One of the top executives at the European branch of the Wall Street Journal, the flagship newspaper at Rupert Murdoch-owned News Corporation, has resigned amid a growing scandal that has called into question the paper’s journalistic ethics and jeopardized its reputation. Adding to the scandals News Corp. is already facing in Europe — alleged phone hacking, bribing of public officials — and a potential criminal investigation by the U.S. Justice Department, the Guardian reported today that Andrew Langhoff, the European director of Dow Jones and Co. (the subsidiary of News Corp. that owns the Journal), oversaw a massive scam that artificially inflated the circulation numbers in Europe in order to avoid losing investors, readers, and advertisers.
The scam was organized in London and focused on the paper’s European edition, and even when top executives in New York were alerted, they failed to do anything about it, the Guardian reports:
The Guardian found evidence that the Journal had been channelling money through European companies in order to secretly buy thousands of copies of its own paper at a knock-down rate, misleading readers and advertisers about the Journal’s true circulation.
The bizarre scheme included a formal, written contract in which the Journal persuaded one company to co-operate by agreeing to publish articles that promoted its activities, a move which led some staff to accuse the paper’s management of violating journalistic ethics and jeopardising its treasured reputation for editorial quality.
Internal emails and documents suggest the scam was promoted by Andrew Langhoff, the European managing director of the Journal’s parent company, Dow Jones and Co, which was bought by Rupert Murdoch’s News Corporation in July 2007. Langhoff resigned on Tuesday.
According to the Guardian, the Journal contracts charged as little as one cent per copy, meaning a company like Executive Learning Partnership (part of one of the biggest deals) could sponsor 3.1 million copies at a cost of only 31,080 euros. The deals began to blow up when ELP and other organizations complained about not receiving their fair share of coverage, despite multiple pages of exclusive stories throughout the paper. When the deals appeared to falter, the Journal, led by Langhoff, funneled money through a middleman, effectively using its own cash to pay for the copies of the paper so as to avoid an immediate 16 percent drop in circulation, which would have scared advertisers, shareholders, and readers.
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The scam only adds to the growing perception that News Corp. is a company out of control after a tumultuous summer in which it was caught in scandal after scandal involving its journalistic practices in both Europe and the United States. Fraud investigations were opened and British MPs called Murdoch and his son, James, to appear before Parliament to discuss details of the company’s phone hacking scandal came to light. The FBI and Department of Justice both opened investigations into the company over violations of American laws, and details emerged of News Corp. reporters hacking into the phones of families of 9/11 victims. Now, scandal seems to have spread to the company’s most prestigious publication.