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Murdoch May Face Legal Challenges in U.S. Over Hacking Scandal

Tuesday, July 19, 2011

Rupert Murdoch's publicly traded News Corp. may face multiple legal challenges in the U.S. amid the phone-hacking scandal that has rattled the media mogul's empire, according to legal experts.

Murdoch and his son James both reiterated to parliament during hearings on the blossoming scandal Tuesday that News Corp. has vowed to cooperate with law enforcement probes over claims that reporters at the now-defunct News of the World hacked voice mail messages and others in their employ bribed police.

But that does not mean they are in the clear in the U.S., experts say.

"There are a whole lot of ways they maybe in trouble," said Joel Seligman, the president of Rochester University and a nationally recognized expert on corporate governance and the Securities Exchange Commission.

"Whether they are will be determined ultimately by two things: facts and circumstance and what is called the culpability standard. Were the relevant individuals aware of something wrong going on and failing to correct it or reckless in disregarding this?"

Over the years as U.S. multinationals have increased their global reach, legal experts say the Department of Justice has increasingly relied on the Foreign Corrupt Practices Act to try and project U.S. anti-bribery standards into countries where such behavior is a business as usual.

New Jersey Senator Frank Lautenberg  said he wants the Department of Justice and the Securities Exchange Commission to investigate whether Murdoch's News Corp., through a British subsidiary, violated what's called the U.S. Foreign Corrupt Practices Act by making payments to British police officials for access to non-public information.  

"Any American Corporation that offers a bribe to a foreign official is creating a violation of law and it could ultimately mean jail or certainly fines for that kind of behavior," Lautenberg told WNYC in a phone interview. 

Attorney General  Eric Holder has said he's reviewing Lautenberg's request.

Although the phone hacking scandal exploded on the U.S. media scene just recently, it has had a long narrative arc on the other side of the Atlantic. There have been criminal convictions in the case, and News Corp. has paid out large sums to settle out-of-court court claims with victims of the hacking scandal.

Professor James Cox, who teaches Corporate and Securities Law at Duke University, said even boilerplate representations made over the years by News Corp. that describes itself as a company that is fully compliant with all relevant laws like the U.S. Foreign Corrupt Practices Act could haunt itself and the Murdochs.

"There is case law that these so-called 'We are clean' statements are materially misleading," Cox said. "So the real issue is what News Corp. said about how they and their publishing empire have carried out their business. That would be one area where both SEC investigators and stockholders ... will be looking at closely to see if they have a claim."

There have been legal papers filed suggesting that at least two law firms are pursing a case on behalf of stockholders who allege the value of their News Corp stock was undermined because they claim the management at News Corp. engaged in a cover-up of the hacking scandal. 

In papers filed on behalf of the Lewis Wilder Revocable Trust, attorney Arthur Abbey claims that in the aftermath of the arrest and conviction in 2007 of News of the World private detective Glenn Mulcaire and News of the World Royal editor Clive Goodman that the company conducted a phony internal review.

In fact, not only had defendants not done a "full rigorous internal inquiry into the hacking issues but they set out on a course of conduct to conceal and cover up the illegal activity" that included as many as 4,000 victims, Abbey wrote.

Investors, law enforcement and the SEC are not the Murdochs only potential problems.

Professor Ellen Goodman, who teaches communications law at Rutgers University, said that in rare instances, the Federal Communication Commission can lift a television broadcast license from a licensee if they have been found guilty of a felony or have not been truthful in their filings with the FCC or other regulators.

Murdoch currently has  27 local FCC TV licenses. 

"If it were shown that there had been violations of the law by the company that could be traced back to him and to News Corp. then I think there would be definitely a lot of dogs barking up that tree," Goodman said in a phone interview.

Goodman said one potential precedent could be found in the 1980s when the FCC broke up the legendary broadcasting company RKO that was owned by General Tire.

RKO was found to not be forthcoming with the FCC and General Tire, the parent company, was flagged for making illegal campaign contributions and making overseas bribe payments. One of the stations lost in that action was New York's own WOR-TV,  now part of the  Murdoch holdings.

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Comments [5]

robert

Doesn't this crook own Fox News?Can he be put in jail for dumbing down the consevative wacko's who actually believe that Fox is a fair,balance and courageous news outlet.What a joke!!!

Dec. 26 2012 01:55 PM

Banana Republic, spot on. UK has been in decline for a long time and EU - a technocrats wet and somewhat absurd dream - as a whole is in quite bad shape - the economy, politics and democracy. The spirit.

I voted no to EU and will definitely vote no to the euro, but they will have the vote when its a deep crisis and play on peoples fear. Swedish politics is full of scare mongers and nobody knows who the politicians in Brussels are or what they do. Its Kafka light, so far. In reality Germany and France decide everything of importance.

Swedish media is okay and probably not very corrupt, but 90% is center-right = neoliberal wich might be surprising since Sweden, on WNYC for instance, is described as a well functioning socialist relic, a VOLVO. Our moguls are more cultivated and discreet than Murdoch and Berlusconi. For obvious reasons media consentration is a non-subject.

The only hope for USA and Europe is figuring out what the alternatives are to the frightfully unimaginative neo-liberalism that makes the careers of persons like Murdoch and Berlusconi inevitable.

Jul. 20 2011 03:31 PM
Alison

Perhaps it's time to revisit the 2008 State Department report about unauthorized passport access?

It was described at the time in the press as "heavily redacted"; however, Congressional members saw the whole report.

Mukasey's Justice was supposed to conduct their own investigation...

...and wouldn't you know it, just yesterday Viet Dinh hired him and Mary Jo White to advise News Corp directors !!!

Jul. 20 2011 01:51 PM
nuff said from ny

Shouldn't you also be looking at when Newspapers and reporters are actually being paid to promote an agenda and print op-eds that are are really political statements that are bought and paid for? The most egregious appears to be "Education Reform". The NY Times reported in Mar 2011 that many reporters were being paid as much as $500,000/y­ear by Bloomberg and/or affiliated entities. If that is true are the newspapers­, in particular the NY Post and NY Daily News, still entitled to site source confidenti­alityu et al for paid political op-eds? At what point will the Times itself finish the coverage of this subject now that the corruption in the Murdoch papers is on the front pages? Is there criminalit­y in paying newspapers for stories or should there be disclaimer­s attached identifyin­g who is really responsibl­e for the storry? At this point could the cozy relationsh­ip between Bloomberg, Murdoch, Zuckerman, Gates, Tisch and Michele Rhee end up being a scandal of epic proportion­s or are their actions legal? Is it even legal to pay reorters that work for a newspaper, it sure seems like an ethics violation? Have the reporters classified themselves as independen­t contractor­s? If so , who is paying the papers , and who and how much is being paid to carry the story?Thes­e are questions I hope you will explore in your follow-up articles--­-just a thought

Jul. 20 2011 10:59 AM
Rick from Coonecticut Coast

I remember the big hoopla 30 years ago when he bought the Times of London. Many people knew his reputation as an unethical gutter sleazeball and now after he has supported Labor and Conservative candidates, bribed and blackmailed Scotland Yard, M.P.'s, Policeman he has reduced Great Britain to a Banana Republic, truly a sad day. Who knows what the FBI investigation will show here?

Jul. 20 2011 10:42 AM

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