The Securities and Exchange Commission has launched an investigation into fraudulent reporting of circulation numbers at newspapers owned by publicly-traded companies, the Washington Times reported last week:

The Securities and Exchange Commission has started an investigation into newspaper circulation reporting after several publications acknowledged exaggerating their sales.

In the past two months, the commission has requested circulation documents from at least six major publishers, including The Washington Post Co., Gannett Co. Inc. and the New York Times Co., according to a report the New York Times published yesterday. ...

The investigation was triggered by a series of circulation scandals that has left the $55 billion-a-year newspaper industry stained. Since June, four newspapers have admitted to reporting faulty sales figures to the Audit Bureau of Circulations, an independent agency that audits circulation data for newspapers and magazines.

The Chicago Sun-Times disclosed that it inflated circulation by as much as 10 percent over six years. Its parent, Hollinger International Inc., plans to pay advertisers as much as $27 million to compensate for overpriced advertising based on the false numbers. The Tribune Co. admitted that the circulation of two of its New York-area newspapers — Newsday and Hoy, a Spanish-language publication — was exaggerated during the 12-month period that ended in September 2003. Newsday's daily circulation was inflated by as much as 100,000, according to an internal investigation by Tribune, which plans to set as much as $95 million aside to compensate advertisers who were overcharged. Belo Corp. said its Dallas Morning News had overstated its circulation figures for the six months that ended in September 2003. It has said it will set aside $23 million to compensate its overcharged advertisers.

After a series of newspapers admitted inflating their circulation numbers -- used to determine ad rates, which translate into revenue -- an SEC investigation was not only inevitable but desirable for anyone investing in these corporations. Oddly enough, these same newspapers who covered the Enron, Tyco, and Worldcom stock-manipulation cases remain strangely quiet about this round of corruption. I missed this article entirely until a CQ reader wishing to remain anonymous pointed it out to me.

Bear in mind that these same editorial boards, who routinely castigate the Bush administration for its coziness with Ken Lay before the Enron collapse, hold their newspapers out as paragons of integrity and openness. Why don't they cover their own problems on their front pages? Haven't their shareholders lost value as a result of circulation fraud? Not only will the corporations have to return the money they fleeced, but their projected revenues will drop as the ad rates will have to be readjusted. That means the value of each share will continue to decline and that the projections under which they were purchased were falsified, apparently deliberately.

Bear this in mind while you read the endorsements their editors publish for electoral offices up and down the ticket.

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