ABC Censures Chicago Sun-Times, Newsday and Hoy Over Fraudulent Circ Practices
The Schaumburg, IL-based media circulation auditor said yesterday that the three daily newspapers had circumvented ABC's bylaws and rules. Harsh sanctions were imposed July 7-10 at the ABC board of directors' summer meeting.
"The relationship between publisher and advertiser is based upon trust," ABC chairman Robert Troutbeck said in a statement. "Each member of the ABC board agrees that we as an industry do not tolerate rules circumvention, to say nothing of fraud and will do whatever is necessary to preserve the trust between publishers and advertisers."
Under the sanctions, the censured publications will have to submit their circulation claims to more frequent audits. For the next two years, their records will be audited every six months instead of annually. Publications typically submit statements twice each year, but are audited only once.
Also, the Chicago Sun-Times, Newsday and Hoy will be excluded next year from FAS-FAX, ABC's semi-annual report of the top-line publisher circulation claims. A note in the report will explain that the exclusion is the result of the censure. The three newspapers also will have to give the ABC board a plan of action to correct their practices.
ABC also censured magazine sales agent Synapse Group Inc. for improper record keeping, and the board has asked Synapse to provide a plan for correcting its practices.
ABC, a 90-year-old body with 4,300 members, has further defined the censure provision in its bylaws. This provision applies to newspapers that show an adjustment of at least 5 percent in circulation numbers reported. It also applies to periodicals that have two consecutive audit adjustments of at least 5 percent.
The penalties for censured publications have been further defined as well. In addition to those imposed on the Chicago Sun-Times, Newsday and Hoy, ABC has added another set.
ABC will publicly disclose specific audit issues within the ABC Audit Report and in a separate notice to members. The auditor will inform the audit committee of the ABC board about the censured publication and its lack of cooperation to allow six-month audits. Also, ABC will impose a cash fine on publishers who have submitted a false circulation statement.
The ABC board did not stop there. Audits will become more stringent with ABC's adoption of the principles of the American Institute of Certified Public Accountants Statement on Auditing Standards (SAS) #99. This statement offers guidance on fraud.
ABC's censure comes a month after the Chicago Sun-Times disclosed discrepancies in its circulation figures, and nearly six months after a media expose of the Newsday and Hoy claims.
The ABC reprimand is unprecedented in recent times, according to spokeswoman Heidi Chen.
"Based on our records, it has not occurred in the last 20 years," Chen said. "For the most part, ABC audits are stringent and eventually do catch misstatements. Now if there is a willful intent to be fraudulent in reporting numbers to ABC, then it's possible that the misstatements can go undetected for a while."