Nick Davies reports that the resignation Tuesday of Andrew Langhoff, publisher of The Wall Street Journal Europe, resulted from a “panic” at Dow Jones as the Guardian was probing an alleged scam to prop up the publication’s circulation. If the extensive report is correct, then the Journal’s explanation, and its reporting, of why Langhoff resigned was incomplete at best.
Starting in January 2008, The Wall Street Journal Europe began working with European companies that sponsored seminars for students with leadership potential. The Journal published the sponsors’ names in the paper. “The sponsors paid for that publicity by buying copies of the Journal at a knock-down rate of no more than 5¢ each. Those papers were then distributed to university students,” Davies writes. This arrangement, which was approved by the Audit Bureau of Circulation, accounted for 41 percent of the newspaper’s daily sales.
When one of those sponsors, Executive Learning Partnership, threatened to back out, “Langhoff agreed that the Journal would publish ‘a minimum of three special reports’ that would be based on surveys of the European market which ELP would run with the Journal’s help,” Davies reports. Two of those stories were published.
He describes what happened next:
By the autumn of 2010, ELP were complaining that the Journal was failing to deliver its end of the agreement. They threatened not to make a payment of €15,000 that was due at the end of December, for the copies of the Journal which they had sponsored since April 30. Without the payment, the Journal could not officially record the sales and their circulation figures would suddenly dive by 16%, undermining the confidence of advertisers and readers.
So Langhoff set up a complex scheme to channel money to ELP to pay for the papers it had agreed to buy – effectively buying the papers with the Journal’s own cash.
Davies describes how the Journal routed payments through third parties; he cites an email from Langhoff with a diagram indicating how money was to be channeled to ELP.
A whistleblower alerted Dow Jones management, including Les Hinton, who resigned as Dow Jones CEO in the wake of the phone-hacking scandal. “No action was apparently taken at that time on the whistleblower’s allegations. The whistleblower, who had worked for Dow Jones for 9 years, was made redundant in January.”
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