Wall Street Journal Stole From Advertisers via Circulation Scam

If you had any doubts the Murdoch’s NewsCorp was a criminal enterprise, this story by Nick Davies of the Guardian (who has been out in front on NewsCorp reporting) should settle it.

In case you managed to miss it, NewsCorp International has been embroiled in a widening scandal about the hacking of cell phones in its now shuttered tabloid News of the World, which led to the resignation of the head of NewsCorp International, Rebekah Brooks, and has put heir apparent James Murdoch in a perilous position. It has also led to what amounts to serious, and hopefully permanent break in the status Murdoch held in England as a kingmaker.

We now see a calculated scam on the business side designed to defraud advertisers by boosting circulation figures (ad rates are based on circulation, so higher circulation = more revenues). This is fraud, pure and simple. The operation was material, accounting for a full 16% of the Journal’s European sales. And the former Dow Jones CEO Les Hinton was told of the scam, and in predictable fashion, nothing was done and the whistleblower was fired.

Key sections of the Guardian report (hat tip readers Michael Thomas and Reader of Tea Leaves):

The Guardian found evidence that the Journal had been channelling money through European companies in order to secretly buy thousands of copies of its own paper at a knock-down rate, misleading readers and advertisers about the Journal’s true circulation.

The bizarre scheme included a formal, written contract in which the Journal persuaded one company to co-operate by agreeing to publish articles that promoted its activities, a move which led some staff to accuse the paper’s management of violating journalistic ethics and jeopardising its treasured reputation for editorial quality.

Internal emails and documents suggest the scam was promoted by Andrew Langhoff, the European managing director of the Journal’s parent company, Dow Jones and Co…The highly controversial activities were organised in London and focused on the Journal’s European edition, which circulates in the EU, Russia, and Africa…

In what appears to have been a damage limitation exercise following the Guardian’s inquiries, Langhoff resigned on Tuesday…Neither he nor an article published last night in the Wall Street Journal made any reference to the circulation scam nor to the fact that the senior management of Dow Jones in New York failed to act when they were alerted last year…

The Journal’s decision to secretly purchase its own papers began with an unusual scheme to boost circulation, known as the Future Leadership Institute. Starting in January 2008, the Journal linked up with European companies who sponsored seminars for university students…

The sponsoring companies were not reading the papers they were paying for; they were never even seeing them; and they were buying at highly reduced rates. The students to whom they were distributed may or may not have read them; none of the students paid for the papers they were being offered. But the Audit Bureau of Circulation ruled that the scheme was legitimate and by 2010, it was responsible for 41% of the European edition’s daily sales – 31,000 copies out of a total of 75,000.

In early 2010 the scheme began to run into trouble when the biggest single sponsor, a Dutch company called Executive Learning Partnership, ELP, threatened to back out. ELP alone were responsible for 16% of the Journal’s European circulation.

Desperate to keep ELP in, the Journal concocted a greatly sweetened barter arrangement. But the Journal appears to have botched execution, leading ELP to threaten to pull out again:

By the autumn of 2010, ELP were complaining that the Journal was failing to deliver its end of the agreement. They threatened not to make a payment of €15,000 that was due at the end of December, for the copies of the Journal which they had sponsored since April 30. Without the payment, the Journal could not officially record the sales and their circulation figures would suddenly dive by 16%, undermining the confidence of advertisers and readers.

So Langhoff set up a complex scheme to channel money to ELP to pay for the papers it had agreed to buy – effectively buying the papers with the Journal’s own cash. This involved the use of other companies although it is not suggested that they were aware they were taking part in a scam.

These are just the high points of the story; Davies provides considerably more in the way of sordid detail and I strongly urge you to read his account in full. I’m waiting to see what other shoes start dropping as a result of this revelation.


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  1. readerOfTeaLeaves

    Thanks so very much for highlighting this, Yves.

    Particularly in a time when so many fine journalists and papers have been hammered for about 15 years now with declining revenues and readership, to see this news, it’s disgusting to see NewsCorp prosper from cheating, while other papers went out of business.

    I hope the WSJ EU advertisers raise holy hell about being defrauded in this fashion.

    1. steelhead23

      Holy hell? Look, this is fraud. Further, the fact that a broad array of NewsCorp personnel were involved means there was a conspiracy to commit fraud. Thus, I don’t want WSJ’s advertisers to raise hell, I want the state to prosecute this obvious crime. You see, here on the street, the payment for crime is time – in the slam. Rupert could pay the cost of his bilking his customers out of pocket lint – its the stay at the greybar hotel he cannot afford. I am sick of playing nice with the 1% ers – or in the case of Rupert, the 0.0001% ers. Book’m Dano.

        1. YankeeFrank

          You’re not asking the correct question. The next question is who committed the fraud? Was it a wealthy connected individual or corporation? Or was it a normal every day fellow? Once we answer that then we can determine the penalty. For the former the penalty is nothing. In fact, the fraudster in this case will likely get a nice infusion of taxpayer cash for their trouble. The latter? Oh well, then take everything they own and throw ’em in a hole. Such base criminality will not be tolerated!

      1. rd

        I don’t understand this “fraud” thing.

        I thought that creative and innovative businessmen deserve to be rewarded with great wealth and power. After all, their creativity and innovation is what creates jobs.

        Just about anybody can run a business based on real numbers. It takes geniuses to be able to run a business with “innovative” numbers. This is why it is so important to ensure (and insure) that our numerous geniuses in the financial sector, as well as deserving companies like Fox, are richly rewarded for their many innovations.

      2. Richard Kline

        I have never understood, through twenty years, why Rupert Murdoch wasn’t either in jail or doing the Australian crawl to Babylon along side Robert Maxwell. And if Rupert lives long enough, he’s going to be in slot A or slot B.

        Don’t think that these frauds and phone taps just ‘started’ three, or ten, or fifteen years ago. Everything about Murdoch from the inception reeked of fraud and graymail like an accumulation of sour hair rinse. I think that his media slave empire is going to crash before he goes through the Black Door in the Stars.

        1. patrick

          Ah, Robert Maxwell, another publishing paragon with “innovative” business practices; first at Leasco (?) and latterly BPCC. Particularly with regard to “creative” accounting and employee pension funds, or , more accurately, the disappearance of them.

          It’s never been confirmed that he fell, jumped, or was pushed off his yacht in the Atlantic. If I was Rupert I’d avoid any sea cruises for the foreseeable future.

          1. patrick

            Correction: Pergamon Press was his first brush with the authorities. Leasco was the company that Maxwell was trying to pull a fast one on when he tried to sell them Pergamon.

  2. JB Smith

    The problem with this is a circulation scam is not headline grabbing, despite being further evidence of an anything goes attitude which seems to pervade Mr Murdoch’s papers. Relating it directly to fraud – which it is – perpetuated upon advertisers, who are the lifeblood of any paper, may give it real teeth; and furthermore, make a real difference in the behaviour of the Murdoch press.

    Incidentally, any publishing auditing company which qualified the figures is also going to have some questions to answer.

  3. abelenkpe

    Stealing, hacking, lying, but not not under arrest. One set of laws for the wealthy and one set for everyone else.

  4. Sock Puppet

    Let’s hear it for the Guardian, whose ownership structure allows truly independent reporting like this.

    1. PhilJoMar

      The ownership structure is important but The Guardian has also dallied with stupid investment vehicles itself, losing tens of millions through investing in derivatives. There never seems to be anything these days that you can support 100%. Sniff. Sniff.

  5. mitchw

    In his resignation letter, Langhoff wrote it was the honorable thing to do. Who could he have been addressing?

      1. Sufferin' Succotash

        The thing to do when confronted by a scam like that one is to go straight to the authorities. No dicking around. Not even stopping to see your attorney first.
        I guess personal responsibility is for the serfs though.

        1. Procopius

          Well, going straight to “the authorities” is a good idea if your authority is Eric T. Schneiderman. If it’s Eric Holder, not so much.

      1. Sisi

        The *really* honorable thing would have been to have committed seppuku upon receiving orders no decent person should obey. Between the Scylla of disobeying orders and the Charybdis of carrying out a dishonorable action in obeying, the person of principle is supposed to block the action as much as possible and then commit suicide for the high crime of disobedience. Cf. “The 47 Loyal Ronin”.

        Nowadays one is allowed to commit career suicide instead of the literal thing; an honest person unaccountably employed at NewsCorp could have uploaded everything to WikiLeaks or shipped it to Nick Davies, resigned and ended his/her career in journalism or business. I think some WSJ reporters who resigned a few years ago intending to set up a private inquiry firm may have done something like that.

  6. LucyLulu

    I’ve been getting my subscription to the WSJ for free for quite a while now and I’m here in the US. I cashed in some frequent flyer miles that were set to expire for a few months subscription a couple years back, and ever since it expired, they’ve continued to deliver the paper. I ignore the bills and when they call, I tell them I don’t want it anymore, to cancel my subscription. They never do. I assumed its due to wanting to boost their reported circulation numbers. It’s looking like I’m a lifetime subscriber now, for free, and I wonder how often this happens.

    1. YankeeFrank

      This happens a lot, and not just with the Journal. I receive a couple magazines that I’ve canceled several times. I check my credit cards regularly and haven’t been charged in some time. I never read them because they suck, and can’t remember how I even wound up receiving them in the first place. Circulation baby!

      1. Nathanael

        This sort of circulation scam does mark the death knell for a newspaper or magazine. Eventually, the advertisers figure out that their money is being wasted. Advertisers are the income stream, so…. bankruptcy.

        The WSJ may not suffer the same fate, as it may be propped up by Wingnut Welfare. Propaganda rags don’t need to be profitable, they just need to keep getting money from the people who want to spread the propaganda.

    2. ginnie nyc

      I’ve experienced something similar. The apartment across the hall, 3 or 4 tenants ago, had a sub to WSJ. Two years after they moved out, it continued to be delivered like clockwork. The succeeding tenants had no interest in it; they appreciated my removing unwanted trash from their doorstep (lol).

      1. monday1929

        Let’s name names. Several Working people I associate with get MONEY magazine and Conde’ Nast Traveler, among others. They never asked for them, never paid for them,and they never read them. What other Publishers do this?
        Maybe an investigative reporter can…….naaah, forget it.

        When I reported to a senior Barron’s editor years ago that their options price listings were seriously flawed, he laughed and said, “we know that”.

    3. Walt

      The functional equivalent of banks allowing those seriously arrears inmortgage payments so they can pretend the loans are still “performing.” Or playing with loan loss reserves to pad so-called earnings.
      I want to puke.

    4. ambrit

      It’s like the article says, circulation equals revenue from ads. We’ve had the same thing happen for some of Phyls’ design magazines.

    5. Richard Hershberger

      I strongly suspect that circulation fraud is pretty widespread. I receive a regional “style” magazine: glossy, full color, and a large page count. I never asked for it. The one time I actually looked inside, there was a piece of hand-wringing over restaurants getting rid of sommeliers. I didn’t read much of the article, but I didn’t get the impression that the concern was for the plight of these newly-unemployed, but for that of the diners forced to read wine lists for themselves. I have never looked inside since. In the meantime I continue to get them. Years ago I naively even went out of my way to track down the publisher and inform them of their error. The magazines kept coming. Since then I have moved. I hoped this would put them off my scent, but they tracked me down. I have even occasionally received “renewal” notices gravely concerned that I might miss an issue.

      So my take on this is that it is a circulation scam. The magazine is purportedly one that you would actually pay for, and I am on their subscription rolls. I suspect that there is enough of an auditing procedure in place that they have to actually send me the issues rather than have it be completely fictive, but no procedure in place to actually confirm that the “subscribers” have any say on their status.

      What I mostly take away from this is that should I ever be in a position to buy advertising, I will be extremely skeptical of circulation claims.

  7. Paul Tioxon

    Who cares about defrauding their advertisers, they defraud their readership and the public with their fraudulent stories. How did they cover the imminent sub prime scandal, AIG OR MADOFF? Are they still blaming the victims for bursting into banks, gun in hand demanding mortgage approvals for their overextended credit card fueled consumer binges?

    1. decora


      2008, february, the Wall Street Journal ran a story on Magnetar Capital, a “fund behind astronomical losses”, by Serena Ng and Carrick Mollenkamp. It was one of the first ‘big media’ stories about this, predating EConned’s + ProPublica’s awesome analyses by a year+. You can find dozens of other examples of WSJ doing amazing work.

      The C Section of the journal is like an awesome, horrifying crime magazine if you know what to look for and skip the trash. I particularly was gobsmacked by the coverage of Death Bonds / Longevity Swaps / Mortality Swaps / Collateralized Death Obligations / etc.

      1. LucyLulu

        I agree. The WSJ does some excellent reporting, better than most mainstream newspapers, which overall seem to be increasingly lacking when it comes to investigative journalism. (It blows my mind that some of the best investigative stories are now found in tabloids like the Rolling Stone. Who’d a thunk?) Their editorial pages are skewed to the right but then who expects objectivity from editorials?

        1. BondsOfSteel

          The cartoons really stink though… I don’t think they’re funny at all.

          (A mis-quote from Michael Scott)

      2. Fíréan

        The WSJ journalist Jonathon Weil is credited with breaking the story of the Enron abuses, and though the paper may be only a shadow of it’s former self ( i do not know )reporter James B.Stewart received, 1988, a Pulitzer prize for his reporting and enlightening the public to insider trading practices.

        ps.i thought that i had already sent this posting but it didn’t appear in this thread.Excuse me for any duplication of posting.

        1. Nathanael

          The WSJ is a shadow of its former self. It used to be *the* go-to place for financial crime reporting, but the Murdoch folks have infiltrated the news section with their paid propagandists from the editorial pages, and the editor put in just before the Murdoch takeover filled the news pages with fluff pieces.

          The WSJ is no longer the go-to for financial crime exposes; it’s just not doing them much any more. The Financial Times has become important, breaking several of the financial crimes in the last few years.

      3. DP

        3 WSJ reporters (Mark Maremont, Charles Forelle and James Bandler) won Pulitzer Prizes a few years back for a superb investigative series on companies that had backdated executive stock options to set strike prices at lows just before the stock prices jumped. Their stories were researched and published before News Corp bought the WSJ. I doubt reporters at the WSJ today would be allowed to pursue such a story today, if there are any remaining with the talent to do so.

        Among the beneficiaries of backdated stock options were Steve Jobs and Michael Dell. After these stories broke, Apple made their CFO the fall guy and replaced Jobs’ option grants with restricted stock.

  8. brian

    criminal prosecution is in order
    since it crosses state lines likely federal jurisdiction
    consistent with past practice don’t expect Obama to do a thing and the word will be passed to US attornies accordingly

  9. Hugh

    Lie, cheat, steal, this is pretty much the business model of any successful corporation in the kleptocratic age in which we live.

  10. Moopheus

    That sounds pretty sleazy–I mean, magazine and newspaper publishers will take all kinds of bulk purchase deals to boost numbers, but usually they aren’t paying themselves for it–though one wonders how “secret” it was if they let the Audit Bureau in on it. And if ABC knew they were bulk discount sales, one wonders how much that really boosted ad rates. . . .okay a little bit of digging reveals part of the answer. The WSJ rate card lists only the top-line total circulation that appears in the ABC report. The audit bureau has changed the way it reports that number. Previously bulk copies of this sort (a category they call “Newspapers in Education”) would not be included in total paid circulation, but now it is. Also, copies distributed free by hotels can now be counted.

    1. Nathanael

      Yeeech. If ABC is now assisting in circulation scams, this indicates they’re very widespread in the newspaper industry. How long until advertisers realize newspaper ads just aren’t worth very much any more?

  11. Jesse

    “And the former Dow Jones CEO Les Hinton was told of the scam, and in predictable fashion, nothing was done and the whistleblower was fired.”

    Did anyone else laugh?

  12. kravitz

    Memory lane. Back to earth, folks.


    “Newsday has acknowledged that between 2000 and 2004, it inflated its circulation by nearly 100,000 copies on weekdays and Sundays. Hoy doubled its reported circulation, prosecutors said.”

    “The Tribune Company, which owns both Newsday and Hoy, has set aside $90 million to reimburse advertisers who were overcharged based on the inflated circulation figures.”

  13. aidee

    Here is Australia, in the city of Adelaide where News Limited started, i’ve been trying to figure out why every weekend at the local supermarket the weekend edition of the local paper is being given away free with a grocery purchase.

    Wondering if indeed by subsidising the cost of the paper to the grocer, the circulation figures can be gamed and thus an alternate income through advertisers can be gained…

  14. JasonRines

    I make my living from marketing, building systems and doing digital marketing. Back in 2007 I had buillt a lead generation model. When I started calling companies media directors they would act insulted that I would ask them what their marketing plan called for as a target per acquired customer as I could back-in leads from customers.

    The media directors justed wanted me to tell them the price per unit and shedup. When you see this kind of stupidity, the tempation to just sell them digitial nothing is overwhelming, especially when you know the risks of pain at the homestead of not paying your bills.

    Being known as trustworthy is now fetching a premium as it should and those media directors are gone with new ones asking me what the return will be rather than unit prices. Perpetual growth is a lie. Better to have more small panics/recessions to clear bad behavior than 40 years of boom and 20 years of immoral people to deal with that believe stealing is just part of the culture to afford to keep up.

  15. Mamzer ben Yoni

    On one of my computers, for some magical reason, I have free unlimited access to the WSJ. I wonder if they are boosting electronic circulation that way??

    1. Matthew

      The NY Times was extending digital access to one family member per subscriber recently. To a certain extent, many papers perform similar activities. I’d bet that the way USA Today appears in front of so many hotel and motel room doors is predicated on some super-cheap-to-chains deal, too.

      1. mk

        When the New York Times pays back American Taxpayers the cost of the Iran and Afghanistan Wars, I will forgive them, but I will never again trust them.

  16. aet

    I for one cannot wait to read the next editorial opinion from the Fox Media Corps as to what “the right thing” for governments to do would be. On any issue, whatsoever.

    Who can trust, who can pay attention to, a “news” organization which is so free-and-easy with telling lies to its audience, and committing fraud on its advertisers?

    1. aet

      Gee, it must be nice to earn good profits by telling people only that, which re-enforces what they already know, and only that, which they wish to read or hear.

      Much easier than reporting actual factual news, anyhow.

  17. Fíréan

    The WSJ journalist Jonathon Weil is credited with breaking the story of the Enron abuses, and though the paper may be only a shadow of it’s former self ( i do not know )reporter James B.Stewart received, 1988, a Pulitzer prize for his reporting and enlightening the public to insider trading practices.

  18. ella

    Here’s a fraud, there’s a fraud, everywhere there’s a fraud fraud. Ole’ capitalism has devolved into fraud E-I-E-I-O.

  19. EricT

    This reminds me of an article I’ve read that discussed how news corp aquired the company that manufactures the boxes that nielsen ratings uses for collection of tv viewing data. At the time I thought it was conspiracy theory, now I’m not so sure. It would explain the high ratings that fox news receives. Wow, who would of thought of building a company through fraud.

  20. Mark P.

    [1] There’s nothing that the touch of NewCorp could not worsen –and almost invariably it has.

    [2] To set on the scale’s other side, a few items exist like THE SIMPSONS. Though even there —


    ‘Fox wants “The Simpsons” for one more season at most — and only if it can pay 25 to 30 percent less for it … producers have agreed to salary cuts to keep the show going, and the show’s six voice actors have been asked to decide by Friday whether they will agree to have their payment cut almost in half.’

    [3] More seriously, for NewsCorp and Murdoch to be repetitively hit such blows as recently may only be down to serendipitous reporting by THE GUARDIAN. But Murdock’s global propaganda machine couldn’t have been targeted at a more strategic time — for all our sakes.

    So one can bet that Rupert, family and consigliores are wondering who the real power and money is behind this well-targeted, strategic hit job against their organization. Superficially at least, it certainly looks like the kind of orchestrated public takedown that NewsCorp has carried out on others in the past.

    All of it couldn’t have happened to a nicer bloke, anyway.

    1. JasonRines

      No one can fool you Mark P! Fascism or Communism shpuld have the 99 Bottles of Beer song attached to it in regards to oligarchs and consolidations.

      Now Murdoch exposes another Oligarch and 98 Bottles

    2. Nathanael

      The Simpsons producers should pull a Futurama. They don’t need FOX. Big question is how the contracts are written, though.

  21. Elizabeth

    This is rich:

    “We came to the conclusion that ELP was only compensated for valid services; however, we were uncomfortable with the appearance of these programs and the manner in which they were arranged. We subsequently eliminated the position of one of the employees responsible for those deals in January 2011.”

    Translation: We fired the whistleblower. Problem solved.

  22. ChrisM

    I used to be a WSJ subscriber from about 1990 – 2008 and got to watch the sad downward spiral after the Murdoch buyout.

    At the time, I remember WSJ staffers set up some kind of “ethics board” so they could ensure their ethics didn’t go down the toilet with the rest of the Murdoch empire.

    My Google skilz are pathetic, so I’m not sure if the board still exists. If so, would be fascinating to get their take on the situation.

    I ultimately cancelled in disgust at their lack of reporting on TARP, etc. I would read items on this site and Zero Hedge and others, and then two or three days later read a dumbed down version in the WSJ. Truly sad.

    1. Lidia

      I cancelled The Economist for the same reason: well into the housing meltdown they were still in “whoo coulda knowed?” territory. A real waste of resources, there.

      1. Mark P.

        J.G. Ballard once said about the BBC that, while all television is bad, the Beeb is particularly awful because it makes you think you’re actually getting something worthwhile.

        I’ve always hated THE ECONOMIST for a similar reason. Its pretensions and ostensible intelligence (relatively speaking) almost never fail to serve the purpose of advancing a mind-numbingly conventional and simplistic argument, usually for more free-er markets.

  23. Siberian

    Murdoch is an easy target, but not the relevant one in this case. The executive in charge is also a tempting target. But sometimes the “little guy” is not as heroic as we’d like to imagine. For a taste of the ego-driven root motives, find the name of the “whistle-blower” in the WSJ’s excellent piece today and then look up his LinkedIn profile.

    1. Nathanael

      Honestly? I’m enough of an economist to not care too much about the motives of people who expose crimes. They can expose crimes for the money for all I care. This is not a morality play.

  24. deeringothamnus

    In defense of the Economist, and, the WSJ, they both ran articles that would have given any diligent read fair warning, well ahead of time. about the subcrime crash. That said, after Murdoch, there was less good investigative reporting that made the journal so worthwhile, and much more of the sort of drivel that reads like it is written by underpaid twenty somethings.

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