Murdochs to be questioned in UK; FBI opens review

JILL LAWLESS

ROBERT BARR

Asso­ci­ated Press

LONDON — Rupert Mur­doch and his son James first refused, then agreed Thurs­day to appear before U.K. law­mak­ers inves­ti­gat­ing phone hack­ing and police bribery, while in the U.S., the FBI opened a review into alle­ga­tions the Mur­doch media empire sought to hack into the phones of Sept. 11 victims.

Those two devel­op­ments — and the arrest of another for­mer edi­tor of a Mur­doch tabloid — deep­ened the cri­sis for News Corp., which has seen its stock price sink as investors ask whether the scan­dal could drag down the whole company.

Mur­doch defended News Corp.’s han­dling of the scan­dal, say­ing it will recover from any dam­age caused by the phone-hacking and police bribery alle­ga­tions. The 80-year-old told The Wall Street Jour­nal — which is owned by News Corp. — that he is “just get­ting annoyed” at all the recent neg­a­tive press.

He also dis­missed reports he would sell his U.K. news­pa­pers to stem the scan­dal, call­ing the sug­ges­tion “pure and total rubbish.”

A law enforce­ment offi­cial in New York said the FBI was look­ing into alle­ga­tions that employ­ees of News Corp. tried to hack into the tele­phones of vic­tims of the Sept. 11, 2001, ter­ror­ist attacks in the United States.

The deci­sion to step in was made after U.S. Rep. Peter King, Sen. Jay Rock­e­feller and sev­eral other mem­bers of Con­gress wrote FBI Direc­tor Robert Mueller demand­ing an inves­ti­ga­tion, said the offi­cial, who spoke on con­di­tion of anonymity because he wasn’t autho­rized to speak publicly.

The alle­ga­tion that Mur­doch papers may have tar­geted 9/11 vic­tims came from the rival Daily Mir­ror, which quoted an anony­mous source as say­ing an uniden­ti­fied Amer­i­can inves­ti­ga­tor had rejected approaches from uniden­ti­fied jour­nal­ists who showed a par­tic­u­lar inter­est in British vic­tims of the ter­ror attacks. It cited no evi­dence that any phone had actu­ally been hacked.

There was no indi­ca­tion mem­bers of Con­gress had infor­ma­tion beyond the Mir­ror report. King spokesman Kevin Fog­a­rty said the congressman’s let­ter “was based on what was in the pub­lic record and that those alle­ga­tions were not denied.”

A fed­eral law enforce­ment offi­cial said the FBI rou­tinely car­ries out reviews when an issue like the Mur­doch scan­dal becomes highly vis­i­ble, and par­tic­u­larly when the mat­ter involves a request from Con­gress. The offi­cial spoke on con­di­tion of anonymity because of the sen­si­tiv­ity of the matter.

The FBI’s New York office hasn’t com­mented and there was no imme­di­ate response Thurs­day from News Corp. or the U.S. attorney’s office in Manhattan.

News Corp. stock fell more than 3 per­cent on the news.

Ana­lysts said News Corp. exec­u­tives could be at risk of being found crim­i­nally or civilly liable under fed­eral wire­tap­ping and state pri­vacy laws if inves­ti­ga­tors find that Amer­i­can cit­i­zens were tar­geted. The com­pany could also face sanc­tions in the U.S. for phone hack­ing that orig­i­nated in Britain under the 1977 For­eign Cor­rupt Prac­tices Act.

Still, experts said they doubt such actions could jeop­ar­dize News Corp.’s U.S. news­pa­per hold­ings such as The Wall Street Jour­nal or result in the revo­ca­tion of the license it needs to own Fox TV sta­tions in America.

“I think we’re a long way from that,” said Philip Raible, a part­ner at New York law firm Rayner Rowe LLP, which spe­cial­izes in cor­po­rate law affect­ing media companies.

News Corp. has been in cri­sis mode in the U.K. since a rival news­pa­per reported last week that its News of the World tabloid hacked into the phone of teenage mur­der vic­tim Milly Dowler in 2002 and may have impeded a police inves­ti­ga­tion into the 13-year-old’s disappearance.

The com­pany closed the 168-year-old News of the World and aban­doned a bid for con­trol of the lucra­tive British Sky Broad­cast­ing net­work in a so far fruit­less attempt to halt the cri­sis, which has exploded with rev­e­la­tions that as many as 4,000 peo­ple may have been hack­ing targets.

U.S.-based media indus­try ana­lyst Richard Mac­Don­ald said the scan­dal was under­min­ing Murdoch’s 30-year bid to con­vince investors that News Corp. was “a blue chip diver­si­fied media company.”

“With­out ques­tion, the rev­e­la­tions and sub­se­quent penal­ties either crim­i­nal, civil or strate­gic will impair earn­ings per­for­mance, earn­ings mul­ti­ples and asset value for who knows how long,” he said.

British law­mak­ers took the dra­matic step Thurs­day of issu­ing a sum­mons to the once all-powerful Mur­dochs after the father and son said they would not appear before Parliament’s Cul­ture, Media and Sport Com­mit­tee on Tuesday.

Within hours, the Mur­dochs made room in their sched­ules after all. It was another vic­tory for politi­cians over the Mur­dochs — some­thing that would have been all but unthink­able just two weeks ago.

It is highly unusual for wit­nesses to refuse to appear before par­lia­men­tary com­mit­tees, which quiz every­one from busi­ness lead­ers to prime min­is­ters on a wide range of issues.

Rebekah Brooks, who heads the company’s British news­pa­per divi­sion, did agree to tes­tify. She was edi­tor of the News of the World at the time of some of the hack­ing, but says she knew noth­ing about it.

Mur­doch began his media career in Aus­tralia in 1952 after inher­it­ing The News news­pa­per after the death of his father, and has built News Corp. into one of the world’s biggest media groups, with mar­ket cap­i­tal­iza­tion of $46 bil­lion. Assets include Fox News, the 20th Cen­tury Fox movie stu­dio, The Wall Street Jour­nal, The New York Post and three news­pa­pers in Britain — down from four with the death of the News of the World.

Mur­doch con­trols 40 per­cent of News Corp.’s vot­ing stock, mostly through a fam­ily trust.

For decades, Murdoch’s media empire wielded mas­sive influ­ence over British law­mak­ers. Now Par­lia­ment has flexed its mus­cles in a dis­play of free­dom some are call­ing the “British Spring.”

Busi­ness Sec­re­tary Vince Cable said Thurs­day the fast-moving events were “a bit like the end of a dictatorship.”

James Mur­doch ini­tially told the Cul­ture, Media and Sport Com­mit­tee he would be will­ing to appear Aug. 10 or 11, with­out explain­ing why he was not free on Tues­day. Rupert Mur­doch said he would not appear at all, offer­ing instead to speak before a sep­a­rate inquiry ini­ti­ated by Prime Min­is­ter David Cameron and led by a judge.

Defi­ance of a par­lia­men­tary sum­mons is ille­gal, and can in the­ory be pun­ished with a fine or jail time. In prac­tice, such sanc­tions have been all but unknown in mod­ern times; the House of Com­mons last pun­ished a non­mem­ber in 1957. And it was not imme­di­ately clear whether Par­lia­ment could have enforced its sum­mons on Rupert Mur­doch, a U.S. citizen.

Com­mit­tee chair­man James Whit­ting­dale said he espe­cially wanted to ques­tion James Mur­doch, who said last week that Par­lia­ment had been mis­led by peo­ple in his employ­ment, with­out his knowledge.

“We felt that to wait until August was unjus­ti­fi­able,” Whit­ting­dale said.

News Corp. faced more pres­sure Thurs­day with the arrest of for­mer News of the World exec­u­tive edi­tor Neil Wal­lis — the ninth per­son involved with the News of the World to be detained by police prob­ing phone hacking.

Police said Wal­lis, 60, was arrested on sus­pi­cion of con­spir­ing to inter­cept communications.

He was News of the World deputy edi­tor between 2003 and 2007 under Andy Coul­son, who resigned from the paper when a reporter and a pri­vate detec­tive were jailed in Jan­u­ary 2007 for hack­ing into the phones of royal aides.

Wal­lis was exec­u­tive edi­tor until 2009; Coul­son was Cameron’s com­mu­ni­ca­tions direc­tor from 2007 until Jan­u­ary, when he quit as the hack­ing scan­dal resur­faced. He was arrested on July 8.

In another sign of what Cameron has called the overly cozy rela­tion­ship between politi­cians, the media and the police, the Met­ro­pol­i­tan Police con­firmed that Wal­lis had been employed as a part-time con­sul­tant to the force.

Wal­lis’ firm was employed to pro­vide “strate­gic com­mu­ni­ca­tion advice” for two days a month while its own staffer was on med­ical leave, the Met­ro­pol­i­tan Police said. The con­tract ended in September.

Media ana­lyst Claire Enders said News Corp. might be tempted to sell its other British news­pa­pers — The Sun, The Times and the Sun­day Times.

That is an out­come favored by some ana­lysts and share­hold­ers, who see the papers as finan­cially incon­se­quen­tial and rep­u­ta­tion­ally bur­den­some — as well as by many British politicians.

“The politi­cians want the Mur­dochs’ role in pub­lic life to be greatly dimin­ished,” Enders said. “They would like them to move to New York and stay there.

“Since the papers have no polit­i­cal value any more, then their eco­nomic value must be ques­tioned as well.”

Posted by AP News on Jul 14 2011. You can follow any responses to this entry through the RSS Feed. Comments can be made below.