Overzealous Circulation Managers Blamed for Belo's Numbers

Belo Corp., the owner of the The Dallas Morning News, provided details Wednesday on its concluded internal investigation of the paper's circulation practices, saying that its circulation has been overstated by overzealous circulation managers and poor monitoring procedures.

The investigation, conducted by law firm Seyfarth Shaw under the supervision of the Audit Committee of Belo's Board of Directors, found that the The Dallas Morning News' circulation should be lowered by 5.1 percent for its daily edition and approximately 11.9 percent for its Sunday edition for the six-month period ending September 30, 2004.

These discrepancies are slightly higher than those originally disclosed by Belo on August 5. At that time, circulation was reported to be off by 5 percent and approximately 11.5 percent, for the daily and Sunday editions, respectively.

Belo did not go into specifics as to the exact sources of these overstatements, but cited an overly aggressive pursuit of circulation goals by former senior circulation managers, coupled with inadequate procedures to monitor and verify distribution and returns of newspapers as the primary culprits.



In a statement, Henry P. Becton Jr., chairman of the audit committee, said: "This investigation has been painstaking and thorough. The committee feels that all necessary information has been reviewed, fully analyzed, and put into proper context. Every person important to the investigation was interviewed by the investigation team, some more than once..."

According to Belo, The Dallas Morning News circulation department used a variety of questionable methods to boost circulation, including: trip and cash incentive contests for contractors; employee bonuses; low newspaper wholesale rates; and old fashioned pressure.

The investigation concluded that the use of these methods, along with the lack of sufficient processes to ensure accurate circulation reporting led to inaccurate circulation figures.

While the circulation department at the The Dallas Morning News received the brunt of the criticism (The vice president of circulation left the paper last month, and Belo said that no employee involved in the scandal now works in circulation), the investigation cleared all current senior executives of any culpability.

Still, Robert Decherd, chairman, president, and chief executive officer, called this episode, "the most disappointing event in my 18 years [in the business]."

As disclosed back in August, executives accountable for the accuracy of circulation figures at The Dallas Morning News will not receive bonuses for 2004 or salary increases for 2005.

Going forward, the newspaper's circulation review team will continue defining long-term process and control improvements with an aim toward implementing changes.

Besides seeking a better system for monitoring circulation, Belo also provided some specifics on its more immediate maneuver to repair its business, its voluntary advertiser compensation plan. The company said that more than 19,000 checks have been mailed or delivered to advertisers as part of the plan. As of September 24, 73.6 percent have cleared the bank, representing 62.8 percent of the dollars.

Belo's other publications: The Providence Journal, The Press-Enterprise in Riverside, Calif., Al Dia and Quick in Dallas, and the Denton Record-Chronicle in Denton, Texas, were all found to be clean as part of the investigation.

Also on Wednesday, the company announced that it will cut 250 jobs, or 3 percent of its work force, though it emphasized that this decision was not related to the circulation scandal.

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