What damage could Rebekah Brooks do to News Corp?

By Felix Salmon
July 8, 2011
Bribery Act of 2010 finally became law in the UK.

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The implosion of the News of the World, and of News Corp’s bluster surrounding hacking and bribery allegations, comes less than a week after the Bribery Act of 2010 finally became law in the UK. The Bribery Act had an unbelievably long gestation — a distant relation of mine, Cyril Salmon, headed up the Salmon Commission on Standards in Public Life and put forward recommendations on the subject as long ago as 1976.

Today, the Bribery Act — which finally came into force on July 1 — is considered the toughest anti-corruption legislation in the world. And it’s one of the few pieces of UK legislation under which a company itself can be convicted of criminal activity, as opposed merely to its executives individually. There’s a new corporate offense now, of failure to prevent bribery, which is relatively easy to prove. If News International executives are ever found approving bribes to the UK police, then a conviction under the Bribery Act would be extremely easy.

For the purposes of the current investigation, however, News International looks as though it’s in the clear. The alleged bribes all happened long before July 1 of this year, and the act isn’t retroactive. The UK doesn’t have an equivalent to RICO, in the US, where a corporation’s very existence can hang in the balance if it’s convicted of corporate criminal acts. And even the tough new Bribery Act is relatively toothless in that regard: the worst that can happen is generally that the company in question has to pay a fine. (Many thanks to Barry Vitou of Pinsent Masons for helping me to understand the Bribery Act; I should emphasize that the speculation you’re about to read about News International is very much mine and not his.)

News International, then, is extremely unlikely itself to be convicted of any crime, and if it is convicted, then News Corporation will surely be able to afford any fine. Which in its own way gives News International the leeway to continue acting as a criminal corporation would — not in terms of bribing police officers, perhaps, but more in terms of protecting the people who know where the bodies are buried.

One thing that’s undeniably true about the troika of Les Hinton, Rebekah Brooks, and James Murdoch — and Rupert Murdoch himself, for that matter — is that all of them are extremely smart and capable executives. I personally believe that all of them knew about the hacking and the bribery — and it’s also fair to assume that if Hinton or Brooks were fired and decided to tell everything to the police, they could do enough damage to the Murdochs that News Corp might easily be declared not fit and proper to own a media company in the UK. (There is some precedent for former Murdoch editors telling expensive tales out of school; think of Judith Regan.)

In the grand scheme of things, News International is a very small part of the News Corp conglomerate; it could disappear entirely and the financial impact on News Corp would be small. The political clout which News International gives News Corp in the UK, however, is extremely valuable. And if malfeasance at News International ends up poisoning News Corp’s ambitions with respect to BSkyB, or results in criminal charges against either of the Murdochs, then at that point this scandal really could do serious damage to one of the world’s most powerful and notorious media organizations.

So it’s easy to see one reason why Rebekah Brooks might still have her job: News wants her on the inside, working for them, rather than on the outside, turning witness against them. And the same goes for Les Hinton, too. I still can’t really believe that Brooks is going to survive this scandal. But I can easily believe that the Murdochs will fight very hard indeed to try to keep her in her current position, at least until the police investigation is over.

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13 comments so far

If companies are going to be fined as a result of criminal convictions, it seems faintly ridiculous that the fines should be preset amounts. This would mean that, for instance, a small firm might face a fine that’s essentially a corporate death penalty, when a large firm convicted of the same crime could easily shrug it off. Shouldn’t it be based on a percentage of revenue or profit or assets or something like that?

Posted by jfruh | Report as abusive

If corporations have the rights of personhood they should be subject to the laws of people too. Fraud, bribery, embezzlement, perjury, invasion of privacy, hacking, etc… if Julian Assange can be made to go away for doing a service, hopefully they make these people go away forever!

Posted by CDN_Rebel | Report as abusive

Word’s bubbling up that the bribes could be prosecuted in the US under the Foreign Corrupt Practices Act (FCPA). I doubt very much it’ll happen, but if you’d told me a week ago that the Murdoch empire would be reeling in a few days’ time I’d have smiled and backed away from you slowly — so who knows? US and UK cultures a extremely different, but a fish rots from the head: I’m certain that some of Murdoch’s organs in the US have engaged in similar practices, though I doubt they’ve done it so systematically. (Disagree if you will, but at some point you’ll need to appeal to Roger Ailes’s scruples — good luck with that…) Also, these are electronic communications, after all: it’s quite possible that some of Murdoch’s UK people have hacked into the phones of US citizens on occasion. Whether or how they might have shared any juicy info with their colleagues across the pond, again, who knows? If so, I’d expect that that kind of info-sharing would flow up and down through Murdoch’s empire, not laterally; and though RM himself probably wouldn’t want to expose himself directly, I can’t see him objecting (what, on principle?!) if it served his political ends. That’s not strictly related to the FCPA, of course; rather, it’s just an effort to think through some of the issues that might bear on the any US governmental interest in the scandal — and you can rest assured there’s some.

Posted by someoneorother | Report as abusive

America’s RICO should have been called upon in the target-rich environment following the Collapse of 2007/2008, but it was not, in spite of the angry demands of many American citizens.

Excalibur was useless while it was stuck in a stone. It required someone with the courage and moral authority to pluck it out and wield it. Sadly, America was fresh out of great leaders just when we most needed one.

I hope the UK fares better with its Bribery Act.

Posted by breezinthru | Report as abusive

It’s too easy just to blame Brooks. Blame the PCC for not regulating. Blame Murdoch himself – he is the proprietor after all. She’s being used as a convenient scapegoat. Take a look at my view at http://dasteepsspeaks.blogspot.com/2011/ 07/news-is-screwed.html

Posted by mjs2781 | Report as abusive

Murdoch’s Empire is built on the same principle as William Randolph Hearst’s: sleaze sells big. Murdoch’s entire global operation exists to exploit that weakness of human nature. You would expect the UK government especially at the highest levels to be too dignified to openly support that kind of trash. Word is that’s how Cameron pulled off the election. You are what you sleep with ..

Posted by Woltmann | Report as abusive

Rupert’s scandal will stretch over the globe.

Wait and see how the dominoes start to fall.

Posted by DillyWacker | Report as abusive

I don’t buy at all the idea that Rebekah Brooks is just a scapegoat — although most of the people who lost their jobs at the News of the World were certainly scapegoats.

Like Murdoch (Rupert and James), she will claim that she did not know about the vicious campaign of phone hacking and the bribes paid to police officers (including very senior police officers), but I believe this has gone too far for the wrongdoers to wriggle out of it this time. A prosecution of James Murdoch under the US Foreign Corrupt Practices Act, for example, is looking like very real possibilty.

The Fall of the House of Murdoch cannot happen too soon for me — they are a global public menace. Good riddance !!

Posted by Mike113 | Report as abusive

Brooks, and possibly/probably James Murdoch are toast. In the end, ‘willful blindness’ will get them, if nothing else does.

Brooks most sensible personal strategy now would be to negotiate some sort of a voluntary retirement with Rupert and go. She has absolutely no career left (nor a social life for that matter), and she is rapidly running out of leverage.

Posted by seanmatthews | Report as abusive

@breezinthru angry demands of many American citizens? That sounds like an alternate reality event. Someone will perhaps make a movie where the banksters are jailed because the America people wrote letters, protested and boycotted their representatives and banks until it happened.

Are you talking about a few people bantering back and forth in tweets to themselves or the comments on blogs? yeah that portrayal of anger is pretty effective…

@Felix That was an intyeresting look at a story behind the story. Although Murdoch is doing some face-saving back-pedaling, I think he might not get by as unscathed as he hopes. (One can hope)

Posted by hsvkitty | Report as abusive

All three are very smart? Really?

Rebekah Brooks, appearing before a UK Parliamentary committee volunteered that NI was in the business of paying the police.

I don’t need a law degree to know that is not the sort of thing you shout from the roof tops.

It seems to me Ms Brooks has been promoted well beyond where ability would take her. Check her use of the word ‘inconceivable’.

Posted by Dafydd | Report as abusive

Given the pressure particularly Ms Brooks for her resignations,I can be some how difficult for her to stay.The damage has ready being done and there is absolutely nothing neither she nor Mr Murdoch can withstand the waves.It is time for her to go and whether she has something to say or not that is her own personal affairs.

Posted by Asaki | Report as abusive

I’m sure that Rupert and James will be well advised on the UK Bribery Act. After all they own their own Anti-Corruption business
http://www.dowjones.com/nl/riskandcompli ance/

Posted by special_herres | Report as abusive
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