The Basics on the Latest Murdoch Scandal

The Basics on the Latest Murdoch Scandal

by Braden Goyette

There’s yet another scandal bubbling up at Rupert Murdoch’s News Corp. On Tuesday, the Murdoch-owned Dow Jones announced that a top executive with The Wall Street Journal’s European edition was resigning, without mentioning why. The next day, the Wall Street Journal reported that the exec stepped down after an internal ethics investigation found he had pressured reporters to write two positive stories about a Dutch firm that had an agreement with the paper that helped boost their circulation figures.

Circulation numbers matter because they’re used to set advertising rates, and American papers are no strangers to scandals over inflated circulation figures.

But that turned out to be just the beginning. The next day, the Guardian came out with a story by Nick Davies — the same reporter who first drew attention to the breadth of the phone hacking scandal — asserting further transgressions. The Guardian suggests the Journal funneled their own money to the Dutch firm, Executive Learning Partnership, through middleman companies. In other words, the Guardian reported, the Wall Street Europe was buying its own papers by proxy. The Guardian also reported that executives within Dow Jones and News Corp knew this was going on since December and fired the employee who brought it light.

Dow Jones issued a statement calling the Guardian’s claims them “inflammatory” and “replete with untruths and malign interpretations.” But a story in this morning’s Wall Street Journal confirmed much of the Guardian’s account, including that WSJ Europe’s circulation department channeled “thousands of euros” to ELP through third party companies.

It’s an embarrassing turn of events for News Corp, which has recently been embroiled in a few other high-profile scandals (see our previous guides for a refresher.) Here’s a rundown of the facts that have emerged and the allegations that have been made so far.

How it started

The Journal and the Guardian both report that over the past few years, Wall Street Journal Europe arranged with companies to buy copies of the paper at a bulk rate — the Guardian says for as little as a penny apiece — and hand them out to students at conferences they sponsored. In return, the companies would be named in a promotional segment that ran in the paper. According to the Guardian, 41 percent of the paper’s daily sales last year came from the program.

That may be surprising, but it’s nothing particularly unusual. The arrangement had been approved by the U.K. Audit Bureau of Circulation, and, as the Columbia Journalism Review points out, “though advertisers dislike bulk sales like these, lots of papers do them.”

But then ELP, one of the initiative’s biggest participants, said they wanted to stop buying the papers, even at the reduced rate.

The plot thickens

According to the Guardian and the Journal, ELP itself bought 3.1 million copies of the paper last year, accounting for 16 percent of the Journal’s European circulation. Fearing a sudden drop in its reported circulation, the Journal cut some new, sketchier deals to keep ELP, including free advertising and positive coverage. ELP has stated that they weren’t promised editorial coverage.

Soon after, the Journal published the two positive stories about ELP. (The stories were in special sections of the paper, which are often advertising friendly.) CJR’s Ryan Chittum notes that ELP had gotten little to no other previous newspaper coverage before. The Journal didn’t disclose their relationship with the company at the time of the articles’ publication, though both articles now feature disclaimers.

Incidentally, one of ELP’s partners, Rien van Lent, is also a former publisher of the Wall Street Journal Europe. In one of the special reports the Journal produced about ELP, van Lent was quoted and described as ELP’s chief executive.

ELP complained months later that the Journal wasn’t giving the company enough publicity and threatened to withhold payments. To avoid that, the Guardian says, the paper arranged to give ELP money with which to buy the papers by channeling it through other companies. The Journal reported that payments through third party companies were arranged for services ELP provided at events.

In their response to the Guardian’s story, Dow Jones said “the manner in which [ELP was] paid was admittedly complex but nevertheless legitimate.” The company said the WSJ Europe executive at the center of the brouhaha, Andrew Langhoff, stepped down over a “perceived breach of editorial integrity,” and not in relation to the details of the circulation deal itself.

Who knew, and what did they do about it?

The Guardian reports that complaints from Journal staff about the deal went up the chain of command but were ignored. An employee took concerns about the arrangement to top human resources executives, a company lawyer, and former Wall Street Journal publisher and Dow Jones CEO Les Hinton. The employee was let go shortly afterward, According to the Guardian, he was told to keep quiet.

Hinton stepped down this summer after he was accused of making misleading statements to Parliament about phone hacking at News International, News Corp’s British subsidiary. Hinton maintains he didn’t know about phone hacking at the company.

Dow Jones disputed the Guardian’s characterization of the employee as a “whistleblower,” since he was under investigation by the company “because of concerns around his business dealings.” But the Wall Street Journal interviewed the employee, Gert van Mol, and got his side of the story. He says he was involved in the deal at a lower level, and that Dow Jones put him under investigation after he raised concerns about it to his superiors. “I was not in a position to make payments or authorize contracts,” he told the Journal. “I was just an employee.”

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s