MediaFile

The case against the bribery case against Murdoch

July 22, 2011

By James Ledbetter
The opinions expressed are his own.

Ever since reports surfaced that executives at News of the World paid bribes to members of the UK’s Metropolitan Police, there have been lots of people in the United States who would like to see News Corp and/or its top executives prosecuted under American laws. News Corp is an American company, goes the argument, and paying bribes abroad is explicitly prohibited by the Foreign Corrupt Practices Act (FCPA).

Those observations are true as far as they go, and they appear bolstered by reports Friday morning that the Justice Department is preparing subpoenas as part of a preliminary investigation into News Corp. But the argument that a successful U.S.-based bribery case can be built against Murdoch’s company involves at least as much wishful thinking as it does legal acumen. There may be some effective ways to use the FCPA against News Corp, but nailing News Corp executives in the U.S. for police bribes in the UK requires an enormous, unprecedented stretch of the FCPA, and one which seems unlikely to stand up in court.

The FCPA was a groundbreaking piece of anti-corruption legislation when Jimmy Carter signed it into law in 1977. But even its most passionate fans would admit that a) its enforcement over the decades has been spotty, and b) no one involved in the creation of the FCPA ever envisioned it being used to punish checkbook journalism, legal or illegal.

Indeed, when the Securities and Exchange Commission (SEC) originally issued a report in 1976 describing the types of illegal payments U.S. corporate entities were making at the time, the four categories it outlined didn’t remotely involve paying for information of any kind. Instead, the FCPA was designed to prohibit the classic kickback scenario: Company A pays Foreign Official B to receive Contract C—or, in the words of the statute, “to assist in obtaining or retaining business.” Following reports of the alleged News Corp bribery, several lawyers have been quoted in the press saying that the government agencies responsible for enforcing the FCPA have in recent years become more aggressive in how they interpret that phrase.

That’s true. And the vagaries of FCPA enforcement—different courts have different standards, cases get settled before decisions are reached—make it impossible for even experts to know conclusively how a zealous SEC or Justice Department official might define “obtaining or retaining business.” Still, a review of dozens of such cases produces not a single instance in which the bribe in question resembles a newspaper paying police for tips. Even the most expansive enforcement efforts have uniformly been about the mechanics of getting commerce done, what legal experts call a “business nexus”: customs duties; tax payments; securing government licenses and permits; obtaining storage space in government-controlled facilities; patent applications; etc.

As offensive and explicitly illegal as paying police for information might be, it is a huge stretch to say that it is part of the business nexus of a multinational corporation. Assume for the sake of argument that News of the World did spend 100,000 pounds or more paying the police for story tips, and that the paper reaped some modest circulation benefit from the scoops it published. That is still worlds away from, say, paying a Nigerian tax official to look the other way on an audit. The police would have to be proven to have knowingly taken the money in order to further News Corp’s business in the UK. In fact, they were in no position to influence whether News of the World did or didn’t sell copies on any given week; nor would any of the revenue involved been dependent on government action, as it would be, say, in a customs duty bribe. Without a government quo for News Corp’s 100,000 quid, without even the suggestion of a governmental action that might make it easier or cheaper for News Corp to do business, there is no solid basis for a case.

Incidentally, it’s far from clear that the more recent and aggressive FCPA cases themselves pass judicial muster. Much of the contemporary debate around FCPA involves a case that began in 2001, called U.S. v Kay. In it, two officials of a Houston-based company were accused of deliberately understating the amount of rice they had exported to Haiti in order to reduce their tax bill. Although the defendants were eventually found guilty, the Fifth Circuit appeals court’s much scrutinized decision clearly stated that simply because a bribe might have helped a company economically, that doesn’t mean it violates the FCPA.  “Although we recognize that lowering tax and customs payments presumptively increases a company’s profit margin by reducing its cost of doing business, it does not follow, ipso facto, – as the government contends – that such a result satisfies the statutory business nexus element,” wrote the Fifth Circuit.

Finally, there is a blunter, less politically correct reason why a FCPA case is unlikely. Enforcement of the FCPA since its inception has been almost comically arbitrary; the title of a detailed law review article by an influential professor is “the façade of FCPA enforcement.” In 2003 and 2004, the government initiated a meager total of 6 FCPA cases each year. In 2007, the government initiated 38 cases. Obviously, there was not a sixfold increase in bribery activity in the intervening years; the government chooses these cases very selectively. Go down the list of where cases are initiated and you’ll see a pattern—China; Indonesia; Pakistan; Iraq; Nigeria; Malaysia; Venezuela; Honduras; Yemen, etc. Very rarely does any OECD or G20 country show up. Rightly or wrongly, the U.S. government obviously chooses to enforce the FCPA in places where it perceives that local rule of law is insufficient. By contrast, if News Corp executives broke bribery laws in the UK, it is very reasonable to assume that British justice is up to the task of prosecuting them.

Of course, if Americans really want our laws to prohibit police bribes overseas, we can change the FCPA statute. But as a rule, you don’t want to see it stretched to cover behavior outside its intended scope. There, may, however, be other uses of the FCPA in this case, which will be the subject of another column.

Comments
13 comments so far | RSS Comments RSS

Just because a law is intended for one thing at the time it is written means nothing.

Consider the RICO Act targeted at mafiosi who could only be convicted on conspiracy charges. Next thing you know, it’s being used to bring down mayors, county supervisors and even US Senators–none of whom ever dream of passing laws that could be used against the Senate.

Posted by Banj0man | Report as abusive
 

You do make excellent points, but being phone hacking occurred on American soil (the Jude law case and possibly the 9/11 victims) should they not at least attempt to build a case?

It is likely this goes on under the table at all the tabloids and elsewhere, but only NWI was caught. Investigations in the states may deter the practice and even draw out a whistle blower (if they are sure Sean Hoare wasn’t murdered of course) to bring it out in the open in the USA as well.

Posted by hsvkitty | Report as abusive
 

Banj0man: I agree with you to a point. But many people, including myself, believe that the RICO statutes have been stretched beyond recognition. Does it make sense to use that as a rationale to stretch another law into a similarly tortured state?

Posted by jledbet | Report as abusive
 

Just take away their public broadcasting air rights. The US people own the airwaves not Murdoch. Shut him down and shut him up.

Posted by seattlesh | Report as abusive
 

Rupert doesn’t employ journalists, he employs paparazzi.

Posted by borisjimbo | Report as abusive
 

We pride ourselves on laws. We don’t have the world’s largest prison population for nothing. If the Government looks hard enough, certainly they have a cell for Mr.Murdoch somewhere. It’s sad, but true! As a citizen you must know every single law too. All ten gazillion of them. Ignorance is no excuse and you will go to jail without passing go.

Posted by schmetterling | Report as abusive
 

Mr. Ledbetter,

You state that the bribery of the police in England is merely a case of “checkbook journalism” used in the pursuit of good stories. I find it incredible that you are unaware of the extent to which Scotland Yard was corrupted by these bribes.

I am not a journalist. I’m an average shmoe who spent all day moving boxes and cleaning my house. I read your article, and then turned to a vastly technical research tool known to only a select few as “Google” and performed a “search” and within seconds was able to find a report in an obscure publication named “The New York Times” which provided me with a rather more thorough and insidious description of what occurred than even your worst-”for the sake of argument”-case scenario.

According to the Times, a “treasure-trove of evidence”, including “11,000 pages of handwritten notes listing nearly 4,000 celebrities, politicians, sports stars, police officials and crime victims whose phones may have been hacked by The News of the World” lay undisturbed and peaceful in six large plastic bags.

“According to former and current police officials”, “… from August 2006, when the items were seized, until the autumn of 2010, no one at the Metropolitan Police Service, commonly referred to as Scotland Yard, bothered to sort through all the material…”

“For nearly four years they lay piled in a Scotland Yard evidence room, six overstuffed plastic bags gathering dust and little else.”

“During that same time, senior Scotland Yard officials assured Parliament, judges, lawyers, potential hacking victims, the news media and the public that there was NO EVIDENCE OF WIDESPREAD HACKING BY THE TABLOID.” (emphasis added) They steadfastly maintained that their original inquiry, which led to the conviction of ONE reporter and ONE private investigator, had put an end to what they called an isolated incident.”

“At best, former Scotland Yard senior officers acknowledged in interviews, the police have been lazy, incompetent and too cozy with the people they should have regarded as suspects. At worst, they said, some officers might be guilty of crimes themselves.”

Even on the surface it looks very bad…

“Neil Wallis..a former top editor at The News of the World at the time of the hacking ..went on to work as a media strategist for Scotland Yard…[and] was reporting back to News International while he was working for the police on the hacking case…” It goes on and on, “…the police commissioner met for meals 18 times with company executives and editors during the investigation.”

“It’s one thing to decide not to investigate,” said Jeremy Reed, one of the lawyers who represents numerous phone-hacking victims. “But it’s quite another thing not to tell the victims. That’s just mind-blowing.”

Apparently, Mr. Ledbetter, your mind is safely un-blown as you somehow are still characterizing the scandal as mere checkbook journalism.

Here’s why we should prosecute Murdoch and his News Corp: This American citizen led an organization which embarked upon a massive and successful effort to suborn the premier law enforcement agency of America’s single most important ally. This American citizen has done incalculable harm to the government of Great Britain. Don’t think so? Maybe my opinion and the opinion of the New York Times isn’t good enough for you. That’s fine.

Why not ask a man whose life’s work was the pursuit of justice while employed at the Metropolitan Police Service:

“It’s embarrassing, and it’s tragic,” said a retired Scotland Yard veteran. “This has badly damaged the reputation of a really good investigative organization. And there is a major crisis now in the leadership of the Yard.”

Seems fairly more serious than your breezy characterization now, doesn’t it, Mr. Ledbetter? And we haven’t even begun to discuss the involvement of the sitting Prime Minister of America’s leading ally, which would take up far more space.

Mr. Ledbetter, what I would like to know is, were you just unaware of all these facts, or are you also on Mr. Murdoch’s payroll? How else could you, a journalist, possibly miss the significance of this scandal when the information is so very blatantly available and obvious that even an ignorant average shmoe such as myself can easily find it? Tell me what am I missing here? I didn’t want to write this post. I take no pleasure in attacking you. I’m not trying to be a troll. I just can’t escape the implication of your article. I’m afraid the options are that you are either blindly incompetent, or insidiously corrupt.

Prove me wrong. Please.

Posted by BajaArizona | Report as abusive
 

My post is pending approval, yet a later post on another article has already been approved.

I made what I thought were sharp yet cogent criticisms of the article. My main point was that calling the actions of Murdoch’s organization “checkbook journalism” in pursuit of scoops ignores the evidence that Murdoch’s employees actively suborned Scotland Yard to halt an investigation into their illegal hacking. This is far worse than paying for juicy information. This is corruption of the premier law enforcement of America’s #1 ally, and a much more serious crime which is indeed worth prosecuting. I found the writer’s ignorance of the facts to be deeply troubling, and I didn’t hold my rhetorical fire. Yet I was honest and my attack on his integrity although severe was backed by quoted research and was not at all ad hominem.

Withholding my post because I raise very real questions about the writer’s motives is not in keeping with a fair discussion. I hope to see it appear soon.

Posted by BajaArizona | Report as abusive
 

Murdoch’s mouthpiece, The Wall Street Journal, had a nice big feature piece about how federal law prosecutions have gotten way out of hand. I wonder what the motivation for that article is?

Posted by BajaArizona | Report as abusive
 

Murdoch is rich. ‘Nuff said. There is no a chance in hell he’ll ever be charged with a crime, let alone to time. The same applies to his son. In the U.S., MONEY and Power is the key to everything and the Murdochs have both. The U.S. is now number 10 on the corrupt government list, so don’t expect anything but lots of hot air.

Posted by robert1234 | Report as abusive
 

To BajaArizona: You misread this column if you think it attempts to reduce the entire News of the World scandal to checkbook journalism. Obviously the widespread hacking of phones is reprehensible, and will be dealt with using whatever laws apply. This column refers only to the *bribery* allegations of the scandal, those to which the FCPA arguably does or does not apply.

Posted by jledbet | Report as abusive
 

Also to BajaArizona: If you click on the first link in my column, you’ll get to the original Guardian story, which said that all of the bribes they were reporting on took place in 2003. So they could not be part of any effort to suppress an investigation of things that took place after 2006. I agree, though, that if payments to police were used to thwart an investigation at any time, that would come closer to the definition of bribes that are covered by the FCPA.

Posted by jledbet | Report as abusive
 

To jledbet,

“I agree, though, that if payments to police were used to thwart an investigation at any time, that would come closer to the definition of bribes that are covered by the FCPA.”

Thank you.

Posted by BajaArizona | Report as abusive
 

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