By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
Last week the Fort Worth Star-Telegram broke a story saying the Dallas County district attorney had sent a grand jury subpoena to the Belo Corp., owners of The Dallas Morning News, as part of a criminal investigation of business fraud at the paper. The Morning News published a catch-up story about itself the day after the story broke in the Star-Telegram.
No pants, man.
Circulation fraud is claiming to distribute more newspapers than are really distributed and then charging advertisers a higher rate because of it. It's serious. The equivalent would be a cell phone company telling you it has towers all over the country, and later you find out they have only one tower on top of their double-wide office building.
It's cheating. But is it criminal? A local criminal probe was announced last year in Nassau County, New York, shortly after a circulation fraud scandal broke at Newsday. The Securities and Exchange Commission has been looking into circulation fraud issues at Hollinger International, the Tribune Co. and Belo as well, but neither of those investigations has produced accusations or indictments.
The known and alleged details in the Belo story can be read at least two ways: 1) Top Belo officials knew about the circ fraud problem at the News a year before they disclosed it to investors and covered it up with a fake story, or 2) top Belo management sniffed trouble early on and jumped on it. Now devil-dog class-action lawyers are trying to portray Belo's reform efforts as a conspiracy. More on all that in a minute.
The thing we know for sure right away is that someone in the Belo Corp. is making the Morning News look as doofusy as possible while this business drags on. Ticklish, squeamish, goosey: Whatever you want to call the paper's public posture, it's exactly the wrong thing. It's the kind of behavior that elicits public stoning.
On one hand, I guess, this should make me happy. I skipped school the day they taught us not to gloat. On the other hand I enjoy crossing swords with the city's only daily newspaper, not watching it commit suicide.
Left to its own devices and given the number of sophisticated news professionals on its staff, the Morning News certainly would have broken this story itself, had it been able. I have to believe the squeamishness is corporate and lawyerly.
But to what end?
The subpoena from a Dallas County grand jury sat on the desk of Morning News Publisher James M. Moroney III for a week before anybody made a peep. Maybe Belo needed time to digest.
The problem was that Belo Corp., a public company, had to publish its first quarterly report and disclosures on April 21--Thursday of last week. They actually put their report up on their Web page the day before, on Wednesday, and in that disclosure, they had to reveal the subpoena to investors in order to stay right with federal securities law.
I knew about it within maybe half an hour of when it went up on the Web site. How? Well, I must ask: Who wants to know? If it is my employer asking, then the answer is that I noticed it as part of my painstaking and unstinting surveillance of the news front, which I carry out even at the cost of sleep and personal happiness, in my relentless search for important stories that may be of journalistic and/or commercial value to my employer.
If it's you, I can tell: A helpful and much appreciated source interrupted me in the middle of my morning oatmeal and told me. I'm sure the Startlegram found out in a similar fashion. Sources do call, thank goodness.
Thus is the way of the world.
And thus is what, by the way, Belo should have known. Give me a break. Somebody thought they were going to slip it into the agate type down at the bottom of a disclosure, and maybe nobody would notice?
Here is the really bizarre part: When the Morning News finally did report the story, the paper did it under the byline of a reporter for The Providence Journal in Rhode Island--a Belo property. Somehow, using the guy in Providence is someone's idea of how to avoid an appearance of conflict of interest at the News. But it just looks goofy. It makes no sense, like in addition to no pants, they have their shirt on backward.
Contrast all of this with Newsday, the Long Island, New York, newspaper caught in a circulation fraud story last year when a group of advertisers sued. Newsday sent out a team of reporters to do a thorough, hard-hitting story on its own circulation department. That is the only way a news medium can cleanse a wound to its credibility. When your basic product is supposed to be the truth, you better not let wounds like that fester.