Sun-Times Media Group Inc – ‘8-K’ for 10/5/04 – EX-99

On:  Wednesday, 10/6/04, at 7:15pm ET   ·   As of:  10/7/04   ·   For:  10/5/04   ·   Accession #:  950142-4-3461   ·   File #:  1-14164

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                         6     22K 
 2: EX-99       Exhibit 99.1                                           5     23K 
 3: EX-99       Exhibit 99.2                                           2     11K 
 4: EX-99       Exhibit 99.3                                           2     10K 

EX-99   —   Exhibit 99.2

EX-99
1st Page of 2
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
                                                                    EXHIBIT 99.2
                                                                    ------------

Dear Advertiser:                                                                

I am now able to provide you with detailed information about the inflation of   
circulation at THE CHICAGO Sun-Times. But first I'd like to thank you for the   
patience you've shown us during this challenging period for our newspaper.      

The information I am sharing with you in this letter was produced during an     
intense, five-month independent investigation carried out by counsel for        
Hollinger International and the law firm Gardner Carton & Douglas LLP with the  
assistance of other professionals from Deloitte and Touche LLP. During the      
investigation, dozens of SUN-TIMES employees were interviewed and our business  
records were extensively examined.                                              

The enclosed press release summarizes the investigation's findings and outlines 
the practices that violated the rules of the Audit Bureau of Circulations. As   
you will see, our investigation found that the inflation of THE SUN-TIMES'      
single-copy circulation began modestly on weekdays and Sundays during the period
covered by the 1998 ABC report and increased over time. Saturday circulation was
never inflated.                                                                 

On discovering the problem earlier this year, I stopped all unacceptable        
practices and the investigation began promptly after I reported my concerns to  
the Company's officers and directors. Our press release includes a table that   
sets out the extent of the overstatement reported in each year since 1998.      

It may seem that this information has been a long time coming, but we wanted to 
ensure this investigation was thorough and our disclosure complete. We intend to
do this only once... and to get it right the first time.                        

Through intensive work, our investigation yielded a great deal of information   
for us to determine the extent of what occurred. Specifically, the investigation
identified three different types of overstatement. First, THE SUN-TIMES         
incorrectly reported the timing of unsold papers in a manner that caused the    
average paid circulation to be miscalculated and inflated, and second, THE      
SUN-TIMES at times intentionally failed to report the total number of its unsold
papers, thereby further inflating the calculation of average circulation        
(collectively, "Understated Returns"). Finally, THE SUN-TIMES occasionally      
included in its circulation copies of newspapers that, while actually published 
and circulated, were ineligible to be counted as paid circulation under ABC     
rules.                                                                          

With the knowledge of these methods and using internal, historic records and    
other available information, Deloitte & Touche was able to provide an estimate  
of the circulation overstatement that enables us to set matters right with you. 
As the financial impact of this inflation varies significantly by differences in
advertising program, we are not proposing a one-size-fits-all solution. Instead,
we are implementing a uniform set of restitution principles:                    

o    We will make appropriate restitution for the overstatement of our ABC      
reported circulation.                                                 

o    Our methodologies will err on the side of advertisers for computing the    
compensation amount.                                                  

o    We will compensate advertisers based on the dates their ads ran.           

o    Our settlements will be structured to protect us from paying twice for the 
same wrong.                                                           

EX-99
Last Page of 2
TOC
1st
Previous
Next
↓Bottom
Just 2nd
We have been advised that there is not a one-to-one relationship between        
circulation and advertising rates. Other factors such as the level and growth of
other advertising rates in the market play a strong role.                       

Nonetheless, we have designed a proposal intended to restore your confidence in 
THE SUN-TIMES. Our settlement offer will be based on the percentage of          
understated returns. This percentage will be calculated separately for weekly   
and Sunday circulation overstatements.                                          

We recognize each advertiser's needs are different, and we intend to offer cash 
and value-added options to provide full restitution. The value-added component  
will contain incentives designed to maximize your advertising dollars with THE  
SUN-TIMES and our network of Chicago newspapers.                                

To calculate your benefit, we will use your advertising expenditures in the four
calendar quarters following each ABC audit report, commencing with the second   
quarter of 2001 through the third quarter of 2004, broken down between Sunday   
and weekday placements. We will be making a 100 percent settlement offer based  
on Understated Returns, 70 percent of which will be in the form of cash refunds 
and the remainder through value-added options for future programs. We will also 
make available a 125 percent value-added option for those advertisers who would 
welcome the premium. We have chosen 2001 as the compensation starting point in  
order to expedite restitution, and because prior to then the average            
overstatement was approximately one percent. Our compensation will be based on  
your advertising expenditures following the overstatement in each of the        
applicable ABC audits for weekday and Sunday circulation.                       

As you may know, a number of attorneys have filed class action lawsuits         
following our public disclosure of the overstatement in June of this year.      
Copies of the class action complaints which contain the name of the plaintiffs' 
counsel will be provided to you upon request.                                   

Over the next few weeks, our advertiser representatives will provide you with   
our estimate of the make whole offer and loyalty rebate amounts. I have         
instructed them to create a 2005 advertising program which can incorporate the  
terms of our settlement offer into your future program.                         

THE SUN-TIMES has a proud history in Chicago. It has been acknowledged for      
decades as one of America's great newspapers. This has been a period of anguish 
and embarrassment for all of us here. We are anxious to put this period behind  
us and we have been working very hard to regain our reputation.                 

Over the past several months, we have made investments in editorial, marketing, 
circulation sales and reader service in order to increase our circulation. In   
addition, you should know that, everyone here at THE SUN-TIMES is committed to  
earning and maintaining your trust. We feel confident that today's announcement 
and our restitution offers mark an important step forward.                      

                        Sincerely yours,

                        John Cruickshank