LONDON, June 5 (Reuters) - Last Christmas Eve,NewsBreak, a free app with roots in China that is the mostdownloaded news app in the United States, published an alarmingpiece about a small town shooting. It was headlined "ChristmasDay Tragedy Strikes Bridgeton, New Jersey Amid Rising GunViolence in Small Towns."The problem was, no such shooting took place. The Bridgeton, NewJersey police department posted a statement on Facebook onDecember 27 dismissing the article - produced using AItechnology - as "entirely false".
"Nothing even similar to this story occurred on or aroundChristmas, or even in recent memory for the area theydescribed," the post said. "It seems this 'news' outlet's AIwrites fiction they have no problem publishing to readers."
NewsBreak, which is headquartered in Mountain View,California and has offices in Beijing and Shanghai, told Reutersit removed the article on December 28, four days afterpublication.The company said "the inaccurate information originated from thecontent source," and provided a link to the website, adding:"When NewsBreak identifies any inaccurate content or anyviolation of our community standards, we take prompt action toremove that content."
The operators of the website, findplace.xyz, did not respondto a request from Reuters for comment. The police declined toprovide further comment.
As local news outlets across America have shuttered inrecent years, NewsBreak has filled the void.
Billing itself as "the go-to source for all things local,"Newsbreak says it has over 50 million monthly users. Itpublishes licensed content from major media outlets, includingReuters, Fox, AP and CNN as well as some information obtained byscraping the internet for local news or press releases which itrewrites with the help of AI. It is only available in the U.S.
But in at least 40 instances since 2021, the app's use ofAI tools affected the communities it strives to serve, withNewsbreak publishing erroneous stories; creating 10 stories fromlocal news sites under fictitious bylines; and lifting contentfrom its competitors, according to a Reuters review ofpreviously unreported court documents related to copyrightinfringement, cease-and-desist emails and a 2022 company memoregistering concerns about "AI-generated stories."
Reuters spoke to seven former NewsBreak employees, includingfive who said most of the engineering work behind the app'salgorithm is carried out in its China-based offices. The formeremployees requested anonymity, citing confidentiality agreementswith NewsBreak.
Two local community programmes assisting disadvantagedpeople told Reuters they were impacted by erroneous storiesproduced by NewsBreak's AI.On three occasions in January, February and March, Food toPower, a Colorado-based food bank said it had to turn peopleaway because NewsBreak stated incorrect times of fooddistributions. The charity complained to NewsBreak in a January30 email to NewsBreak's general customer support email address,which Reuters has reviewed. The charity said it received noresponse.Harvest912, a charity in Erie, Pennsylvania emailed NewsBreakabout two inaccurate, AI-based news stories which said it washolding a 24-hour foot-care clinic for homeless people, askingthe outlet to "cease and desist" erroneous coverage.
"You are doing HARM by publishing this misinformation -homeless people will walk to these venues to attend a clinicthat is not happening," Harvest912 told NewsBreak, in a January12 email seen by Reuters.
In response to Reuters' questions, NewsBreak said it removedall five articles about the charities after learning they wereerroneous and that the articles were based on incorrectinformation on some of the charities' web pages.
Without providing a reason to Reuters, NewsBreak added adisclaimer to its homepage in early March, warning that itscontent "may not always be error-free".
Newsbreak generates revenue by showing ads to its users, whoare predominantly female, above the age of 45, without collegedegrees, and live in suburban or rural parts of the U.S.,according to the seven former employees and a 2021 companypresentation reviewed by Reuters.The company launched in the U.S. in 2015 as a subsidiary ofYidian, a Chinese news aggregation app. Both companies werefounded by Jeff Zheng, the CEO of Newsbreak, and the companiesshare a U.S. patent registered in 2015 for an "Interest Engine"algorithm, which recommends news content based on a user'sinterests and location.
NewsBreak told Reuters that the patent was assigned by Zhengto both companies because "some of the concepts were developedfrom Jeff's time at Yidian" and that NewsBreak is "U.S.-based"and "U.S.-invested". The shared patent has "absolutely nobearing on the company and its operations", NewsBreak said inwritten responses to Reuters, describing the technologyreferenced in the patent as "outdated".
COMPANY MEMO
A May 2022 company memo from a NewsBreak consultant toZheng, reviewed by Reuters, raised concerns about NewsBreak'suse of AI tools to re-publish stories from local news sitesunder five fictitious bylines.
"I cannot think of a faster way to destroy the NewsBreakbrand," Norm Pearlstine, former Executive Editor at the WallStreet Journal and the Los Angeles Times who was working at thetime as a consultant to NewsBreak, wrote in the memo to Zheng.
In an interview after NewsBreak gave him permission to speakwith Reuters, Pearlstine said he learned of the practice from aNewsBreak colleague.
"I question the legality of creating fake accounts usingcontent publishers put behind their paywalls. If I had learnedabout the practice while at the LA Times, I would haveinstructed our lawyer to seek a restraining order and sue fordamages," wrote Pearlstine, whose six-month consulting role atNewsBreak in 2022 consisted of advising the company about U.S.editorial businesses.
Pearlstine, who confirmed the memo was authentic,attributed the lapse to a lack of journalistic experience. "Afair number of people on the staff were either new to journalismor new to the U.S. market. That was part of the reason I felt Ihad to be very direct and very explicit in explaining why Ithought this was important," he told Reuters.
NewsBreak said the news stories referenced in Pearlstine'smemo were a "limited experiment in three U.S. counties" toaggregate third-party content, and that the effort was disbandedafter producing ten articles. The company denied going behindpaywalls and said it used "snippets" of articles that werepublicly visible to produce complete news stories using OpenAI.
NewsBreak also pointed Reuters towards Zheng's emailedresponse to Pearlstine, saying he recognized the problem andasked his team to fix it.
OpenAI told Reuters its policies prohibited using itstechnology to mislead people.In 2022, Patch Media, which operates digital local news feeds inevery U.S. state, reached a $1.75 million settlement in alawsuit against NewsBreak for copyright infringement, accordingto court documents reviewed by Reuters, which alleged thatNewsBreak republished Patch's news stories without permission orcredit.
Patch did not respond to a request for comment. NewsBreaksaid the settlement was not an admission of wrongdoing.
Emmerich Newspapers, which operates newspapers inMississippi, Arkansas and Louisiana, reached a 2021 settlementwith NewsBreak in a lawsuit alleging copyright infringementrelated to NewsBreak's use of Emmerich's content withoutpermission. NewsBreak said the settlement was "amicable."
Another copyright lawsuit is ongoing. The two parties are"embroiled in additional lawsuits which we are vigorouslydefending against," NewsBreak said.
Wyatt Emmerich, the company's president, said the lawsuitagainst NewsBreak involved "verbatim copying of content". Headded: "What worries me in the future is that news aggregatorscould use artificial intelligence to slightly rewrite ourstories which would make proving copyright infringement muchmore difficult. I have witnessed instances of this happeningalready on news aggregation sites."
CHINA ROOTS
NewsBreak is a privately held start-up, whose primarybackers are private equity firms San Francisco-based FranciscoPartners, and Beijing-based IDG Capital, NewsBreak told Reuters.
Francisco Partners declined to answer questions about itsinvestment in NewsBreak. IDG did not respond to repeated emailedrequests for comment.In February, IDG Capital was added to a list of dozens ofChinese companies the Pentagon said were allegedly working withBeijing's military. IDG Capital told Bloomberg in February thatit has no association with the Chinese military and does notbelong on that list. NewsBreak did not comment on the finding.Yidian, the Chinese aggregation company, divested from NewsBreakin 2019 because "its management team at the time did notunderstand the U.S. market", Zheng said. Until then, Li Ya, thepresident of Phoenix New Media, a Chinese state-linked mediafirm which held a 46.9% stake in Yidian, had been a director atNewsBreak, according to corporate records.Yidian continued to describe NewsBreak as its U.S. version onits website until 2021, according to The Wire China.Yidian in 2017 received praise from ruling Communist Partyofficials for its efficiency in disseminating governmentpropaganda. Reuters found no evidence that NewsBreak censored orproduced news that was favourable to the Chinese government.
A NewsBreak spokesperson said there was no ongoingcommercial relationship with Yidian. Yidian, Phoenix New Mediaand Li Ya did not respond to requests from Reuters for comment.
About half of NewsBreak's 200 employees are China-basedwhere they are engaged in R&D, the company said.
A 2022 company roster reviewed by Reuters showed that 100 ofNewsBreak's 137 engineers at the time were based in China.
Five of the former NewsBreak employees said CEO Zhengdivides his time between China and the United States.
Zheng, who was born in China, is a permanent resident ofthe United States and his family relocated to the U.S. earlylast year, the company said.Reuters found five job advertisem*nts NewsBreak posted onChinese job sites seeking data analysts or engineers for itsBeijing and Shanghai-based offices capable of "in-depth mining"of "massive user behaviour data" from the app's U.S. users.
A Republican aide to the U.S. House of RepresentativesForeign Affairs Committee told Reuters the use of Chinese-basedengineers by Newsbreak raised possible concerns that Americanuser data can be accessed in China. The aide declined to beidentified because they were not authorised to speak to themedia.
In a recent high-profile case, U.S. officials warned thatTikTok, whose parent company is the Chinese firm ByteDance,could be compelled by the Chinese government to use itsalgorithm to control what kind of news is viewed by Americansand hand over their data.
TikTok, the most downloaded short video app globally, with170 million U.S. users, now faces a forced sale or a U.S. ban.
In response to Reuters questions, TikTok said it wasplanning to offer third parties more access to examine its codeand verify the app functions as intended.
Zheng told Reuters that NewsBreak complies with U.S. dataand privacy laws and is maintained on U.S.-based Amazon (AWS)servers. "Staff in China only access anonymous data stored onAWS servers in the U.S.," he said. Amazon declined to comment.
NewsBreak also said that as a U.S.-based business it was notsubjected to Chinese data laws.
Pearlstine, the former NewsBreak consultant, saidNewsBreak's ability to demonstrate it is a U.S. company wascritical.
"The long term health of NewsBreak was dependent on itsbeing perceived as a California company and that the more theleadership was in Mountain View, the better it would be for thecompany," he said.
(Reporting by James Pearson in London; Additional reporting byEduardo Baptista in Beijing; Christopher Bing and Mike Scarcellain Washington and Karen Freifeld in New York;Editing by Chris Sanders and Suzanne Goldenberg)
