One of Rupert Murdoch’s most senior European executives has resigned following Guardian inquiries about a circulation scam at News Corporation’s flagship newspaper, the Wall Street Journal. The Guardian found evidence that the Journal had been channelling money through European companies in order to secretly buy thousands of copies of its own paper at a knock-down rate, misleading readers and advertisers about the Journal’s true circulation.
The bizarre scheme included a formal, written contract in which the Journal persuaded one company to co-operate by agreeing to publish articles that promoted its activities, a move which led some staff to accuse the paper’s management of violating journalistic ethics and jeopardising its treasured reputation for editorial quality.
Internal emails and documents suggest the scam was promoted by Andrew Langhoff, the European managing director of the Journal’s parent company, Dow Jones and Co, which was bought by Rupert Murdoch’s News Corporation in July 2007. Langhoff resigned on Tuesday. The highly controversial activities were organised in London and focused on the Journal’s European edition, which circulates in the EU, Russia, and Africa. Senior executives in New York, including Murdoch’s right-hand man, Les Hinton, were alerted to the problems last year by an internal whistleblower and apparently chose to take no action. The whistleblower was then made redundant.
In what appears to have been a damage limitation exercise following the Guardian’s inquiries, Langhoff resigned on Tuesday, citing only the complaints of unethical interference in editorial coverage. Neither he nor an article published last night in the Wall Street Journal made any reference to the circulation scam nor to the fact that the senior management of Dow Jones in New York failed to act when they were alerted last year.
It led to the Journal publishing a full-page feature on 14 October 2010 that reported a survey conducted by ELP about the use of social media in business, quoting ELP’s chief executive at length. The story carried no warning for readers that it was the result of a deal between the Journal and ELP, nor that ELP were sponsoring 16% of the paper’s European circulation. Similarly, there were no warnings attached to a second story, published on 14 March 2011, which consisted of an interview with one of ELP’s senior partners, Ann de Jaeger, about the role of women in company boardrooms.
The ELP deal continued to cause more serious problems. Some Journal staff complained the agreement to run stories promoting ELP was unethical. On 12 July 2010, one London executive emailed that “some elements of the deal do not fit easily within best practice, brand guidelines and company policy”. Others warned about the quality of the surveys on which the stories were to be based.
By the autumn of 2010, ELP were complaining that the Journal was failing to deliver its end of the agreement. They threatened not to make a payment of €15,000 that was due at the end of December, for the copies of the Journal which they had sponsored since April 30. Without the payment, the Journal could not officially record the sales and their circulation figures would suddenly dive by 16%, undermining the confidence of advertisers and readers.
So Langhoff set up a complex scheme to channel money to ELP to pay for the papers it had agreed to buy – effectively buying the papers with the Journal’s own cash. This involved the use of other companies although it is not suggested that they were aware they were taking part in a scam.
“effectively buying the papers with the Journal’s own cash”
Churning paper. It’s fitting, somehow.