Friday, June 17, 2005
The government going after the newspaper? Not quite. But DOJ did indict three individuals for their alleged role in defrauding newspaper advertisers.
A press release of the Eastern District of New York reports here "the arrest of three former employees of Newsday and Hoy, subsidiary companies owned and operated by the Tribune Company, for their participation in multiple schemes to overstate paid circulation data in order to induce advertisers to pay millions of dollars in inflated prices for advertising fees between 2002 and 2004." (see also NYTimes story here). In a footnote the press release of DOJ notes that "[i]n October 2004, the Tribune established a reserve fund of more than $90 million to cover settlements for overcharging hundreds of its advertisers through the fraudulent schemes described below."
Applause go to the Tribune Company for stepping forward and covering the costs to victims by problems that may have occurred within their company. It sounds like this was a cost they needed to cover, and this is likely to step up internal controls within the company. But one also has to wonder if the indicted individuals received any benefit for their alleged activities, or whether the benefit was solely to the company. From the press release this mail fraud case does not sound like a situation of a company selling out their employees in order to avoid prosecution (something that seems to be happening a lot these days).