Former New York City Schools Chancellor Joel Klein sat behind Rupert Murdoch and his son, James, as the media mogul and his protege were being grilled by parliament Tuesday.
The familiar face to New Yorkers who joined News Corp. last year is spearheading an internal review of the embattled company facing allegations of phone hacking by its now-defunct News of the World tabloid.
Here are five reasons the former chancellor was likely tapped to lead the internal review:
- He was the former head of the U.S. Justice Department's anti-trust unit under the Clinton Administration, giving him a rare view of corporations and government. He was in charge of the case to break up Microsoft in the 1990s.
- Murdoch trusts Klein. He appointed Klein to the board of News Corp., along with making him an executive vice president in charge of education technology ventures in November 2010.
- Klein is still new to News Corp. He and Murdoch aren't close friends, but are acquaintances who got to know each other better through Murdoch's donations to the city's public schools. He's independent enough to be trusted in this role, according to Rodgin Cohen, senior chairman at Sullivan and Cromwell, who was heavily involved in counseling banks during the financial crisis: "In a crisis situation where the client feels and probably is being besieged, you very much need somebody with sound and whole judgment and is unafraid to tell the client what the realities of the situation are."
- The scandal involves a deep knowledge of government. Though the main investigation focuses on British tabloid reporters, News Corp. and its executives could face a potential prosecution under the U.S. Foreign Corrupt Practices Act, if certain laws were broken overseas. It's already been reported that News Corp. employees allegedly paid $170,000 to the British police to obtain information not available to the public to give the company's tabloid reporters a competitive edge. Because some of the allegations against News Corp. are several years old, the company would have had to fully disclose its potential risks in filings with the Securities and Exchange Commission to inform its stockholders. And the FBI is probing allegations that News Corp journalists hacked into the voice mail of September 11, 2001, victims and their families.
- However, there are limits to Klein's role. He's conducting an internal review and everyone reporting to him is an employee of News Corp. The company set up a new management and standards committee in London, but it also reports to Klein, and therefore management. When companies are in trouble, often their independent directors will conduct their own investigation (separate from management) with outside law firms that they hire specifically to ensure objectivity. This week, it was revealed that News Corp.'s independent directors retained the New York law firm Debevoise & Plimpton. It's unclear exactly what the firm will be doing. Attorney Lanny Davis, an expert in crisis management who was special counsel to former President Bill Clinton, said of News Corp. that "the only way to get this crisis behind them is transparency."