'Newsday' Hit With Racketeering Suit

By: E&P Staff A lawsuit alleges that Newsday of Melville, N.Y., artificially increased its distribution numbers over a period of 10 years in order to pump up its circulation and, therefore, the rates it charges advertisers. First reported in Wednesday's New York Post, the allegations were dismissed by Newsday's publisher as the actions of a disgruntled former employee.

The racketeering suit, filed Tuesday in U.S. District Court in Central Islip, charges that Newsday (Click for QuikCap) told distributors to dump unsold papers and used a computer program called "Fudge ABC" to prepare false circulation numbers for the Audit Bureau of Circulations, according to the Post.

The owners of four Queens businesses filed the $100 million class-action suit, which said "tens of thousands" of other companies have been ripped off by Newsday. Defendants include Newsday, Spanish-language paper Hoy, the Tribune Publishing Co. and four distributors.

Newsday Publisher Raymond Jansen issued a statement Wednesday afternoon saying the suit "is completely without merit."

Jansen elaborated: "The allegations contained in the lawsuit are false. The source of the allegations is a disgruntled former employee who was a principal of a bankrupt distribution company that was an affiliate of Newsday, bought in 1998. The allegations involve less than 1% of Newday's total circulation, and less than 15% of Hoy's total circulation."

Jansen added that ABC has audited and approved the circulation numbers during the time frame in question. "ABC also conducts regularly scheduled field audits of the wholesale and hawking operations of Newsday and Hoy," he said. "The last one was done in 2003, and we are scheduled for another in 2004."

The publisher said the paper would have no further comment.

According to the complaint, Newsday executives told some distributors to inflate the paper's sales number "by as much as 50% or more" whenever there was a major news event. The daily also "force-fed" distributors by delivering as much as three times the regular order, the suit said. If distributors did not go along with the demands, both Newsday and Hoy allegedly threatened to drop them.