The European publisher of Rupert Murdoch's Wall Street Journal (WSJ) has resigned amid allegations of a circulation scam and a row with the Guardian.

The resignation came after the Guardian newspaper reported the Wall Street Journal had been involved in a scam to boost its circulation.

The WSJ responded by saying the Guardian's report published late last night was "replete with untruths and malign interpretations".

WSJ Europe parent Dow Jones had said the previous day that Andrew Langhoff had quit over ethical issues raised by the paper's commercial relationship with Dutch consulting firm Executive Learning Partnership (ELP).

It did not disclose the nature of the relationship.

Rupert Murdoch's News Corp, parent of Dow Jones, has been fighting accusations of ethical missteps related to phone hacking at its now defunct News of the World newspaper in London.

Much of the reporting on the phone-hacking scandal has been led by the Guardian.

Yesterday, it reported that the WSJ Europe had been channeling money through European companies to secretly buy thousands of copies of its own paper for as little as 5 cents per copy. This had the effect of inflating its circulation and misleading advertisers about the Journal's true circulation, the Guardian said.

Both the Guardian and WSJ Europe said the UK Audit Bureau of Circulation had signed off on the programme.

The partnership also involved a contract in which the Journal promised to publish articles that promoted ELP's activities, the Guardian said.

"The Guardian's inflammatory characterization of WSJE's former ELP circulation programme is replete with untruths and malign interpretations," the Journal said in an e-mailed statement. "

Andrew Langhoff resigned because of a perceived breach of editorial integrity, not because of circulation programmes, whose copies were certified by the ABC UK," it added.

The Guardian said a former employee, who was not identified, was a whistleblower who helped to reveal the circulation-boosting effort.

The whistleblower's position was made redundant in January after he raised concerns about the circulation circulation-boosting effort, the Guardian said.

"In fact, that employee was first investigated by the company because of concerns around his business dealings," the Journal said in its statement.

The Guardian said former Dow Jones chief executive Les Hinton, a close ally of Mr Murdoch, had been aware of the circulation effort. A Dow Jones spokeswoman declined to comment on Mr Hinton's involvement.

In an article on its website on Tuesday, the Journal said an internal investigation had found that Mr Langhoff had personally pressured two reporters into writing articles featuring ELP.

The agreement between the paper's circulation department and the Dutch firm, now expired, was not disclosed to readers of the articles, the Journal said in a note attached to the articles on its website.

ELP did not respond to e-mailed requests for comment.

"There is - and should be - an inviolable boundary between our commercial relationships and the content we produce," Mr Langhoff said in an internal memo on Tuesday.

"The perception that this boundary was crossed via a broad agreement between the WSJE Circulation department and a company called Executive Learning Partnership has been of great concern to me," he said.

The phone-hacking allegations, which have led to a number of arrests, have prompted critics to demand the resignation of Murdoch and other executives, including his son James.

News Corp has fiercely defended Murdoch and other directors saying it "vehemently disagrees" with critics of the company's practices.

Reuters