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The Basics on the Latest Murdoch Scandal

Another high-profile executive within the Murdoch empire stepped down this week. But there are conflicting accounts of what brought on his resignation. Here’s a rundown of the basics.

Yet another scandal is bubbling up at Rupert Murdoch’s News Corp. On Tuesday, the Murdoch-owned Dow Jones announced that the publisher of The Wall Street Journal’s European edition was resigning, without mentioning why. The next day, The Wall Street Journal reported that the top European exec stepped down after an internal ethics investigation found he had pressured reporters to write two positivestories about a Dutch firm with which the paper had an agreement that helped boost circulation figures.

Circulation numbers matter because they’re used to set advertising rates, and American papers are no strangers to scandals over inflated circulation figures.

But that was just the beginning. Also on Wednesday, the Guardian came out with a story by Nick Davies — the same reporter who first drew attention to the breadth of the phone hacking scandal — asserting further transgressions. The Guardian suggested that The Journal funneled its own money to the Dutch firm, Executive Learning Partnership, through middleman companies. In other words, the Guardian reported, The Wall Street Journal Europe was buying its own papers by proxy. The Guardian also reported that Dow Jones and News Corp. executives had known since December that this was going on, and fired the employee who brought it to light.

Dow Jones issued a statement calling the Guardian’s claims “inflammatory” and “replete with untruths and malign interpretations.” But a story in this morning’s Wall Street Journal confirmed much of the Guardian’s account, including that WSJ Europe’s circulation department had channeled “thousands of euros” to ELP through third-party companies.

It’s an embarrassing turn of events for News Corp., which has been embroiled in a few other high-profile scandals (see our previousguides for a refresher.) Here’s a rundown of the facts and allegations so far.

How it started

The Journal and the Guardian both report that over the past few years, The Wall Street Journal Europe arranged with companies to buy copies of the paper at a bulk rate — the Guardian reported for as little as a penny apiece — and hand them out to students at conferences they sponsored. In return, the companies would be named in a promotional segment that ran in WSJ Europe. According to the Guardian, 41 percent of WSJ Europe’s daily sales last year came from the program.

That may be surprising but not particularly unusual. The U.K. Audit Bureau of Circulations had approved the arrangement, and as the Columbia Journalism Review points out, “though advertisers dislike bulk sales like these, lots of papers do them.”

But then ELP, a strategy and learning consultancy, one of the initiative’s biggest participants, said it wanted to stop buying the papers, even at the reduced rate.

The plot thickens

According to the Guardian and The Journal, ELP bought 3.1 million copies of the paper last year, accounting for 16 percent of The Journal’s total European circulation. Fearing a sudden drop in its reported circulation, The Journal cut some new, sketchier deals, including free advertising and positive coverage, to keep ELP. The Dutch firm has stated that it wasn’t promised editorial coverage.

Soon after, The Journal published the two positive stories about ELP. (The stories appeared in special sections of the paper, which are often advertising-friendly.) CJR’s Ryan Chittum noted that ELP had gotten little or no previous newspaper coverage. The Journal didn’t disclose its relationship with the company at the time that the articles were published, though both articles now feature disclaimers online.

Incidentally, one of ELP’s partners, Rien van Lent, is a former publisher of The Wall Street Journal Europe. In one of the special reports The Journal produced about ELP, van Lent was quoted and described as ELP’s chief executive.

ELP complained months later that The Journal wasn’t giving the company enough publicity, and threatened to withhold payments. To avoid that, the Guardian reported, The Journal arranged to give ELP money with which to buy the papers by channeling it through other companies. The Journal reported that payments through third-party companies were arranged for services ELP provided at events.

In its response to the Guardian’s story, Dow Jones said that “the manner in which [ELP was] paid was admittedly complex but nevertheless legitimate.” The company said the WSJ Europe executive at the center of the brouhaha, Andrew Langhoff, stepped down over a “perceived breach of editorial integrity,” and not in relation to the details of the circulation deal itself.

Who knew, and what did they do about it?

The Guardian reported that complaints from a Journal staff member about the deal went up the chain of command but were ignored. An employee took concerns about the arrangement to top human-resources executives, a company lawyer and former Wall Street Journal publisher and Dow Jones CEO Les Hinton. The employee was let go shortly afterward. According to the Guardian, he was told to keep quiet.

Hinton stepped down last summer after he was accused of making misleading statements to Parliament about phone hacking at News International, News Corp.’s British subsidiary. Hinton maintains he didn’t know about phone hacking at the company.

Dow Jones disputed the Guardian’s characterization of the employee as a “whistleblower,” since he was under investigation by the company “because of concerns around his business dealings.” But The Wall Street Journal interviewed the employee, Gert van Mol, and got his side of the story. He was quoted as saying that he was involved in the deal at a lower level, and that Dow Jones put him under investigation after he raised concerns about the deal to his superiors. "I was not in a position to make payments or authorize contracts,” he told The Journal. “I was just an employee.”

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