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News Corporation Scandal Continues To Grow

David Carr of The New York Times has published a great article about News America – you should really read the whole thing, if you are at all interested, but I’ve excerpted a few paragraphs below

Alley Garbage - by Law
Alley Garbage – by Law

I’ve been paying close attention to the escalating Rupert Murdoch scandal because not only is News Corporation and its subsidiaries like Fox News and the New York Post, and increasingly the Wall Street Journal, an insult to liberal, fair-minded citizens everywhere, but also I have some direct dealings with News America Marketing, the in-store marketing division of Murdoch’s empire. Let’s just say they were not pleasant dealings, and cost my company significant loss of income. I have met dozens or more ex-News America employees, most are decent enough folks, on the surface anyway, but the anti-competitive cut-throat behavior of News America emanates from the top.

Legal Tender - London

Legal Tender – London

David Carr of The New York Times has published a great article about News America – you should really read the whole thing, if you are at all interested, but I’ve excerpted a few paragraphs below:

“Bury your mistakes,” Rupert Murdoch is fond of saying. But some mistakes don’t stay buried, no matter how much money you throw at them. Time and again in the United States and elsewhere, Mr. Murdoch’s News Corporation has used blunt force spending to skate past judgment, agreeing to payments to settle legal cases and, undoubtedly more important, silence its critics. In the case of News America Marketing, its obscure but profitable in-store and newspaper insert marketing business, the News Corporation has paid out about $655 million to make embarrassing charges of corporate espionage and anticompetitive behavior go away.

That kind of strategy provides a useful window into the larger corporate culture at a company that is now engulfed by a wildfire burning out of control in London, sparked by the hacking of a murdered young girl’s phone and fed by a steady stream of revelations about seedy, unethical and sometimes criminal behavior at the company’s newspapers.

So far, 10 people have been arrested, including, on Sunday, Rebekah Brooks, the head of News International. Les Hinton, who ran News International before her and most recently was the head of Dow Jones, resigned on Friday. Now we are left to wonder whether Mr. Murdoch will be forced to make an Abraham-like sacrifice and abandon his son James, the former heir apparent.

The News Corporation may be hoping that it can get back to business now that some of the responsible parties have been held to account — and that people will see the incident as an aberrant byproduct of the world of British tabloids. But that seems like a stretch. The damage is likely to continue to mount, perhaps because the underlying pathology is hardly restricted to those who have taken the fall.

As Mark Lewis, the lawyer for the family of the murdered girl, Milly Dowler, said after Ms. Brooks resigned, “This is not just about one individual but about the culture of an organization.”

(click here to continue reading For News Corporation, Troubles That Money Can’t Dispel – NYTimes.com.)

SymphonyIRI
SymphonyIRI

For instance, we’ve written extensively about this case:

In 2009, a federal case in New Jersey brought by a company called Floorgraphics went to trial, accusing News America of, wait for it, hacking its way into Floorgraphics’s password protected computer system.

The complaint summed up the ethos of News America nicely, saying it had “illegally accessed plaintiff’s computer system and obtained proprietary information” and “disseminated false, misleading and malicious information about the plaintiff.”

The complaint stated that the breach was traced to an I.P. address registered to News America and that after the break-in, Floorgraphics lost contracts from Safeway, Winn-Dixie and Piggly Wiggly.

Much of the lawsuit was based on the testimony of Robert Emmel, a former News America executive who had become a whistle-blower. After a few days of testimony, the News Corporation had heard enough. It settled with Floorgraphics for $29.5 million and then, days later, bought it, even though it reportedly had sales of less than $1 million.

There were more damaging allegations about to be put into the public record, so News America just paid off the owners of Floorgraphics. I’m only repeating what I’ve heard second-hand, but there were some unmistakably criminal actions conducted by News America employees, so no wonder the lawsuit ended quickly.

News America paid more money to other competitors rather than have the embarrassment of public trials:

But the problems continued, and keeping a lid on News America turned out to be a busy and expensive exercise. At the beginning of this year, it paid out $125 million to Insignia Systems to settle allegations of anticompetitive behavior and violations of antitrust laws. And in the most costly payout, it spent half a billion dollars in 2010 on another settlement, just days before the case was scheduled to go to trial. The plaintiff, Valassis Communications, had already won a $300 million verdict in Michigan, but dropped the lawsuit in exchange for $500 million and an agreement to cooperate on certain ventures going forward.

and Murdoch’s minion, Paul Carlucci was a News Corporation man through and through. Meaning he was slimy, corrupt, and full of hatred towards liberals:

News America was led by Paul V. Carlucci, who, according to Forbes, used to show the sales staff the scene in “The Untouchables” in which Al Capone beats a man to death with a baseball bat. Mr. Emmel testified that Mr. Carlucci was clear about the guiding corporate philosophy.

According to Mr. Emmel’s testimony, Mr. Carlucci said that if there were employees uncomfortable with the company’s philosophy — “bed-wetting liberals in particular was the description he used” Mr. Emmel testified — then he could arrange to have those employees “outplaced from the company.”

Clearly, given the size of the payouts, along with the evidence and testimony in the lawsuits, the News Corporation must have known it had another rogue on its hands, one who needed to be dealt with. After all, Mr. Carlucci, who became chairman and chief executive of News America in 1997, had overseen a division that had drawn the scrutiny of government investigators and set off lawsuits that chipped away at the bottom line.

So what became of him? Mr. Carlucci, as it happens, became the publisher of The New York Post in 2005 and continues to serve as head of News America, which doesn’t exactly square with Mr. Murdoch’s recently stated desire to “absolutely establish our integrity in the eyes of the public.”

Albion
Albion

And meanwhile, the corrupt culture of Rupert Murdoch’s organization is being slowly exposed in England. Rebekah Brooks hasn’t yet been formally charged, but the British system operates a bit differently:

Ms. Brooks has not yet been formally charged, but it is significant that she was questioned in connection with two separate investigations. One, called Operation Weeting, is examining allegations of widespread phone hacking at The News of the World, the tabloid at the center of the scandal, where Ms. Brooks was editor from 2000 to 2003. The other is Operation Elveden, which is looking into charges that News International editors paid police officers for information.

…The arrest was a shock to the News Corporation, the parent company of News International, and the other properties in Mr. Murdoch’s media empire, which is reeling from the traumas of last week: the forced withdrawal of its cherished $12 billion takeover bid for British Sky Broadcasting and the resignations not only of Ms. Brooks but also of Les Hinton, a longtime Murdoch ally and friend who was the chairman of Dow Jones and the publisher of The Wall Street Journal.

Speaking of Ms. Brooks, an official at News International said: “When she resigned on Friday, we were not aware that she would be arrested by the police.” Another person briefed on the News Corporation’s plans said that on Friday, when the company was preparing to announce her exit and the departure in New York of Mr. Hinton, the possibility of her arrest was not discussed.

Investor unease about the scandal appeared to be affecting News Corporation shares, which were down nearly 6 percent in early Monday trading on the Australian exchange in Sydney.

Until Ms. Brooks arrived at a London police station by prearranged appointment on Sunday, she believed she would merely be helping the police as a witness, her spokesman said.

“She was very surprised, I think, to then be arrested,” said the spokesman, David Wilson, chairman of the Bell Pottinger public relations firm. Mr. Wilson said it all happened so quickly that both her lawyer and he were brought in to handle her case over the weekend.

(click here to continue reading Cameron to Address Parliament in Emergency Session – NYTimes.com.)

Could Murdoch be jettisoned by his own company? Probably not, though never say never. Just ask Steve Jobs…

Rupert Murdoch could be facing a coup. If a recent report from Bloomberg is correct, at least some of the independent directors of News Corp. have, due to the phone hacking scandal that is engulfing the company and taking down some of its seniormost executives, begun asking “whether a leadership change is needed.” Fortunately for Murdoch, he’s built himself something of a firewall. Of the 16 voting members currently on the board, three are Murdoch family members—there’s Rupert himself, of course, along with his sons James and Lachlan—and another four are current News Corp. executives. (Elisabeth Murdoch, whose Shine Group was just purchased by News Corp., is expected to join the board as a voting member at some point though the current scandal may delay that move a bit.) But even those seven presumably reliable votes don’t get Rupert Murdoch an automatic majority. So he’s stacked the rest of the board with loyalists and puppets. . Many have ties with Murdoch that stretch back decades—and involve mutually beneficial financial transactions.

So he’s stacked the rest of the board with loyalists and puppets. . Many have ties with Murdoch that stretch back decades—and involve mutually beneficial financial transactions. “It’s an open secret, a joke inside News Corp., that the board is designed to be obsequious to Rupert,” a source close to the company says.

(click here to continue reading Could Rupert Murdoch’s Handpicked Board Turn Against Him? | Adweek.)

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