Is everybody in the newspaper business inflating circulation?

Publishers love to brag about their drinking and lie about their circulation, says the old newspaper industry cliché. I don't know how much the publishers of Hollinger's Chicago Sun-Times, Belo's Dallas Morning News, or the Tribune's Newsday and Spanish-language daily Hoy have been drinking, but the cooked circulation numbers they passed off to the Audit Bureau of Circulations should produce numerous candidates for admission into the Liars' Hall of Fame.

All four newspapers admit having intentionally inflated their circulation numbers. Newsday exaggerated its weekday circulation by 40,000 copies (7 percent) and Sunday circulation by 60,000 copies (10 percent) over the past year. Hoy overstated its circulation by 19 percent. The Sun-Times admitted to cooking its numbers over the past couple of years, reportedly inventing 78,000 daily copies, or 25 percent of newsstand sales. * The Morning News overstated 5 percent on Sunday and 1.5 percent on weekdays for a 6-month period in 2003.

Newsday and Hoy have confessed bad numbers dating back to 2001, and the swindling probably goes farther back than that. The Sun-Times concedes having fudged numbers for years. This isn't the Morning News' first brush with "circulation irregularities," as they're called in the business. Back in the late '80s, Dallas Times Herald owner Dean Singleton sued the Morning News for allegedly inventing circulation numbers.

Ordinarily, the press gives a hot-diggity-dog ride to corporate corruption stories. If it's a banking, real estate, or stock market swindle, it wins multipart coverage on Page One. But, despite the fact that newspapers are a $55 billion business, the press has largely tamped down the circulation scandal, burying its scant coverage in the business pages. As scandals go, it's a big one and threatens to grow bigger. Newsday and Hoy have set aside $35 million to assuage advertisers who purchased ads based on the higher circulation numbers. The Morning News is promising advertisers $23 million in restitution. The Sun-Times, which has been on the verge of collapse for decades,has yet to name a give-back figure. But real damages at these confessing newspapers could grow into the hundreds of millions of dollars. Attorney Joseph Giamio, who represents four advertisers in a circulation fraud lawsuit filed against Newsday in February, claims circulation fraud at the paper dates back to 1995 and calls for $600 million in damages. He adds that racketeering charges would mean "treble damages" against the company.

Newspapers lie about their circulation numbers for two simple reasons: 1) because increased circulation allows increased advertising rates, and that means more revenue; and 2) because industry auditing standards make it easy to do. The agency that's supposed to keep the newspapers honest is the Audit Bureau of Circulations, a nonprofit outfit that validates circulation for nearly every newspaper and magazine of note in the United States, and many abroad. But the ABC is captive of the very industry it monitors, which means that its numbers are only as honest as the newspapers producing them.

Michael Kinsley once noted that the scandal isn't what's illegal, the scandal is what's legal. His truism applies to the circulation brouhaha. Newspaper employees appear to have committed fraud in spiking the numbers, but the circulation scandal really begins with the ABC-sanctioned fuzzy math newspapers use to compile official counts.

Newspaper circulation has declined for decades as consumers have found new places to cull news and information. Edward Wasserman of Washington and Lee University writes that newspapers have lost 8 percent of their circulation in the last decade and that 12 of the 25 largest newspapers lost circulation last year. That lost circulation has steered billions of dollars in advertising away from newspapers to TV, radio, cable, direct-mail operations, classifieds weeklies, and the Internet. At newspapers across the country, publishers push their circulation directors to reverse the tide, promising them bonuses if they succeed or dismissing them if they don't.

To prop the wheezing industry up, the ABC moved a couple of years ago to define "paid circulation" down. (The best reporting on the circulation scandal and the ABC's skimpy standards has appeared in Newsday, from which I draw liberally.) Advertisers regard paid circulation as the most desirable, and in the old days newspapers that sold for a discount greater than 50 percent did not count as paid circulation. But in 2001 the ABC changed the rules to allow newspapers to consider circulation that was discounted by 75 percent "paid circulation."Newsday helped itself to this new rule—generously. In the 6-month period ending in March 2004, 15.5 percent of the newspaper's paid circulation was deeply discounted papers, as Newsday reports, the highest among the top 20 circulation newspapers in the United States.

"Experts said the 2001 change in ABC rules opened the door for papers to boost circulation by increasing bulk sales to airlines, hospitals, hotels and other entities that usually give away copies as a perk to customers," Newsday reports. "The rule change also opened the door to giving people copies of the paper they did not request and spreading the cost through full-paying purchases."

ABC circulation rules give newspapers more crutches than an orthopedic ward. For example, newspapers distributed to employees count toward paid ABC circulation, as Newsday reports. That's 5,500 copies a day at Newsday. "Publishers are permitted to exclude from circulation statements the instances where sales were unusually low. A maximum of 40 days—holidays and the days immediately before or after—can be excluded if each day's sales were at least 5 percent below the same day from the week before," Newsdayreports. If a paper suffers poor circulation during a spate of bad weather, or is stymied by production problems, or readers have dropped the paper because of some horrific news, the ABC's fuzzy math department is here to help. Publishers can strike an unlimited number of those weak days from their official circulation figures. Newsday availed itself of that ploy 31 days in the 12 months ending September 2003. Apply such a lax audit to your golf score and you'd qualify for the PGA Tour!