McClatchy 'Aggressively' Litigating Circulation Suit

By: Jennifer Saba McClatchy Chairman, President, and CEO Gary Pruitt spent a good deal of time addressing the circulation-pumping allegations at the Star Tribune in Minneapolis during his opening remarks to analysts this afternoon. "This is an important issue," he said during a Q2 earnings call. "But it will not distract us from the business of running the McClatchy Company."

Pruitt said the company has retained the Minneapolis law firm Faegre & Benson to "litigate the case aggressively."

In late June, four Minneapolis advertisers filed suit against McClatchy and the Star Tribune claiming the paper inflated its circulation numbers and pumped up advertising rates. The plaintiffs are seeking class action status.

The company reported today that no other advertisers have jumped on board or reduced buys as a result of the suit.

Pruitt assured analysts that McClatchy has "faith" in its circulation processes and reports and "confidence" in the management of the Star Tribune. He also detailed how McClatchy's circulation make-up differs from those of several other papers caught inflating numbers last year.

In those instances, the papers had a high percentage of single copy sales, relied on hawkers, used large incentive programs, and farmed out subscriber database and payments to third parties. Pruitt explained that the Star Tribune and McClatchy have high home delivered copy counts, don't use hawkers, don't rely on incentive programs, and controls subscriber lists and payments.

Pruitt reiterated that McClatchy is no stranger to the plaintiffs; the Star Tribune sued one of the executives involved in the lawsuit -- Duane Hendrickson of Masterson Personnel -- for delinquent payments totaling roughly $60,000. That suit was filed in September 2004.

According to McClatchy, the four plaintiffs, which are staffing agencies, spent $105,000 in advertising in the paper in 2004 and have spent a combined average of $190,000 per year over the six and a half years covered by the complaint.