ABC Denies Its Own Culpability in Circ Scandal

By: Jay Schiller The Audit Bureau of Circulations would have you believe that the "circulation conspiracies" at Newsday, Hoy, the Chicago Sun-Times and The Dallas Morning News were so complex that there should be no reasonable expectation of ABC uncovering them. Here are a few quotes from ABC officials that exemplify their position:

"The fact is, an audit is not designed to catch collusion ... We're reviewing our process internally but if there is a real concerted effort to cheat, it can work." (E&P, June 18)

"... no audit program can immediately identify every possible fraudulent situation, especially if the conspiracy is complex and involves collusion. If a publication sets out with the deliberate intent to misrepresent their figures, it is difficult to catch them initially." (ABC news release, June 21)

"The fact is, the audit is not designed to catch collusion. Managers and distributors all working together can fake the numbers. If there is a real concerted effort to cheat, it can work." (E&P, July 26)

Even if ABC is correct in its assertion that it played even the smallest of parts in uncovering the fraudulent circulation at Newsday of Melville, N.Y., it took years to do so. However, ABC's public stance continues to be "It's not our fault" despite mounting evidence to the contrary. ABC uses the words "fraud" and "collusion" to deny its own culpability as often as the lawsuit against Newsday and Hoy uses them to affix culpability to the plaintiffs.

As a former ABC auditor, it is my opinion that the no-good circulation at Hoy, Newsday, the Sun-Times and the Morning News was not buried 20,000 leagues under the sea; it was floating around on the surface in relatively plain sight. Hoy, for example, almost tripled its daily circulation literally overnight (in four years). As part of the basic audit process, ABC has its field staff do graphs of circulation trends to explain any significant variances. Tripling circulation in four years is almost unprecedented; it should have set off all sorts of audit bells and whistles.

If Hoy was an Olympic or professional athlete, it would have been taking drug tests every week; no one gets that big that fast.

Taking this one step further, consider what occurred at the Chicago Sun-Times. Over the years auditors who were assigned to the Sun-Times and the Chicago Tribune voiced their frustration over the lack of access to records necessary to verify circulation claims. Specifically, the Teamsters handle a lot of distribution for both newspapers and fail to provide them with "laydowns" or "in/outs" that detail the draw and returns for the individual outlets. Yet ABC continued to sign off on the numbers.

Almost every circulation practice employed by the newspapers that resulted in "no good circulation" is covered in ABC 101 (training classes):

* Low/no returns = increased audit risk
* Low wholesale rates = increased audit risk
* High bonuses, allowances, commissions, incentives = increased audit risk
* Increased circulation in "spurts" = increased audit risk
* Any hawker program = increased audit risk

These examples are known as "red flags." Red flags result in expanded testing which include an increased amount of contractor interviews as well as more outside field-testing. There was a plethora of red flags at the papers in question.

Unlike the newspapers that have jettisoned involved executives and are negotiating financial settlements with advertisers, ABC has failed to take any responsibility for their part in what has been occurring. With much of its circulation staff having less than one year's experience, ABC is ill-prepared to effect the necessary changes to shore up an inadequate audit process that allows bad circulation numbers to flourish.

Perhaps the biggest victims in this are not the advertisers but the newspapers that do abide by the rules and report legitimate circulation numbers.