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This article by Barbara Fox was prepared for the January 8, 2003 edition of U.S. 1 Newspaper. All rights reserved.
Life in the Fast Lane
Every industry has its trade magazines that are distributed
free, and periodically the publishing companies ask their lists of
recipients to send back a card indicating that the magazine is welcomed.
They do this to qualify for low bulk postal rates rather than second
class rates. Even in a Web-based world, these magazines — especially
those sent to the medical profession — are good profit centers.
Healthcare firms want to reach their target markets any which way
A Cranbury-based firm that is the world’s largest allied health publisher,
Medical World Communications (MWC), has fallen afoul of the U.S. Postal
Service, and now both sides are crying foul. The federal government
claims that from 1994 to 2000 the Forsgate Drive firm failed to pay
$2 million in postage by fraudulently claiming that more than half
of the recipients of 11 magazines had requested to receive the magazine.
The complaint alleges that the defendants knowingly misstated the
rate of requesters to avoid paying the higher rates, and that the
scheme continued when an employee tried to stop it. The complaint
was unsealed on December 19.
Jack Hennessy, founder and CEO of MWC, says that he has fixed any
problems and has cooperated with the investigation from the beginning.
"We spend $10 million a year on postage, and we want to remain
a good customer of the post office," says Hennessy. "We did
everything possible to fix the problems, and the money we owe them
— we want to pay it."
Michael A. Chagares, assistant U.S. Attorney and chief of the civil
division in Newark, released a statement saying that there were "hundreds
of false records and/or statements" used to conceal, avoid, or
decrease the obligation to pay money to the Postal Service. For each
of these records the government hopes to levy a penalty of from $5,000
to $10,000, in addition to triple damages ($6 million) on the $2 million
in postage fees. Unless the case settles, he promises a jury trial.
"The implication of some type of wrongdoing on our part is simply
unacceptable, since this is a problem that we inherited and addressed
as quickly as it was discovered," said Hennessy in a four-page
statement to clients and employees. He emphasizes that at no time
were his circulation figures in question, and that he has spent more
than $3.1 million to fix the requester problem.
"We’ve made 16 acquisitions, and when you acquire an asset you
acquire a liability," says Hennessy. "Only the acquired titles
have we had to fix. The company acquired these assets, fixed the assets,
and wants to pay any and all postage due. That’s what we have been
saying for 3 1/2 years."
"A significant portion of the damage amount would go to a former
disgruntled employee who was responsible for overseeing these very
acquisitions," says Hennessy’s statement, "and who in the
past has attempted to wrongfully obtain money from the company. We
believe, as should every organization, that it is wrong to financially
reward any employee for such actions."
The suit was filed in 1999, under the whistle blower provision of
the False Claims Act, by Peter F. Sprague, who had just been fired
after three years as the company’s COO. It is being handled in Trenton
in U.S. district court by Judge Garrett E. Brown Jr. Sprague’s attorney,
Nicholas C. Harbist, has said his client could potentially get 15
to 25 percent of triple damages, but he did not return calls to this
newspaper. Medical World is represented by Samuel P. Moulthrop in
Hennessy is a 1978 graduate of the University of South
Carolina and has had a medical publishing business since 1985. In
1993, with investment from Boston-based Media Communications Partners,
he took the magazines from the first business to open the current
business and embarked on aggressive growth. Hennessy now claims 1.25
million unduplicated circulation in the medical field, and 400,000
in the food and food processing fields. He has 10 divisions and more
than 74 publications and information services, with 90 employees at
offices in Jamesburg, plus offices in New York, Chicago, Los Angeles,
California, and Rhode Island. The magazines are printed in Kentucky
(U.S. 1, March 20, 2002). MWC also owns an ad agency and Stagnito
Communications Inc., a publisher of specialized food and beverage
The lawsuit names the recently acquired firms — Novicom Inc.,
Romaine Pierson Publishers, Medical World Business Press, and Dental
Learning Systems. The affected periodicals are Physical Therapy Products,
Chiropractic Products, Plastic Surgery Products, Podiatric Products,
Orthodontic Products, Compendium of Continuing Education in Dentistry,
Cardiology Review, Resident and Staff Physician, Family Practice Re-certification,
Surgical Rounds, and Clinical Lab Products.
In 2001 MWC reported revenues of $100 million. "In 2002, the worst
media market in recent history, we finished the year up 15 percent,"
says Hennessy. His firm, he says, is the largest allied health publisher
in the world and owns the largest ad agency for the healthcare professionals
in the United States. "Each one of the divisions last year grew
Said Hennessy’s statement: "We are fully prepared to protect our
firm’s reputation and the welfare of our nearly 400 employees who
work diligently each day to produce leading journals."
08831. Jack Hennessy, CEO. 609-860-8088; fax, 609-860-5903. Also 241
Forsgate Drive, Jamesburg 08831. 732-656-1140; fax, 732-656-1142.
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