DALLAS — The Dallas Morning News overstated its circulation during the last two reporting periods and expects a circulation decline of 1.5 percent daily and 5 percent Sunday due to the overstatement, parent company Belo Corp. reported Aug. 5.

An internal investigation, which is ongoing, has disclosed practices and procedures that led to an overstatement in circulation, primarily in single-copy sales, the company reported. (See the company's press release.)

“The Morning News will voluntarily provide fair compensation to its advertisers given the circulation overstatement,” Robert W. Decherd, Belo’s chairman, president and chief executive officer, said. 

Belo said earlier this year that as of March 31 its daily circulation was 528,379 and Sunday circulation was 755,912.

The decline, coupled with a reduction in state circulation that was first communicated publicly on March 9 of approximately 2.5 percent daily and 3.5 percent Sunday, and anticipated lower circulation volumes for the six month period ending Sept. 30, will result in a total decline in circulation of approximately 5 percent daily and 11.5 percent Sunday when compared with reported September 2003 figures.

The Morning News has advised the Audit Bureau of Circulations (ABC) of its intention to revise its previously reported September 2003 and March 2004 circulation figures.

ABC’s board of directors last month said it would censure newspapers and periodicals that inflate their circulation by 5 percent or more or  that experience two consecutive audit adjustments of at least 5 percent.

The ABC board met to re-define its censure clause after the Hollinger-owned Chicago Sun-Times and Tribune-owned Newsday and Hoy admitted to fudging circulation figures by as much as 23 percent, 16 percent and 9 percent respectively.

ABC reviewed those newspapers after a group of advertisers filed a lawsuit last February claiming an attempt to defraud them.

Belo also announced the resignation, effective immediately, of Barry Peckham, The Morning News’ executive vice president/operations who was responsible for the circulation department. The company said it has no reason to believe at present that Peckham or any current executive officer of The News acted illegally.

“When certain questionable circulation practices at The Dallas Morning News were reported to me last week, I immediately ordered a stepped-up investigation led by the national law firm of Seyfarth Shaw to uncover all of the pertinent facts,” Decherd said.

A report will be made to the audit committee of the Belo board of directors in four to six weeks, he said.

“The Dallas Morning News’ circulation practices must be completely consistent with Belo’s uncompromising standards,” Decherd said.

As the internal investigation proceeds, Decherd said The Morning News, which is distributed exclusively by independent contractors, is making changes necessary to ensure the collection and reporting of more accurate circulation data.

According to Belo, the largest part of the overstatement found late in July appears to be attributable to a change made in early 1999 in the unsold newspaper returns practice, which relies on circulation reporting by contractors and verification by circulation managers.

Coupled with circulation sales rewards programs that were implemented subsequently, this resulted in an overstatement of circulation that grew over time. Such circulation sales rewards programs were discontinued during the first quarter of 2004, the company said.

The Morning News is working to estimate the financial impact of its compensation plan for advertisers and the impact on net earnings and net earnings per share on the third quarter.