Attorney: ABC Role in Check-Swapping Scheme Will Play Out in Court
In a 17-page civil complaint filed April 12 in U.S. District Court in Brooklyn by Teletype Co. Inc., a copy of which was provided to FOLIO: Alert by the plaintiff’s attorney, Teletype says ABC would "attract and retain publishers who paid fees to subscribe to the ABC because ABC would accept falsified paperwork as a way for magazine publishers to meet their circulation numbers for any given period and therefore charge higher advertising rates."
Michael Lavery, ABC president and managing director, released a statement saying the suit is "totally without merit," and that ABC had "terminated Laptop’s membership in ABC" after the magazine’s last audit in 2002. Furthermore, Lavery said, "ABC has no relationship with Inflight Newspapers & Magazines Inc., Bedford Communications Inc., or any of their principals. Our bylaws and rules are established by a board of directors comprised predominantly of advertisers and advertising agencies. It is ridiculous to suggest that any of these individuals or organizations would participate in fraud intended to harm their own industry."
The suit comes after months of controversy surrounding circ practices, in particular the participation in "check-swapping" arrangements;a form of sponsorship program where a sponsor purchases copies of magazines and in turn bills publishers an equal amount for services rendered. ABC disqualified paid circ from Inflight’s sponsorship program last July and changed the rules regarding paid sponsorship copies. Speaking on the condition of anomynity, the plaintiff’s lawyer, a partner in the New Jersey-based law firm of Notis & Gardy, said the suit was filed in Brooklyn because it’s the same court that is presiding over the criminal mail fraud case pending against Bedford’s president Edward D. Brown and circulation director, John Jay Annis.
The suit specifically charges that Brown and Annis engaged in a "check-swapping and dumping scheme" with distributor Inflight to inflate circulation figures for Laptop by falsely reporting "tens of thousands of copies of Laptop as paid circulation each month that were actually given away free to readers or destroyed and never delivered to readers." It alleges that Bedford would pay Inflight "to accept delivery of the magazines each month in exchange for paperwork showing that Inflight had accepted" copies for paid distribution. Inflight distributed the magazines free of charge to Delta, U.S. Airways and Continental shuttles that operate between Boston, New York/Newark and Washington D.C, according to the suit. The falsified paperwork was then turned over to ABC, the suit says. A message left at a general mailbox at Inflight was not returned.
No court date has been set for the case. Teletype’s attorney said the defendants will now have a chance to respond to the allegations. "As with most lawsuits, this one will have a specific path that it follows and it’s not a very quick one," he added.