By: (AP) A shareholder lawsuit accuses Belo Corp. of defrauding people who bought stock in the media owner by overstating circulation figures at its flagship newspaper, The Dallas Morning News.
The lawsuit in U.S. District Court in Dallas says misrepresentations made by Belo and two of its top executives artificially inflated the company's financial results and its share price.
"You can't misrepresent a core aspect of your business to induce people to purchase shares," said San Diego attorney Darren J. Robbins, who filed the lawsuit Monday. It also names as defendants Belo Chairman and CEO Robert W. Decherd and former executive vice president Barry Peckham.
Dallas-based Belo said in a statement that it believes the lawsuit is without merit, adding that it plans to defend itself vigorously against the allegations. Peckham did not return a telephone call for comment Tuesday.
Belo disclosed on Aug. 5 that the Morning News (
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The lawsuit, which must be certified by a judge as a class action, seeks to recover damages on behalf of all those who bought stock between May 12, 2003 and Aug. 6, 2004.
The plaintiffs would not have bought the stock at the prices they paid, if at all, if they had known that the market prices had been artificially inflated, the lawsuit alleges. Robbins estimated that the people who'd bought stock over the 15-month period may have lost hundreds of millions of dollars.
The company said a sales reward program for third-party vendors contributed to the overstatement. The circulation managers who were supposed to audit the vendors allowed the inflated numbers because they also worked under an incentive program, the lawsuit alleges.
The lawsuit also contends that Decherd and Peckham schemed to prevent any internal or external accountants from auditing the circulation figures and exposing the overstatement.
Decherd also is accused of violating the "abstain or disclose" rule by selling more than $3 million of his own shares of Belo stock during the class period while he had negative information about the company that was not available to the public.
Belo also owns 19 television stations and three other daily newspapers: the Providence (R.I.) Journal, the Press-Enterprise in Riverside, Calif., and the Denton (Texas) Record-Chronicle. Belo said an internal investigation found no evidence of circulation overstatements at other papers.
Belo shares rose 7 cents to close at $22.84 Tuesday on the New York Stock Exchange.
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