MONEYWEB: Here comes Sandra Gordon, now, the publisher of Marketingweb. Sandra, there's been an issue in the media industry as well, where people are cheating blatantly to inflate their circulations, which is fraud, so that advertisers would pay more. But let's just start off: what is the Audit Bureau of Circulation? What job does it do?

SANDRA GORDON: Alec, it's a bureau that exists to check the circulation numbers of magazines and newspapers. In other words, we as publishers have to prove to an auditing process the amount of copies that are being sold and distributed into the marketplace so that the advertisers can realise the value that they're getting for their advertising.

MONEYWEB: We had Naspers's head of magazines in the studio just a little while ago, Patricia Scholtemeyer, who was terribly contrite about the fact that her company had been fraudulently inflating its circulation figures. I see she's subsequently been promoted to the head of M-Net, and in the last week there have been yet more issues of circulation fraud within Naspers. What gives?

SANDRA GORDON: I think that she has maintained all along her innocence, and that there were individuals involved in her organisation that were in senior management positions that appeared to have inflated the figures. It's not entirely sure why they did it, but I guess it was to keep their jobs in the long run, because obviously if their figures kept going up, they could charge more for advertising and they looked like heroes within their organisation. So I assume that their promotion of her is on the value of her to the organisation, which is a massive organisation and it's the biggest listed media company in the country.

MONEYWEB: Sure. Nick Dennis controlled an even bigger organisation and he's no longer there, and today the Adcock Ingram chief executive was suspended. But leave that as it may, there's confusion about Finance Week or FinWeek and its circulation figures. The ABC claims that these were inflated. Finance Week says that isn't the case. What is the story there?     

SANDRA GORDON: The argument revolves around two issues. There's certain classification - if you give bulk copies to an institution, say for instance the final-year students at a university, they don't pay for them but they're given them, and you can claim to your advertisers that these are very valuable readers and that, whilst they're getting it for nothing, the advertiser is still getting good value. They classified that in the wrong section. They showed them as sales rather than free copies bulk delivered.

MONEYWEB: Come on, Sandra, that's a joke. They gave them away and they classified them as sales! And that's a mistake?

SANDRA GORDON: Well, I think there's an even more spurious argument that's occurring, and my editors did get a letter today from Rikus Delport, who's head of Finance Week, claiming that there's been internal transactions within the larger Naspers group in that they are sending Finance Week to, for instance, the subscribers of the Beeld newspaper or subscribers to DStv. And then there's internal money passing hands that shows that in fact they were paid for circulation, rather than just [given] free to the subscribers of Beeld, whether you want it or not type of thing.

MONEYWEB: So, let me understand this. You're an advertiser, you're paying for sales, and the sales however are being paid by some other member of a group and you're passing it on to people for free - and they claim that there's nothing wrong with this.

SANDRA GORDON: They are claiming that they cleared this with the ABC first; can't prove that one way or the other, because we've been unable to get hold of the head of the ABC. The other thing we need to take cognisance of here, Alec, is that there's another measurement of circulation - that is readership, and that's done by big a measurement group such as AC Nielsen. So really it's interesting to see how those readership numbers will be affected over time because, whether you're getting your Finance Week as a final-year student at Wits, or whether you're paying for it at the CNA, you're still a reader of it. So if those reader numbers remain constant, then it indicates to the advertisers that they're still getting value. That doesn't detract from the fact that, as all your listeners will know, the corporate value in the old days on balance sheets is based on tangible issues like assets, and now apparently globally 70% is intangible, which is in people. And if an organisation doesn't persist with governance issues, those individuals are going to take whatever little tricks that they have at their disposal to make themselves look better, earn incentives and grow higher in their organisation.

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