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From across the Pond, Murdoch looks even murkier

2012 March 18

Rupert Murdoch has a gambler’s nerve but his luck may now be running out, if a conversation I had with a group of American and British corporate lawyers is anything to go by. Across the pond they see Murdoch’s newspaper empire unravelling like a fraying sleeve.

Certainly it seems that whatever wily move the Dirty Digger makes to salvage his position at his scandal-hit British papers a new revelation pops up to deepen the crisis.

Murdoch first became alarmed when it became clear that his journalists had not merely been listening into celebrities’ mobiles in search of gossip column fodder but had hacked the phone of murdered schoolgirl Milly Dowler. A wave of public revulsion broke at the disclosure.

Rupert’s dramatic response took everyone by surprise. He closed down the world’s biggest newspaper, withdrew his long-standing bid to take full control of the money-spiining broadcaster BSkyB, and appeared before a parliamentary committee to announce himself “humble”.

But in the States, a US lawyer told me, it was felt Murdoch had not done enough to forestall a revolt by a third of shareholders at the annual meeting of his US holding company, News Corp.

Again it looked here in the UK that Murdoch had acted decisively after Scotland Yard revealed that as many as 5,795 people may have had their phones hacked. He set up an internal Management and Standards Committee which turned over 300 million emails and internal papers to police. It seemed a thoroughgoing response which led to the arrest of ten senior Sun journalists.

And it seemed Murdoch had pulled off a coup in hurriedly launching The Sun on Sunday to replace News of the World. But very next day the Leveson inquiry heard the gravest accusation yet against News International – that it had set up a secret payments system to bribe police and other public officials. He was snookered again.

There was something else. He lifted the suspension earlier imposed on the arrested hacks. By doing so, lawyers suggest, he brought himself within the provisions of the much stricter 2010 Bribery Act 2010 which had just come into force. That has implications back in America thanks to the Foreign Corrupt Practices Act which makes it illegal for US companies to bribe officials abroad.

The pendulum keeps swinging. Rupert’s son James stood down as executive chairman of News International and returned to New York. From there last week he sent an unsolicited letter to the parliamentary committee accepting responsibility for not uncovering wrongdoing at News International but insisting he had not misled parliament over the affair. The Murdochs are hoping to head off a damning report from the committee which could end their prospects of hanging on to even a minority share in BSkyB.

But their good news keeps being knocked away by bad. Just as Rupert was smiling at pulling off a deal to offload his stake in NDS – a US TV technology provider accused of computer hacking when James Murdoch was, again, on the board – he got news of the re-arrest of Rebekah Brooks on suspicion of conspiracy to pervert the course of justice.

“Each time Murdoch has amputated too little and too late,” one US corporate lawyer told me. In America the FBI has joined the US Treasury’s Foreign Corrupt Practices investigation into News Corp. The FBI has requested sight of all witness statements being taken by Scotland Yard. And it is investigating a Murdoch subsidiary in Russia to see whether “a culture of corruption” is shot through the entire company.

News Corp could probably weather the $2bn fine which investigators are talking about behind the scenes. But the Murdoch reputation might not survive.  And if Rupert, who is now aged 81, were to bow out there is no-one else high in News Corp with ink in their veins. That could mean the sale of all their London papers, which generate relatively little profit, but huge amounts of trouble.


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