One of Rupert Murdoch's most senior European executives has resigned following Guardian inquiries about a circulation scam at News Corporation's flagship newspaper, the Wall Street Journal.The circulation scam is probably legal-- though European companies advertising in the WSJ might not be so happy to hear that almost half of the paper's European circulation was in effect bogus:
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, which was bought by Rupert Murdoch's News Corporation in July 2007. Langhoff resigned on Tuesday.
The highly controversial activities were organised in London and focused on the Journal's European edition, which circulates in the EU, Russia, and Africa. Senior executives in New York, including Murdoch's right-hand man, Les Hinton, were alerted to the problems last year by an internal whistleblower and apparently chose to take no action. The whistleblower was then made redundant.
The scheme was controversial. 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.What took the scheme over the top, though, was the next step of the arrangement with one of these sponsors, Executive Learning Partnership:
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, sponsoring 12,000 copies a day for which they were paying only 1¢ per copy. For the 259 publishing days in a year, they were sponsoring 3.1m copies at a cost to them of €31,080 (£27,200). They complained that the publicity they were receiving was not enough return on their investment.As the Guardian reports, employees of the WSJ started to get unhappy with this arrangement. (Hence the whistle-blower, who in turn caused a panic among the executives involved.)
On 9 April 2010, Andrew Langhoff emailed ELP to table a new deal, explaining that "our clear goal is to add a new component to our partnership" and offering to "provide a well-branded showcase for ELP's valuable services". On 30 April, ELP agreed to continue to sponsor 12,000 copies at the same rate. But that deal included a new eight-page addendum, which the Guardian has seen.
The addendum included a collection of side deals: the Journal would give ELP free advertising and, in exchange, the ELP would produce "leadership videos" for them; they would jointly organise more seminars and workshops on themes connected to ELP's work; but, crucially, Langhoff agreed that the Journal would publish "a minimum of three special reports" that would be based on surveys of the European market which ELP would run with the Journal's help.
It is this agreement that is now being cited as the reason for Langhoff's resignation on Tuesday. It led to the Journal publishing a full-page feature on 14 October 2010 that reported a survey conducted by ELP about the use of social media in business, quoting ELP's chief executive at length. The story carried no warning for readers that it was the result of a deal between the Journal and ELP, nor that ELP were sponsoring 16% of the paper's European circulation. Similarly, there were no warnings attached to a second story, published on 14 March 2011, which consisted of an interview with one of ELP's senior partners, Ann de Jaeger, about the role of women in company boardrooms.
It sounds as though all of these shenanigans are legal. But are they ethical? I wonder whether it's even possible for any publication owned by Murdoch to meet basic ethical standards for journalism. Everyone knows that Fox News has lower journalistic standards than, say, the National Enquirer. But what about the Wall Street Journal? I have to wonder.