What happens to naughty executives in the newspaper and magazine
industry who preside over fraud in their circulation departments? This
is what happens – read this story from today’s Newsday newspaper in New York:

Federal agents arrested three former Newsday employees
today for criminal fraud in connection with a scandal that inflated the
circulation of both publications, the US Department of Justice

Edward Smith and Robert Garcia were arrested today in New York, while Richard Czark was arrested in South Carolina.

Newsday has also disclosed that its reported circulation was
inflated by about 100,000 copies on weekdays and Sundays in the 12
months ending September 2003. Last year, the Spanish language paper Hoy acknowledged that its reported daily circulation of 92,604 was inflated by about double for the same period.

And just to spell it out for Australian advertisers and ad
agencies who refuse to act against the same kind of circulation fraud
that’s occurring in Australia’s major newspapers and magazines, and
force an independent inquiry, the crime is described in the story in
very clear terms:

In a statement discussing the charges, US Attorney Mauskopf
said: “The schemes uncovered to date cheated advertisers out of
millions of dollars paid for ads in papers that were dumped or never
paid for. Today’s arrests of three former employees of Newsday and Hoy
are intended to restore transparency and fairness to the newspaper and
magazine advertising marketplace.” Mauskopf said that the investigation
was continuing.

And how much fraud?

As a result of the scandal, Tribune has set aside $90 million to reimburse aggrieved advertisers who used Newsday and Hoy.
The scandal, in addition, has sent shock waves through the industry,
causing many papers to review their circulation practices.

Australian ad agencies are not doing their job on behalf of their
clients by refusing to take this issue seriously and force an
independent inquiry. As Crikey has been reporting for months, the same
practice is rampant here.