SPH Media files police report after potential offences flagged in circulation data investigation

SPH Media Group has filed a police report after potential offences were flagged in an investigation into the overstating of circulation numbers.

The media company, which publishes The Straits Times, said in a statement on Wednesday that it will cooperate fully with the police, following recommendations made in a report by the organisation’s audit and risk committee. It had been tasked by SMT’s board in January, to look into the inflated numbers.

During an internal briefing for SPH Media publications, Mr Max Loh, who chairs the committee, said the police report was not made against specific individuals or entities but comprised the findings of the investigation.

He added: “We cannot say more than that, because it will prejudice police investigations. We’ve laid out what the issues or the findings are. And I think we really have to leave it to the relevant authorities, which in this case, is the police to figure out how they’re going to proceed and maybe if at all, they want to proceed.”

When asked about the specific offences that were laid out in the report but redacted, Mr Loh said it was not for the committee to determine the offences. The police has access to the full, unredacted report, he said.

“We’ve drawn a line in the sand, basically, so that we can collectively as an organisation, move forward with our own mission and purpose… not being unduly burdened by these legacy things that have bogged us down for the past months,” said the former managing partner of EY Asean & Singapore and a member of SMT’s board.

The report which is available on SPH Media’s website also determined that there was no evidence found that the journalism and editorial departments were involved in the overstatement of circulation numbers.

The committee had commissioned legal advisors Allen & Gledhill to assist, which in turn appointed accounting firm Deloitte to help with forensic discovery and analysis of relevant data.

SMT had said in January that several senior employees had been taken to task or had left the company after inconsistencies were found in reporting circulation data.

The matter came to light after an internal review of processes for the period from September 2020 to March 2022. It was during this time, in December 2021, that SMT was created following a restructuring of its then listed parent company Singapore Press Holdings.

When asked how many people were interviewed for Wednesday’s report, Mr Loh did not give an exact number but confirmed that it included more than 10 people from SMT and SPH and that it was “quite thorough and comprehensive”.

It did not, however, include the four staff who had left the company in January, as they had been interviewed for the earlier internal audit, he said.

In the 14-page report presented to the SMT board on Tuesday, the committee said Allen & Gledhill had found the actions taken against the employees and former employees in January to be “reasonably justified in the circumstances” and in compliance with SMT’s policies.

As for staff who were also involved but are still with the company, Allen & Gledhill said they had acted under the instructions of their superiors. They also appeared to have operated under the mistaken belief that the practices directed by the superiors were accepted practices in the company.

The law firm, which reported its findings to the audit and risk committee on June 16, found that SMT had overstated its daily circulation numbers by 82,600; using data from August 2021.

This comprised 49,000 bulk copies via the Newspapers in Education (NIE) fund that were reported but not distributed; 5,000 from a Y Deal; 15,000 from an X Barter deal; 1,900 school copies, 2,300 airline copies, 9,000 agency copies and 400 from those who had subscribed to all-in-one packages.

The total number accounted for about 10 per cent of reported daily average circulation.

SPH Media did not identify the parties mentioned in the report.

Apart from the police report recommended by Allen & Gledhill, which the committee concurred with, it also set out various recommendations for SMT.

“SPH Media Group should take the opportunity to evaluate its risk culture, enhance its risk management practices and continually improve its internal controls and processes,” it said.

This includes building a culture where people feel they can speak openly about risks and challenge others, including those in higher positions; who should then positively address any concerns.

Leaders should also set the tone for a quality and risk-oriented culture that balances commercial considerations with risk management.

The committee also noted that SMT “has a legacy of operating within individual departments given the specialised nature of each operation or function”.

It said the firm should perform a comprehensive review of its control environment and practices to balance operation effectiveness and efficiency with its expected standards of conduct and accountability.

SMT chief executive Teo Lay Lim said during the briefing on Wednesday that she was as worried as any employee about people who think SMT is untrustworthy following this incident.

“The only thing I can say is that if we saw this, and we are doing something about it, I hope that those who are reasonable and fair out there will believe that we all want to do what’s right and what’s responsible,” she said.

The report noted that printing and distributing bulk copies to third parties appeared to be an acceptable practice in the newspaper industry, and was not illegal or prohibited under the Audit Bureau of Circulation, Singapore rules. However, copies cannot be counted if they are returned, unsold or undelivered.

There were several instances when this was done, stated the report which is available on SMT’s website.

It added that those involved in overstating circulation numbers, and who knew that undelivered copies were included in the reported numbers, were from the circulation division.

“There has been no evidence sighted to suggest that the (SPH) Board or its senior management (save for [redacted]) were involved in this,” it said.

The report cited examples of how the numbers were overstated, like the printing of ST copies for secondary schools that had requested to change their package deal to only include digital copies. Another example was the printing copies for school reading corners amid the Covid-19 pandemic when they had asked for delivery to be paused. These copies were then sent to a Kaki Bukit warehouse to be disposed of or later distributed.

There were also bulk copies purchased under the NIE fund to shore up circulation numbers in annual reports to cushion the fall in print circulation numbers and meet key performance indicator targets for the circulation division. Of these, some were disposed of, while there were also digital copies of which no evidence was found on whether they were ever distributed or accessed.

The NIE fund was originally set up to pay for the distribution of newspaper samples to students, needy families, halfway houses and charities.

The legal advisers who assisted SPH Media’s audit and risk committee with investigating the firm’s overstated circulation numbers cited two examples in Hong Kong and the United States where employees of news outlets were taken to task for having inflated circulation figures.

At the Standard and Sunday Standard in Hong Kong, anti-graft officials arrested six people in 1997 in connection with a scheme to inflate circulation figures for the Hong Kong Standard Newspaper and its sister paper, the Sunday Standard.

Three executives were jailed for terms ranging from four to six months after they were convicted of conspiring with two others, including newspaper tycoon Sally Aw Sian, to defraud companies and people who purchase or might purchase advertising space in the newspapers between 1993 and 1997.

Among other things, they were found to have inflated circulation figures to the Audit Bureau of Circulation (ABC), used a bogus company to purchase excess print newspapers, and disposed of excess newspapers purportedly purchased by the bogus company.

Ms Aw, the adopted daughter of ‘Tiger Balm’ businessman Aw Boon Haw and executive chairman of Sing Tao Holdings, a publicly listed company that published the newspapers, was not prosecuted. Hong Kong’s then-secretary of justice cited a lack of evidence against her and the public interest as reasons not to prosecute, since doing so might have ruined the newspaper and led to a loss of jobs when unemployment was on the rise.

In 2006, nine former employees and contractors of news outlets Newsday and Hoy pleaded guilty to participating in a fraudulent scheme between 2000 and 2004 to inflate paid circulation data so as to induce advertisers to buy advertising space.

Media group Tribune Co, which ran the newspapers, agreed to pay US$15 million in a settlement with the US government.

Newsday Inc and Spanish-language newspaper Hoy Publications admitted that, between 2001 and 2004, their employees “systematically inflated” circulation numbers in books and records and lied to ABC, Reuters reported.

The agreement, under which the two newspapers avoided prosecution by the US Attorney’s Office, was reached after they set aside $90 million to compensate advertisers misled by the false numbers.

Newsday admitted that senior managers told distributors to lie to auditors.

Some of the inflated figures came from Newsday employees posing as customers and buying large quantities of the paper throughout Long Island, New York, prosecutors said.