Belo to Cut 250 Jobs as Readership, Ad Woes Grow

DALLAS Belo Corp. plans to eliminate 250 jobs as it faces costly fallout from a circulation scheme at its flagship Dallas Morning News and “challenging” conditions for advertising in 2005, the company said.

The Dallas-based media company on Wednesday released the first results of a $3 million investigation into the circulation problems that led to shareholder lawsuits and a $23 million third-quarter charge against earnings to repay advertisers. The report from the law firm Seyfarth Shaw was submitted to the audit committee of Belo’s board of directors.

The investigation showed that circulation at the News fell even further than was estimated when the problems were first reported Aug. 5. Belo said the News‘ circulation dropped 11.9 percent on Sundays and 5.1 percent daily for the six months ended Sept. 30 compared to a year earlier. The company had said last month the declines would be 11.5 percent on Sundays and 5 percent daily.

Two weeks after correcting its circulation estimates, Belo announced a plan to repay advertisers who paid for the overstated circulation in the first half of the year.

While clearing top management of any wrongdoing, the investigation blamed aggressive incentive programs and inadequate verification for exaggerated sales.

That finding parallels a claim in a shareholder lawsuit filed by the law firm Lerach Coughlin Stoia Geller Rudman & Robbins.

“Instead of encouraging the circulation managers to carefully audit the third-party vendors . . . Belo created an incentive program for the circulation managers as well,” the suit states. “Thus, when third-party vendors reported fraudulent circulation numbers in order to receive incentive payments, the circulation managers themselves had an incentive to turn a blind eye to the scheme.”

In addition to job cuts, mostly at the Morning News, Belo also said it expected to cut $10 million in losses by closing three local cable news channels it shares with Time Warner Cable.

Belo chairman and CEO Robert W. Decherd said 2005 would be “a challenging year” after the ad falloff from the Olympics and political campaigns. He said Belo would see “a modest reduction” in network compensation.

Belo earned $128.5 million last year on sales of $1.44 billion. It has about 7,900 employees and owns four newspapers and 19 TV stations.