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New allegations hit Rupert Murdoch's media empire

world Updated: Jul 12, 2011 09:25 IST
Agencies
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Media mogul Rupert Murdoch's News Corp could face probes by US authorities for possibly violating bribery laws, compounding the media mogul's problems after a phone-hacking scandal in Britain.

The Obama administration has significantly stepped up enforcement of anti-bribery laws in the last two years, winning big settlements from the likes of Daimler AG and BAE Systems Plc by focusing on bribes they paid to foreign officials to win lucrative contracts.

Bribes for business have represented the bulk of these anti-bribery cases brought by the Justice Department and the Securities and Exchange Commission. It is unclear whether US authorities would use scarce resources to probe News Corp over bribes allegedly paid to British police and other officials for information that became news scoops.

Employees of Murdoch's now-shuttered News of the World tabloid have been accused of hacking into personal voicemail and paying bribes. British authorities are investigating.

Legal experts in the United States said News Corp could face scrutiny on this side of the Atlantic Ocean as US officials probe whether any of the allegations, if proven true, violate the US Foreign Corrupt Practices Act.

That law makes it a crime for any company with US ties to bribe foreign officials to obtain or retain business.

British media outlets reported that News of the World reporters bought phone details for the royal family from a security officer. The Daily Mirror newspaper reported, citing an unidentified source, that News of the World reporters had also offered to pay a New York police officer to retrieve the private phone records of victims of the September 11 attacks.

At a minimum, the News Corp would be at risk for violating laws on accurate accounting reporting if the bribes were paid, according to legal experts. News Corp shares trade on Nasdaq and the company files its financial reports with the SEC.

"Would the Department of Justice go after them on a criminal basis? Hard to say. But the SEC definitely has a stake in this," said Alexandra Wrage, a legal expert on bribery who is the president of the firm TRACE, which helps companies comply with anti-bribery and anti-corruption laws.

One source familiar with the matter said News Corp had not received any query from US authorities.

Meanwhile, Rupert Murdoch's media empire was besieged Monday by accusations that two more of his British newspapers engaged in hacking, deception and privacy violations that included accessing former Prime Minister Gordon Brown's bank account information and stealing the medical records of his seriously ill baby son.

His reporters were also accused of paying Queen Elizabeth II's bodyguards for secret information about the monarch, potentially jeopardizing her safety.

If proven, the charges by rival newspapers would dramatically increase the pressure on top Murdoch executives so far largely insulated from the scandal.

The public outrage began a week ago over wrongdoing at the Murdoch-owned best-selling tabloid News of the World. It has since disrupted the media titan's plans to take over highly profitable satellite broadcaster British Sky Broadcasting and slashed billions off the value of his global conglomerate News Corp.

In Britain, the scandal has cast a harsh light on the unparalleled political influence of Murdoch's collection of newspapers and is taking an increasing toll on Prime Minister David Cameron. The conservative leader's former communications chief, Andy Coulson, was arrested last week in connection with alleged payoffs to police when he was editor of News of the World.

With political pressure rising, a final decision on the $12 billion (7.5 billion pound) BSKyB takeover was delayed after Murdoch withdrew a promise to spin off news channel Sky News. It was seen as a tactical move that forced the British government to refer the bid to authorities charged with enforcing anti-monopoly laws, delaying any decision for months.

Analysts said Murdoch's move amounts to a favor for Cameron, sparing the prime minister the possibility of an embarrassing defeat in the House of Commons.

The takeover will be spared scrutiny during a period of once-unimaginable public criticism of Murdoch's British operation, News International, fueled by a relentless stream of new allegations of wrongdoing at its properties.

London's Evening Standard newspaper reported that corrupt royal protection officers sold personal details about Queen Elizabeth II — including phone numbers and tips about her movements and staff — to journalists working for the Murdoch tabloid News of the World, raising questions over a breach in national security.

The scandal spread beyond the now-defunct tabloid, with British media reporting Monday that Brown was one of thousands whose privacy was breached by News International papers, saying that his personal details — including his bank account and his son's medical records — had been stolen by people working for the Sun and the Sunday Times. None of the media cited sources.

The Guardian, which set off the scandal last week with a report that the News of the World had hacked the phone of a missing 13-year-old girl who was later found murdered, said on its website that the Sun had illegally obtained details from the medical records of Brown's 4-year-old son Fraser, who has cystic fibrosis.

The Sun broke the story of Fraser's illness soon after he was born in 2006.

The Guardian reported that News International chief executive Rebekah Brooks, then editor of the Sun, contacted the Browns before publication to say that the paper had details from Fraser's medical file. The Browns were extremely distressed by the story, friends told the Guardian.

The Guardian said Brown was targeted over a more than 10-year period while he served as chancellor of the exchequer and prime minister, and that some of his financial information was obtained by hacking into his accountant's computers. It said Scotland Yard contacted Brown and his wife, Sarah, to tell them their details had been found in evidence collected by the special inquiry into phone hacking at the News of the World.

Brooks, who also edited the News of the World in 2002 when journalists there allegedly hacked murder victim Milly Dowler's cell phone, has since been promoted to head of News International, News Corp.'s U.K. newspaper division.

Murdoch has publicly stood by her even while closing down News of the World in response to the allegations. Brooks has denied knowledge of any wrongdoing.

Media watchers accuse Murdoch of offering up the more than 200 News of the World journalists as a sacrifice to save Brooks.

A spokeswoman for Brown said Monday that the former prime minister was shocked by the alleged "criminality and the unethical means by which personal details have been obtained" about his family.

His wife, Sarah, tweeted that the information was very personal and it was "really hurtful if all true."

News International spokeswoman Daisy Dunlop said the company had taken note of the accusations and that in order to investigate the company asks "that all information concerning these allegations is provided to us."

Other newspapers reported that Brown's bank account was broken into by a con man acting for Murdoch's Sunday Times.

The Evening Standard report said that News Corp. executives discovered a series of e-mails indicating that Murdoch employees made payments to members of Scotland Yard's royal and diplomatic protection squad in return for details about the queen and her entourage.

The Evening Standard cited unidentified "sources" without saying how they would be in a position to know. Buckingham Palace declined comment on the reports.

"The events of last week shocked the nation," Culture Secretary Jeremy Hunt told lawmakers Monday. He said Britain's proud press tradition had been "shaken by the revelation of what we now know to have happened at the News of The World."

The 80-year-old Murdoch arrived in the U.K. on Sunday to take charge of the widening crisis.

Legal experts said Monday it is possible Murdoch's U.S. companies might face legal actions because of the shady practices at the News of the World, his now defunct British tabloid. In the U.S., Murdoch owns Fox News, The Wall Street Journal and the New York Post, among other holdings.

They said Murdoch's News Corp. might be liable to criminal prosecution under the 1977 Corrupt Foreign Practices Act, a broad act designed to prosecute executives who bribe foreign officials in exchange for large contracts.

A group of News Corp. shareholders already have sued the company over the phone-hacking scandal, accusing News Corp. of large-scale governance failures. The lawsuit was filed late Friday in Delaware Chancery Court by shareholders led by Amalgamated Bank, and several municipal and union pension funds joined in.

The shareholders own less than 1 percent of News Corp.'s stock combined. The lawsuit is part of an amended complaint. The shareholders are also challenging News Corp.'s acquisition of Shine Group Ltd., founded by Murdoch's daughter. News Corp. didn't immediately return messages for comment on the lawsuit.

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