Oct. 13, 2011 at 8:51 AM ET
Media giant News Corp. is again under fire for allegations of ethical breaches, this time over an unusual circulation deal at the Wall Street Journal Europe.
The allegations come months after the company, controlled by Rupert Murdoch, was forced to close its British tabloid News of the World following allegations the company paid police for information and hacked into the voicemails of murder victims and others.
“This is just another data point that raises questions about the ethical integrity of News Corp. as a corporation,” said Laura Martin, a senior analyst with Needham, who covers media companies.
The British newspaper The Guardian reported Wednesday that The Wall Street Journal Europe, an overseas version of the flagship New York newspaper, struck an unusual circulation deal with a Dutch company, Executive Learning Partnership.
The deal called on ELP to buy thousands of copies of the Wall Street Journal Europe at a highly discounted rate, which would then be circulated to students and others. As part of the deal, the Guardian reported, Journal staffers wrote two articles featuring the company.
The Guardian alleges that the cheap newspaper sales were a way for the Journal's European edition to boost its circulation figures.
Dow Jones, publisher of the Wall Street Journal papers, said the programs to sell the discounted papers were publicly disclosed and legitimate.
“The practice of sponsored distribution to business schools and universities is common in the industry and clearly identified in all WSJE publisher statements,” the company spokeswoman Bethany Sherman said in a statement provided to msnbc.com.
However, the company conceded that writing articles featuring ELP raised questions about whether its editorial practices might be influenced by its commercial interests. That led to the resignation of the Wall Street Journal Europe's publisher, Andrew Langhoff.
“Andrew Langhoff resigned because of a perceived breach of editorial integrity, not because of circulation programs,” the company said in the statement.
The company has since added a note to the online versions of the articles involving ELP disclosing that the impetus for the articles was the agreement between the circulation department and the company.
On Thursday, the Journal itself reported that deals such as the one Dow Jones struck with ELP, calling on companies to buy newspapers in bulk at discounted rates, accounted for more than half of the European edition’s circulation of nearly 75,000 copies.
Dow Jones has maintained that the circulation deal itself was above board.
“ELP was paid for legitimate services rendered; however, the manner in which they were paid was admittedly complex but nevertheless legitimate,” the company said in its statement to msnbc.com.
Most news organizations go to great lengths to make sure that their editorial operations are not influenced by their company’s business dealings.
Kelly McBride, a senior faculty member at the Poynter Institute with a focus on journalistic ethics, called the allegations huge and surprising. She said the issues were especially disconcerting because they involve the Wall Street Journal, generally considered the pinnacle of News Corp.’s journalism reputation.
“People are looking at this and saying, ‘Hmm, maybe we were wrong. Maybe the parent company can undermine the integrity of a solid journalism organization in real and substantial ways,’” she said.
She said it raises the question of whether there are other ethical issues elsewhere in the company.
“It’s reasonable to ask questions about all News Corp. properties,” she said.
News Corp. bought Dow Jones, owner of the Journal, in 2007 for more than $5 billion. The Guardian and Pro Publica have reported that some members of the Bancroft family, which formerly controlled the Journal, came to regret the sale in the wake of the hacking scandal.
Murdoch's lieutenant Les Hinton, chief executive officer of Dow Jones, resigned in July over fallout from the News of the World scandal.
News Corp. also owns Fox Broadcasting, the New York Post and many other media outlets.
News Corp. shares have been rallying lately from lows hit during the summer scandal.
Editor's note: Allison Linn previously worked for The Wall Street Journal Europe.
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