Tribune Co. settles SEC probe over falsified circulation

Federal regulators on Tuesday charged Tribune Co. with reporting falsified circulation figures for two of its newspapers in New York, and the Chicago-based company settled the case without a fine.

The settlement comes as nine former employees and contractors of the two papers have now pleaded guilty to criminal charges related to the alleged scheme.

Tribune, whose holdings include the Chicago Tribune, paid no fine in settling the Securities and Exchange Commission's charges concerning the two papers: Newsday and the Spanish-language Hoy.

Tribune neither admitted nor denied the allegations, brought by the SEC in an administrative proceeding, but did agree to refrain from future violations of the securities laws.

In an announcement, the SEC cited Tribune's cooperation with the agency's investigation and prompt corrective actions to explain its decision to settle without fining the company.

The newspaper publisher and TV station owner has set aside $90 million to reimburse advertisers who were overcharged on the basis of the alleged inflated circulation figures.

"We're happy the SEC's findings are consistent with our own investigation results and that we have closed this matter," said Dennis FitzSimons, Tribune's chairman and chief executive.

"The circulation misstatements at Newsday and Hoy were caused by the actions of a few people who are no longer employed at either newspaper," he said. "We've since brought in a new management team and strengthened controls at Newsday and Hoy, and tightened circulation policies, systems and procedures at all of our newspapers."

The SEC accused Tribune of failing to uncover inflated circulation figures at Newsday and Hoy from January 2002 to March 2004 because it lacked adequate internal financial controls.

Besides Newsday and Hoy, Belo Corp.'s Dallas Morning News and Hollinger International Inc.'s Chicago Sun-Times also were found to have significantly inflated their circulation numbers, which affect the rates charged to advertisers.

All four papers were censured by the Audit Bureau of Circulations in 2004 for circumventing circulation-reporting rules.

Nine former employees and contractors of Newsday and Hoy have pleaded guilty to related criminal conspiracy charges in federal court in Brooklyn, six of them last week.

Newsday has acknowledged that from 2000 to 2004 it inflated its circulation by nearly 100,000 copies on weekdays and Sundays. Hoy doubled its reported circulation, according to federal prosecutors.

The individuals who pleaded guilty included four managers who worked in sales, circulation, distribution and home delivery. Two men who worked for companies that distribute newspapers face four to 20 years in prison.

Three executives who pleaded guilty are Louis Sito, former vice president for Hispanic media at Tribune; Robert Brennan, former Newsday vice president for circulation; and Ed Smith, a former independent consultant for Newsday circulation.