The chief financial officer of Gruner + Jahr USA, publisher of Rosie O'Donnell's now-defunct Rosie magazine, admitted on the witness stand Monday that his company massaged circulation figures to hide the magazine's losses and to keep the publication alive.
CFO Lawrence Diamond said executives at G+J decided to "manage the financials" of the publication because if the magazine were to lose more than $4.2 million in a fiscal year, O'Donnell would have been permitted to sever her arrangement with G+J, reports the Associated Press.
"We did not want to shut down," Diamond testified in Manhattan's State Supreme Court under questioning by O'Donnell's lawyer Matthew Fishbein.
O'Donnell and G+J are suing each other for breach of contract -- G+J is seeking $100 million; O'Donnell, $125 million. Judge Ira Gammerman will decide the case, without a jury.
O'Donnell's legal team said the G+J executives were falsifying the circulation numbers during a particularly intense battle for control of the publication between the entertainer and the company, and that the fake numbers were reported to the Audit Bureau of Circulation, the association whose information determines ad rates.
An ABC executive testified that while Rosie charged advertisers on the basis of a circulation of 3.5 million per month, its actual subscription and newsstand sales usually fell short of that number, reports AP.
Among the e-mails sent by Diamond, who was new to his job, was to Axel Ganz, an executive at G+J's German parent company, Bertelsmann AG. It reportedly said: "G+J USA is recommending to you that we manage the financials such that we do not fall below the required threshold point so that we can continue to publish Rosie. We are asking you for approval to this strategy."
"We thought it was in both parties' interests to continue publishing the magazine," Diamond said in the courtroom. "We thought it had great potential and great future value."
Media observers are calling this revelation a victory for O'Donnell's side. Although it was thought that Monday would be the last day of testimony in the trial, O'Donnell, 41, asked the judge whether she should come back on Wednesday, The New York Times reports.
Gammerman told her she should, because he "might have something interesting to say."
Your Reaction
