A federal judge today held the Gannett Co., Inc. liable for $966,450 in damages for padding circulation figures at the Hartford Times daily newspaper when it was sold in 1973.
Second circuit U.S. Court of Appeals Judge Jon O. Newman awarded the damages to the Register Publishing Company of New Haven, Conn., which bought the Hartford Times for about 8.3 million dollars in October of 1973 but folded the paper three years later.
However, Newman held that while the circulation padding seriously hurt the paper, it wasn't the cause of its demise.
In the lawsuit, the Register, which owns New Haven's two daily newspapers, had sought a full refund of the purchase price, plus further unspecifield damages. A counter claim by Gannett had held that the Register failed to pay the final $823,957 due on the purchase. In view of that, Newman wrote, the Register should recover only $142,493 from Gannett.
Despite the testimony of Gannett chairman Allen Neuharth that they didn't know of the false circulation arrangement at the Harford newspaper. Newman wrote, "It is the corporation's duty to exercise control over the employees . . . Any other rule would grant the modern corporation with its complex internal structure, a virtual license to defraud."
The circulation padding, Newman said, caused the circulation at the time of the sale to be listed at 113,372, when it was actually about 8,000 less.
He said that while the sale contract provided for possible downward adjustment of the circulation figures, Gannett should have informed the Register there might be a likely reason for such an adjustment, and the paper was in fact sold on the basis of the higher circulation level.