Three former employees of the newspapers Newsday and Hoy were arrested Wednesday for their roles in schemes to inflate advertising prices by overstating circulation figures, prosecutors said.
The arrests were the first in an investigation by U.S. Attorney Roslynn Mauskopf into alleged circulation fraud at Newsday and the Spanish-language Hoy, both owned by the Chicago-based Tribune Co.
Edward Smith, of Hicksville, N.Y., who was Newsday’s administrative circulation manager and a consultant to Hoy, and Robert Garcia, of Queens, who was Newsday’s New York City circulation manager and Hoy sales and distribution manager, were arrested at their homes Wednesday, Mauskopf said.
Richard Czark, a former Newsday employee and Hoy national circulation manager, was arrested in Bluffton, S.C., where he moved after leaving the Spanish newspaper.
The three men face charges of conspiracy to commit mail fraud.
Smith was released on $250,000 bond Wednesday afternoon. He and his lawyer declined to comment as they left the courthouse.
Garcia was awaiting arraignment. His attorney, Margaret Shalley, said: “He’s obviously denying anything at all.”
Prosecutors said Czark was expected to be extradited to New York next week.
According to Mauskopf, Smith orchestrated a scheme in which Newsday employees and other people posed as customers and bought multiple copies of the paper from vendors around Long Island to fool observers from the Audit Bureau of Circulation, which verifies the circulation numbers used to set ad rates.
The vendors worked for a distributor that had been throwing away tens of thousands of papers daily and counting them as sold, Mauskopf alleged.
Garcia and Czark are accused of working with distributors to falsify circulation numbers for Hoy in Chicago and Los Angeles, Mauskopf said.
According to an affidavit filed Wednesday by a postal inspector who investigated the case, Garcia told an unnamed distributor that his false report of 3,000 daily sales of Hoy in Chicago, a 1,000-copy overstatement, was a “good number.”
The affidavit also charges that Czark arranged the creation of front companies and false bills from newspaper peddlers to cover up the false report that Hoy was selling 15,000 copies a day in Los Angeles, where it was actually selling 5,000.
Newsday spokesman Stu Vincent said the three men were among about a dozen employees fired last year as part of an internal investigation that led the paper to lower its advertising rates and set aside millions of dollars in compensation for advertisers. The circulation scandal also contributed to cutbacks and employee buyouts at Newsday, Vincent said.
“We welcome prosecution against any individuals who have defrauded Newsday, causing injury to the relationships with our readers, advertisers and employees,” he said.