporting fraud or abuse.
Newsday Chief Executive Timothy P. Knight said, "When these issues came to light in 2004, Tribune, Newsday and Hoy took full responsibility and swift action. Over the past few years, we have made comprehensive changes in controls, systems, customer relations, policies and our management team to prevent this from occurring again."
After completing an extensive review of Newsday in 2004, the Audit Bureau of Circulations said the newspaper overstated daily and Sunday circulation by 16.9% and 14.5%, respectively, during the 12-month period ended Sept. 30, 2003.
Tribune was one of a handful of publishers to reveal erroneous circulation numbers in 2004, in a scandal that has cast doubt on the credibility of circulation figures, which are used to determine advertiser rates.
Hollinger International Inc. (HLR) disclosed that its Chicago Sun-Times inflated circulation figures, while Belo Corp. (NYSE:BLC) (BLC) said it inflated circulation figures at the company's flagship newspaper, the Dallas Morning News.
The past few years have been tumultuous for the newspaper industry. The flurry of corporate activity - including a deal to take Tribune Co. (NYSE:TRB) private and an agreement to sell Dow Jones & Co. (NYSE:DJ) (DJ), publisher of The Wall Street Journal, to News Corp. (NYSE:NWS) (NWS) - has failed to mask the overarching trends facing the industry. Newspaper circulation has been falling for more than 20 years amid a shift in consumer habits and a proliferation of other news outlets.
Tribune's shares closed at $33.31 on Tuesday. They traded at $33.31 after- hours.
-By Kathy Shwiff, Dow Jones Newswires (NYSE:DJ) ; 201-938-5975; Kathy.Shwiff@dowjones.com
(END) Dow Jones Newswires (NYSE:DJ) 12-18-07 1747 Copyright (c) 2007 Dow Jones & Company, Inc.
