Rupert Murdoch's media empire, recently hit by UK's phone hacking scandal, suffered another setback after one of its senior-most European executives resigned in the wake of an alleged circulation scam at the Wall Street Journal.

London: Rupert Murdoch's media empire, recently hit by UK's phone hacking scandal, suffered another setback after one of its senior-most European executives resigned in the wake of an alleged circulation scam at the Wall Street Journal.

Nick Davies of The Guardian, whose series of reports blew the lid off phone-hacking and other unethical news-gathering practices at News of the World, today reported the circulation scam at WSJ, a flagship newspaper of Murdoch's News Corporation.

Andrew Langhoff, the European managing director of WSJ's parent company, Dow Jones and Co in in Europe, Africa and the Middle East, resigned on Tuesday.

Dow Jones and Co was bought by News Corporation in 2007. Dow Jones said in a statement that Langhoff stepped down "because of a perceived breach of editorial integrity".

The Guardian, however, reported that it found evidence that the WSJ had been channelling money through European companies in order to secretly buy thousands of copies of its own paper at a knock-down rate, misleading readers and advertisers about the WSJ's true circulation.

Terming the scheme 'bizarre', the report said that the scheme included a formal, written contract in which the WSJ persuaded one company to co-operate by agreeing to publish articles that promoted its activities, a move which led some staff to accuse the paper's management of violating journalistic ethics and jeopardising its treasured reputation for editorial quality.

Internal emails and documents suggest the scam The Guardian reported, was promoted by Langhoff.

The highly controversial activities were reportedly organised in London and focused on WSJ's European edition, which circulates in the EU, Russia, and Africa.

Senior executives in New York, including Murdoch's right-hand man, Les Hinton, were alerted to the problems last year by an internal whistleblower and apparently chose to take no action. The whistleblower was then made redundant, the report said.

In what appears to have been a damage limitation exercise following the Guardian's inquiries, Langhoff resigned on Tuesday, citing only the complaints of unethical interference in editorial coverage.

"Neither he nor an article published last night in the Wall Street Journal made any reference to the circulation scam nor to the fact that the senior management of Dow Jones in New York failed to act when they were alerted last year," the report added.

The News International was only recently embroiled in a major phone hacking scandal which prompted its top executives to resign. The Leveson inquiry, instituted into the scandal is holding investigations into the issue.

PTI