In May, CJR invited Brian Farnham, the founding editor of Patch, to write about a digital news service called Journatic, which had just signed up to take over the Chicago Tribune’s suburban coverage. Farnham weighed in on the chances of Journatic rewriting the hyperlocal news industry’s floundering business model and ended with a challenge: “If Journatic thinks it’s got that model, let them prove it. Or die trying.”

But even Farnham couldn’t have predicted how quickly the Journatic model would run into trouble. Last Sunday This American Life aired a show themed “Switcheroo” about people pretending to be people they’re not. One segment featured Ryan Smith, a writer for Journatic and its affiliated real estate site Blockshopper.com.

Smith said that writers in the Philippines were hired for cheap to write stories under aliases—a clear breach of journalistic ethics—that were later published in places like the Tribune, The San Francisco Chronicle, the Houston Chronicle, and the Chicago Sun-Times.

Brian Timpone, who founded Journatic in 2006, told CJR that the aliases were only ever used by US editors on Blockshopper after they started receiving legal threats, since the site aggregates information online about real estate deals, much to the ire of homeowners. Unfortunately, he said, some of those stories were picked up by bigger newspapers and ended up in print, aliases and all.

“We made a mistake in allowing some of these stories to go to our clients,” said Timpone. “But these stories really don’t deserve bylines at all because they are compiled from six or seven sources.”

Timpone explained that Journatic’s 140 Filipino workers retype police blotters, reformat public records and gather data, which is sent to a team of 200 US freelancers and 60 full-time staffers to assemble into stories. He described the Filipino workers as “support staff” who are paid “more than most places in the Philippines.”

But when Sarah Koenig, the producer of the This American Life story, contacted a Filipino employee of Journatic to ask if they had ever written a whole story, they said they had. Even in the US, a level of deception is necessary for Journatic employees to write local content remotely. Ryan Smith told TAL he’d had to skirt around the fact that he wasn’t a local reporter when a teacher invited him to interview a student at a school for the Houston Chronicle. Smith said he would prefer to do the interview on the phone instead.

“Journalism is supposed to be a local institution written by people that care about what’s going on there,” Smith told TAL. “With this I was writing stories and I don’t know these communities, I have no stake in them … there’s just something inauthentic about the whole process.”

Whether work from the Philippines ran under westernized bylines, as the TAL scoop claimed, or whether Timpone’s assertion that foreign workers’ identities were never fudged is true, Tribune responded to the furor by launching an investigation, the Houston Chronicle published an apology, and GateHouse Media representatives (publisher of 28 daily and weekly locals that use Journatic content) told Anna Tarkov of Poynter that they are reconsidering their contract with Journatic in favor of employing their own local reporters.

Timpone said that Journatic never intended to replace local reporters on the ground, but to provide large quantities of data-driven briefs to metro dailies that might lack the resources to do it themselves.

“If you have a local reporter, they can probably produce six or seven stories a week,” said Timpone. “We can give you 40 stories in that time.” In an increasingly content-driven market, that’s an attractive proposal.

On Thursday, Poynter published a leaked memo from Timpone to Journatic employees that announced “good news” of new contracts and the introduction of a thorough ethical code.

“Don’t let the noise interrupt you,” writes Timpone. “Bumps are going to be a part of the ride.”

Unless struggling newspapers work out a business model that values quality over quantity, the ride’s not getting smoother anytime soon.

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Hazel Sheffield is a former assistant editor at CJR. Follow her on Twitter @hazelsheffield.