WSJ links publisher's resignation to sales deal

Friday, October 7, 2011, Vol. 35, No. 40

LONDON (AP) — The Wall Street Journal says its publisher in Europe resigned after an internal investigation determined that he had tried to influence editorial content to favor a partner in a cut-price circulation deal.

The report on the newspaper's website Thursday appeared to differ from a statement by its owner, News Corp. subsidiary Dow Jones, which said Tuesday's resignation of publisher Andrew Langhoff was unrelated to a circulation deal with the Netherlands-based Executive Learning Partnerships.

The Wall Street Journal is the U.S. crown jewel of the many papers in Rupert Murdoch's global media empire, which has been badly shaken by a phone hacking and police bribery scandal in Europe that has forced some of his top executives to resign.

Murdoch's News Corp. bought the Journal's owner Dow Jones & Co. in 2007 and has worked hard on increasing circulation.

At issue in the latest revelations is how legitimate is the Journal's European circulation figures and whether, in pursuit of higher circulation, the paper breached the journalistic wall between advertising content and editorial content. If circulation figures were found to be false, the paper could owe compensation to hundreds of advertisers.

The Journal, quoting what it called people familiar with the matter, said ELP paid 1 euro cent (1.3 U.S. cents) each for 12,000 copies of the paper daily, a big slice of its European circulation of 75,000. The paper retails for 1.50 pounds ($2.35, €1.71).

So, by paying €12,000 a day to ELP, the paper could charge all of its advertisers a higher rate due to higher circulation.

The Journal quoted its sources as saying Dow Jones had also directed "thousands of euros" to ELP through third parties for other services.

The newspaper quoted its sources as saying those deals were arranged by Langhoff and a circulation department employee, Gert Van Mol. The Journal quoted Van Mol, whose job was eliminated earlier this year, as saying that he had prompted an internal investigation by filing a complaint about the ELP arrangement.

The Journal said the promise of editorial content favorable to ELP was made last year when the two companies renegotiated their relationship. The arrangement with ELP, the Journal said, was part of a broader program of hosting seminars and other events, and distributing copies of the paper in bulk to university campuses. ELP is a business consulting agency that "empowers talent to act into the unknown," according to its website.

The Guardian newspaper in Britain, which broke the story on Wednesday, said stories were published in the Journal in October 2010 and March 2011 as part of the deal.

Announcing Langhoff's departure on Tuesday, Dow Jones said its links to ELP "could give the impression that news coverage can be influenced by commercial relationships" and that Langhoff resigned because of a "perceived breach of editorial integrity" — not because of circulation programs.

The company reiterated the assertion from a previous statement that the circulation deals were "of poor appearance" and that it had since cut ties to the third parties involved. But it insisted that, while "admittedly complex," the deals were still legitimate.

According to Britain's Audit Bureau of Circulations, the Wall Street Journal Europe had an average circulation of 74,800 per issue in the six months through June, with about half coming from its biggest markets in Germany and the U.K.

Nearly 26,000 copies are bought by airlines for less than 5 percent of the cover price and 13,000 are listed as "barter copies." More than 7,100 copies not requested by the recipients were given away freely.

In the United States, The Wall Street Journal's U.S. version surpassed USA Today to grab the bragging rights that it was top-circulation daily in 2009, although both papers make generous use of heavily subsidized hotel copies in boosting their overall numbers.

The reports this week were just the latest to hit Murdoch's media empire. In July, longtime Murdoch executive Les Hinton resigned as chief executive of Dow Jones and publisher of The Wall Street Journal. Hinton was forced out because he was formerly chairman of News International, the U.K. unit of News Corp. that is embroiled in a U.K. telephone hacking scandal and is also suspected of bribing U.K. police officers.

Hinton has said he knew nothing about illegal activity at Murdoch's News of the World tabloid in Britain, which was shut down this summer as the scandal grew.

In the United States, authorities are investigating whether those alleged bribes will run afoul of the Foreign Corrupt Practices Act, which can result in hundreds of millions of dollars in fines despite activity occurring abroad.

The controversy comes ahead of News Corp.'s annual shareholders meeting in Los Angeles on Oct. 21, where Murdoch, 80, could face shareholders with small stakes for the first time since the hacking scandal broke this summer.

Despite calls this week for Murdoch to be voted out by a prominent shareholder advisory firm, Institutional Shareholder Services, he is likely to survive criticism because he controls 40 percent of the voting shares, with solid backers giving him a near-majority.

On Wednesday, News Corp.'s widely traded Class A shares rose 28 cents, or 1.7 percent, to close at $17.09, buoyed in part by a $5 billion share buyback plan put in place after the crisis that is now about a third complete.