Topic: Media

The Figure Fraud Epidemic

Three newspapers of note, Newsday, the Spanish-language daily Hoy, and the venerable Chicago Tribune have announced that their circulation figures have been inflated. Newsday, for example, confessed that it inflated its figures to auditors by 7% and to advertisers by 9%.

Big deal, you say? It is a big deal. “It’s a form of theft,” says newspaper analyst John Morton, as quoted by the Washington Post. “Your ad rates are keyed to your circulation.”

When a paper’s circulation doesn’t meet the levels promised advertisers have a right to refunds.” The fake numbers are also a form of public fraud. For a newspaper, circulation means success, prestige, and influence. When a paper’s numbers start dropping, as almost every daily’s has in the last decade, it has unpleasant consequences, not the least of which is lower wattage power of the press.

Bet the farm on this: the three papers are just the tip of an unethical iceberg. Circulation inflation is one of the more illustrative examples of how unethical conduct, once started, is hard to stop. Let’s say you become the new editor of a major paper. Your new circulation editor, whom you brought on board, slinks into your office and says, “Uh, surprise! Our predecessors were inflating the figures: we have 30,000 fewer readers than we’ve been saying. What do we do?” Of course, the only ethical thing to do is to come clean, but this means problems. Money returned to advertisers, lower income from here on, scandal, questions. And it’s so unfair: this wasn’t your fault! So you rationalize, using the time tested “This isn’t my fault” excuse to justify an unethical act. “Let’s just keep quiet for now. We’ll bring the circulation back up, and make adjustments gradually.”

But the circulation figures don’t go up. They go down. Assuming you don’t hide the new losses, you are now in a bind: revealing the discrepancy you inherited from your predecessors is harder than ever, because it makes already bad news worse. And now there’s that extra problem of your own making: why did you wait so long? The Chicago Tribune didn’t give the extent of its figure-fudging; it just said the inflation had been going on for “years.” Exactly. And the scenario just described has been taking place in a lot of locales other than the Windy City.

This scenario can be passed on from manager to manager over decades. It is a dirty little secret of membership organizations, for example, that nearly all use inflated membership figures to bolster both lobbying power and advertising revenues for their magazines. In the non-profit and membership world, inflation at the Newsday level is peanuts: 10% or more is standard, and some groups are absolutely shameless. In 2001 it was determined that the National Organization for Women was claiming 250,000 members( and up to a half-million in their more exuberant moments) while its real number was less than 200,000. Trade unions and religious groups are also incorrigible number-pumpers. And here’s some irony: newspapers are the main culprits in letting them getting away with it. A reporter will call up a lobbyist for a quote, and pass along the phony membership to the public number without blinking…or checking.

Having a lie hanging overhead is terrible for the ethical climate at any business. It makes management exhortations to ethical conduct seem inherently hypocritical and insincere to employees in the know, leading to greater tolerance of other unethical conduct up and down the organization. It would be in everybody’s interest if we wiped the slate clean and gave every organization an opportunity to reject its accumulated phantom readers and members and announce honest and accurate figures. They would be required to disclose fully how the fake numbers came about and how long they had been used, and to document what measures would be implemented to guard against a repeat of the fraud. But all would be forgiven…once…as a symbolic rejection of the flawed ethics of the past. There will be some eye-popping corrections.

Ethics Scoreboard hereby calls for a National Figure Fraud Amnesty. We expect a lot of supportive editorials from the nation’s newspapers.

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