Tribune Discloses More Circ Problems

By: Dave Carpenter, AP Business Writer

(AP) Tribune Co. disclosed further circulation misstatements at two of its newspapers Thursday, the latest lapses in a costly scandal that has resulted in heavy claims by advertisers and censure by the group that audits circulation.

The media company said it was moving aggressively to address the circulation reporting problems at Newsday of Melville, N.Y., and the Spanish-language Hoy of New York, including nearing an estimated $35 million settlement with advertisers who claim they were overcharged based on the faulty numbers.

The new disclosures compound a flap that first surfaced last month when Tribune announced that circulation numbers at the two papers had been inflated.

Tribune outlined the misstatements as it reported a 58% drop in second-quarter earnings. The media company said the misstatements were uncovered in an internal investigation and occurred in the same period as the earlier reported problems — the 18 months that ended in March. Misstatements affecting 2001 and 2002 numbers also were discovered.

Chairman and chief executive Dennis FitzSimons characterized the misstatements as ethical lapses that were “unacceptable and wholly out of character with Tribune’s history of business integrity.”

The disclosure came three days after the Audit Bureau of Circulations punished the two Tribune-owned papers along with Hollinger’s Chicago Sun-Times for breaking circulation rules and condemned their “deceptive and fraudulent circulation practices.”

“The Newsday/Hoy situation is complex and will take some time to fully resolve,” FitzSimons said on a conference call. “But be assured that it will be fixed as quickly as possible.”

Tribune’s holdings include 14 daily papers, more than two dozen television stations and the Chicago Cubs.

Top company officials told analysts that while they have confidence in the accuracy of circulation numbers at their other newspapers, they are in the process of verifying them and have imposed additional controls. Every Tribune publisher, chief financial officer and circulation vice president must now certify the accuracy of reported figures and that ABC rules were followed.

“We’ll not stop the inquiry until we have numbers of which the Audit Bureau of Circulations and our advertisers can be completely confident,” said Jack Fuller, president of Tribune Publishing — the company’s newspaper unit.

He said the anticipated settlement amount is based on initial discussions with Newsday’s and Hoy’s advertisers, with individual settlements still to be worked out on a case-by-case basis.

Tribune auditors have begun working their way through the company’s other newspapers, with circulation reviews at its six largest papers to be completed by the end of September, Fuller said.

“The immediate purpose of these reviews is to make sure that the numbers we give ABC and our advertisers are scrupulously accurate,” he said. “But we’ll also use the occasion to strengthen controls over circulation reporting. Our goal is to have the most authoritative circulation reporting in the publishing industry.”

Merrill Lynch analyst Lauren Rich Fine said she was surprised by the $35 million charge but impressed with management’s “rapid and aggressive responses” to circulation issues. She told investors in a research note that the settlement will have little impact on the bottom line.

Still, the company’s shares fell $1.12, or 2.6%, to close at $42 Thursday on the New York Stock Exchange.

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