The Deal from Hell (54 page)

186
Sito and his team also sold bulk subscriptions
Author's interview with Louis Sito, Greeneville, SC, summer 2009. After the
Newsday
scandal became public, the Audit Bureau of Circulations implemented a wide array of rule changes dealing with bulk circulation and many other problems that surfaced in the
Newsday
scandal.

186
Although most people in the American
Facts without Opinion, the First Fifty Years of the Audit Bureau of Circulations
, by Charles O. Bennett (Chicago: Audit Bureau of Circulations, 1965).

187
In fact, under ABC rules, newspapers aren't
Audit Bureau of Circulations, Rule Changes and Board Activity from 2004–current, July 2008. The ABC revised its rules after the
Newsday
scandal became public.

188
The next time you check into a hotel
Author's telephone interview with Jay Schiller, a former auditor for the Audit Bureau of Circulations, summer 2009, and winter 2010. The author had numerous conversations and e-mail exchanges with Schiller, who shared letters from hotel chains. Schiller also provided ABC audits of the circulation of
USA Today
.

188
At
Newsday
, Sito engaged in far more sinister plots
Many details of the circulation scandal were first reported by Robert Kessler and James Madore,
Newsday
reporters who covered the scandal at their own paper. The alternative weekly,
Long Island Press
, aggressively covered the
Newsday
scandal.

189
In March 1998, an arm of
Newsday
Details of the March 1998, acquisition came from the author's interview with Louis Sito, Greeneville, SC, summer 2009, and the amended complaint. In addition, the author interviewed Michael Pouchie in Queens, NY, fall 2010, who told the author of the guns he was carrying when he entered the
Newsday
circulation facility.

189
Ed Smith, a
Newsday
and
Hoy
circulation consultant
United States of America
vs.
Ed Smith, Information
, U.S. District Court, Eastern District of New York, April 2006.

189
Months before, Sito had noticed how
“Dismantling the Language Barrier,” by Tim Porter,
American Journalism Review
, October/November 2003.

190
During the first week
Hoy
was on the market
Crabhouse of Douglaston, Inc. et al.
vs.
Newsday, Inc. et al.
, 4th Amended Class Action Complaint, U.S. District Court, Eastern District of New York, September 2006. The details of the marketing campaign
and the exchanges at the holiday party came from the complaint and were reaffirmed in an interview with Michael Pouchie, Queens, NY, fall 2010.

191
“When I got outside, there were like fourteen . . .”
Author's interview with Michael Pouchie, Queens, NY, fall 2010.

191
Two days later when Pouchie showed up at Vreeburg's
Author's interview with Joseph O. Giaimo, Queens, NY, summer 2010.

191
“Tell them we'll see 'em in court . . .”
Author's interview with Louis Sito, Greeneville, SC, summer 2009.

192
“Look, they're dumping papers, they're dumping them . . .”
Author's interview with Joseph O. Giaimo, Queens, NY, summer 2010.

192
at
Newsday
caught Timothy Knight off
Author's interview with Timothy Knight, Melville, NY, summer 2010.

193
Elaine Banar, a hard-nosed federal prosecutor
Author's telephone interview with Elaine Banar, summer 2010.

194
Fuller had selected a Cuban, Digby Solomon
Author's telephone interview with Digby Solomon, winter 2010.

195
“He comes in and tells me that the story he told . . .”
Author's interview with Timothy Knight, Mellville, NY, summer 2010.

196
“I called Banar from the airport to tell her I planned to travel . . .”
Author's interview with Joseph O. Giaimo, Queens, NY, summer 2010.

197
A federal subpoena from the SEC soon demanded
Letter from Tribune lawyer Paul V. Gerlach to Susan E. Curtin, senior counsel, U.S. Securities and Exchange Commission, August 2004. The letter was in response to a subpoena and demands for information from the SEC regarding circulation and ad rates or revenue between Dennis FitzSimons, Jack Fuller, Donald Grenesko, David Hiller, Raymond Jansen, Louis Sito, Robert Brennan, Robert Garcia, and/or Robert Bergin.

197
the auditors tried to clandestinely observe whether the sales
Many details of the circulation scandal were first reported by Robert Kessler and James Madore,
Newsday
reporters who covered the scandal at their own paper.

197
There was more than a grain of truth to the “everybody does it”
Author's telephone interview with Elaine Banar, summer 2010.

197
“But a lot of people aggressively pushed the limits . . .”
Author's interview with Jack Klunder, former director of circulation at the
Los Angeles Times
, fall 2010; and author's interview with Louis Sito, Greeneville, SC, summer 2009.

198
By 2005, when the scandal was unfolding, ABC audits
ABC audits of 21 major metro daily newspapers from 2002 through 2008. In all, the author examined ABC audits of 21 major metropolitan daily newspapers—
Chicago Tribune
,
Washington Post
,
Boston Globe
,
Miami Herald
,
San Francisco Chronicle
,
Denver Post
,
Rocky Mountain News
,
Milwaukee Journal Sentinel
,
Los Angeles Times
,
Atlanta Journal-Constitution
,
Philadelphia Daily News
,
Dallas Morning News
,
St. Louis Post-Dispatch
,
Newsday
,
Florida Times-Union
,
Chicago Sun-Times
,
Houston Chronicle
,
The Commercial Appeal
(Memphis),
Las Vegas Review Journal
,
Sacramento Bee
, and
San Jose Mercury News
. The author calculated the total circulation and then deducted home delivery and mail and single-copy sales from the total to get the percentage of junk
circulation as a proportion of the total. In general, most of the papers fit the profile of the
Los Angeles Times
.
Times
junk circulation went from 7 percent of the total in 2002, before the
Newsday
scandal broke, to 24 percent in 2006. After the federal investigation of
Newsday
's fake circulation picked up steam, the percentage of circulation classified as junk started falling and settled at 9 percent of the total by 2008, as executives pruned the junk from their books. ABC also invoked some rule changes during that period, and advertisers objected to paying for dubious circulation. Not all papers reached as high a proportion of junk. The
Chicago Tribune
average peaked at 7 percent of the total in 2006, although the proportion was higher on days when advertising was heavier. Some papers, like the
Miami Herald
and the
Las Vegas Review Journal
, continued to post large proportions of junk numbers—27 percent and 36 percent, respectively, in 2008. In general, though, the curve for all papers was strikingly similar.

199
“I had written a memo about what I knew and gave it to . . .”
Author's telephone interview with Digby Solomon, winter 2010.

200
Knight concluded that
Newsday
had overstated its circulation
Interview with Timothy Knight, corroborated by news releases that the company publicized announcing the results of its investigation.

201
When the
Newsday
scandal broke
Author's interview with Jack Fuller, Chicago, IL, fall 2008, and winter 2009.

201
Sito had openly disclosed bogus
Author's interview with Louis Sito, Greeneville, SC, summer 2009. The author also examined letters on
Hoy
letterhead, written by Sito.

201
“In going over the papers and records of the case, I decided . . .”
Author's interview with U.S. District Court judge, Jack Weinstein.

202
“The ABC guys were all paper folks.”
Author's telephone interview with Elaine Banar, summer 2010.

203
Fuller was incensed when
Author's interview with Jack Fuller, Chicago, IL, fall 2008, and winter 2009.

204
Fuller announced his resignation
“Jack Fuller to retire as head of Tribune Publishing,” by Tara Burghart,
AP Worldstream
, October 28, 2004.

205
During Tyner's first editors' meeting
Author's interview with Ann Marie Lipinski, Chicago, IL, winter 2010.

208
Kern was careful to couch his reports
“Hurricanes Katrina and Rita, Insights about Tribune's coverage of the big storms and implications for future national coverage,” Tribune Publishing, October 2005. The 22-page report was prepared by Gerould Kern and concluded that Tribune papers should “strive to do more that is extraordinary and differentiating by doing less that is routine and commonly available.” This was just one of numerous reports compiled by Kern.

210
paid Sammy Sosa to swing a baseball bat
In fact, Sosa's annual salary with the Chicago Cubs in 2003–2004 was $16.8 million each year, far more than the Tribune saved in eliminating any kind of duplication.

211
Wolinsky started to worry
Author's interview with Leo Wolinsky, Los Angeles, CA, fall 2010, and by telephone, 2008–2010.

211
phone call he made to Chicago
Author's telephone interview with John Carroll, summer 2009.

212
“There was just no way that you could out Long Beach . . .”
Author's telephone interview with John Puerner, winter 2010.

213
Even industry stalwarts like Brumback
Author's interview with Charles Brumback, Sarasota, FL, May 2010, and by telephone, 2008–2010.

213
“We were discounting deeply . . .”
Author's telephone interview with John Puerner, winter 2010.

213
After Puerner's first year in the publisher's office
Audit Bureau of Circulations Report for the
Los Angeles Times
, 2005.

213
Under Steven Lee, the marketing executive
Author's interview with Jeffrey Johnson, Los Angeles, CA, winter 2011.

214
called “Ten for Ten”
Author's interview with David Murphy, Chicago, IL, summer 2008; and author's interview with Jack Klunder, Los Angeles, fall 2010. As the Tribune executive who assumed responsibility for the advertising and circulation at the
Los Angeles Times
, Murphy dealt directly with the fallout from the “Ten for Ten” program.

214
Klunder had run the
Los Angeles Times
Author's interview with Jack Klunder, Los Angeles, fall 2010.

215
Carroll paid a visit to Norm Pearlstine
Author's telephone interview with John Carroll, summer 2009.

215
David Geffen, who had made billions in Hollywood
Author's interview with Leo Wolinsky, Los Angeles, CA, fall 2010, and by telephone, 2008–2010.

216
Carroll's departure, one writer happened to note
“John Carroll on Winning Pulitzers while Losing Circulation, and the Future of Corporate News Outlets,” by Paul McLeary,
Columbia Journalism Review,
July 2005.

217
By the time ABC auditors acted on Klunder's tip
Audit Bureau of Circulations Report for the
Los Angeles Times
, 2005.

220
Kern began compiling the raw material for
“Hurricanes Katrina and Rita, Insights about Tribune's coverage of the big storms and implications for future national coverage,” Tribune Publishing, October 2005.

221
Times employees had had it, and in a survey conducted by an
International Survey Research, LLC (ISR), Verbatim Comments of
Los Angeles Times
Editorial Department Respondents, March 2005. ISR was hired to do a statistical survey of the morale in the editorial department of the
Los Angeles Times
. Employees were also given the opportunities to supplement their answers to the survey with written comments. In all, 548 employees of the editorial department took advantage of the opportunity to comment on everything from the direction and goals of the company to the quality of their supervisors. Some of the comments were lengthy and harsh
regarding the leadership of the Tribune Company since it acquired the
Los Angeles Times
.

222
The first dose came
The proxy said Tribune management began due diligence on March 10 and that the boards of the two companies approved the deal two days later on March 12. David Hiller said the Tribune due diligence team had scrutinized publicly available records on Times Mirror before March 10 and that the Matthew Bender tax problem was deemed an acceptable risk. Tom Unterman said he had informed Tribune Company how the Times Mirror tax department intended to handle the potential Bender tax liability. Author interviews with David Hiller, Chicago, winter 2010, and Tom Unterman, Los Angeles, fall 2010.

223
However, about a year after the deal was closed
Author's interview with Thomas Unterman, Los Angeles, CA, fall 2010.

223
To diversify the family's investment
Tribune Company, Proxy Statement, April 2007; and Tribune Company Form 10-K for fiscal year ended December 31, 2006.

223
the Chandlers wanted to place valuations
Deposition of Dennis J. FitzSimons, Chicago, IL, June 25, 2010; and author's interviews with Scott C. Smith, Chicago, IL, December 2010, and David Hiller, Chicago, IL, winter 2008, and winter 2010.