UK News

from Felix Salmon:

The real Rupert Murdoch exposed

The single most important task facing Rupert Murdoch right now is to persuade the world that the illegal goings-on in the UK were isolated and not indicative of the News Corp culture more generally. He's tried this with zero success in the past: first he said that they were isolated to a single reporter, and then to a handful of people having their phones tapped, and then to the News of the World -- but in each case the scandal proved bigger than News Corp would have had us believed.

News Corp properties, including most notably the WSJ, are circling the wagons. They still say that the problem was confined to a single publication, that it's not endemic to News Corp generally, and that anybody who suggests otherwise is biased both ideologically and competitively:

We also trust that readers can see through the commercial and ideological motives of our competitor-critics. The Schadenfreude is so thick you can't cut it with a chainsaw. Especially redolent are lectures about journalistic standards from publications that give Julian Assange and WikiLeaks their moral imprimatur. They want their readers to believe, based on no evidence, that the tabloid excesses of one publication somehow tarnish thousands of other News Corp. journalists across the world.

That editorial has achieved the remarkable feat of making the WSJ editorial page even less respected than it was before -- especially since its publication coincides with a wonderful column from David Carr which shows just how a culture of aggression tipping over into illegality was widespread in News Corp, not only in the UK but also in the US.

Carr concentrates on the News America in-store marketing scandal, which you don't know about because it was barely covered in the mainstream media at the time. He does a great job of summing it all up; I won't bother to recapitulate the whole story. But suffice to say that News Corp's US subsidiary, News America, ended up paying $655 million to silence charges of corporate espionage and anticompetitive behavior, including hacking into rivals' computer systems.

Murdoch's reaction to this scandal was telling:

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...

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.”

from Left field:

Major drought continues but U.S. in good shape behind Clarke

If American golf is in crisis then it is a crisis every other nation would like a taste of as the sport's most dominant country made a determined assault on the 140th British Open at Royal St George's this week.

They came up short as Darren Clarke secured a third major triumph in 14 months for Northern Ireland but the final leaderboard was otherwise littered with the Stars and Stripes as Phil Mickelson and Dustin Johnson shared second and Americans filled five of the top seven places and 12 of the top 24.

Clarke's victory means that American golfers have failed to land any of the last six majors -- the worst run since the Masters was launched in 1934 and the first time since 1994 that the sport has had a year without an American holding at least one of the four grand slam crowns.

Throw in last year's defeat in the Ryder Cup and the fact that Europeans occupy the top four spots in the world rankings for the first time in 20 years, and something was surely rotten in United States golf.

Coming into the British Open virtually every member of the PGA Tour was asked at some point for their thoughts on what was causing such a drought.

Was it the legacy of the "Tiger effect" where a whole generation of players have been so scarred by always being in the shadow of Tiger Woods that now the great man is off the scene and/or off the pace they are unable to seize their opportunity?

Was the PGA Tour too cozy, enabling young players to earn millions without ever winning a tournament, let alone challenging for a major?Was the collegiate system out of date?

from Felix Salmon:

News Corp’s future

The abrupt departure from News Corp today of Rebekah Brooks (early) and Les Hinton (late) is yet more proof that News Corp is flailing around and incapable of getting out in front of the phone-hacking story. It's a bit like the way in which the cost of bailing out Lehman Brothers would rise by a few billion dollars an hour at the height of the financial crisis in 2008: every day of bluster and delay just makes this crisis worse for News Corp and for Rupert Murdoch.

If the News of the World had been shut and Brooks and Hinton both defenestrated back in 2009 when the hacking allegations first surfaced, that would have been more than enough to signal that News Corp was taking them seriously, was saying that such behavior was unacceptable, and was drawing a firm line under an unfortunate and illegal episode. Now, however, such actions only serve to make News Corp look even more guilty -- especially since the time gap between the resignations served to draw the story out over two news cycles and makes the whole thing look ad hoc and teetering on the back foot. There's now a clear sense that the virus is moving up and across the News Corp org chart, from the News of the World to News International to Dow Jones, with no sign that its virulence is diminishing.

Next up: the show trial on Tuesday, where James and Rupert will be ceremonially roasted by various UK MPs. If they express only contrition for what happened, without accepting personal responsibility or admitting any culpability, the reaction will not be pleasant: Rupert, in particular, is known as an assiduous reader and manager of everything that goes on at his newspapers, and he can't credibly plead ignorance of what they were doing. Similarly, James spent two years hand-in-hand with Les Hinton covering up the hacking and approving seven-figure payoffs to victims designed to keep them quiet. Indeed, his plan to cover up the wrongdoing rather than come clean might even have worked, were it not for the tireless reporting of Nick Davies at the Guardian and the unexpected revelation that the hacking affected not only politicians and celebrities but also the victims of personal tragedy.

On the other hand, any admission of personal responsibility will certainly result in calls for that person to resign. The loss of Brooks and Hinton is personally painful to Murdoch, but it's not remotely sufficient, at this point, to satisfy the pitchfork-wielding mobs. As Jack Shafer says, "everybody who ever had a grudge against Murdoch for his journalistic crimes, his battles against unions, his acts of political skullduggery, and his brilliant business innovations has sharpened and fixed bayonets to oppose him."

Which is why I suspect that the endgame will involve both James and Rupert falling on their swords, with the pragmatic technocrat Chase Carey taking over as CEO of News Corp for the time being. Rupert won't give up his Class A shareholding, of course, and would continue to wield enormous power and influence behind the scenes. Eventually, the time will be right for Carey to give way to Elisabeth Murdoch, one of News Corp's most expensive hires: the company paid $674 million to bring her on board by buying her company, Shine.

Neither Carey nor Elisabeth Murdoch has any particular love for newspapers; if the Dow Jones special committee starts causing nuisance, or if News International needs to be sold, they're perfectly capable of letting that business go. Television is where the big money is, and neither of them wants to see News Corp's global TV ambitions permanently derailed by a bunch of tabloid hacks. Murdoch's empire might well yet be inherited by one of his children. But that empire might well be very light on newspapers. Actions like spending $5 billion to acquire Dow Jones, which never made economic sense, are now a thing of the past. Rupert's top lieutenants -- and his children, too -- understand that. And Rupert himself, at this point, has very little choice but to come around to their way of thinking.

from Breakingviews:

Tip for the Murdochs: don’t be yourselves

By Chris Hughes

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Don’t be yourselves. That’s probably the best tip for Rupert and James Murdoch as they prepare to face UK lawmakers over the phone hacking scandal engulfing the UK newspaper arm of News Corporation.

Rupert is used to pushing people around. James argues with a passion when challenged. These are great skills in business, but will be handicaps in an event that is part investigation, part show trial.

True, the pair have dealt with some potentially difficult issues. News Corp has pulled its controversial bid to take full control of UK satellite broadcaster BSkyB. Rebekah Brooks, a former editor of the News of the World newspaper at the center of the hacking story, has stood down as chief executive of News International, the UK arm of News Corp. She is being replaced by someone who doesn’t have embarrassing links to British politicians. What’s more, the Guardian newspaper retracted one of its most serious allegations against News International.

Rupert is also to publish full-page apologies in his newspapers this weekend. But he sounded a bum note in an interview with one of his own newspapers, The Wall Street Journal, when he said News Corp had made only “minor mistakes” in its handling of a crisis that has wiped 14 percent off the company’s market value. The group has been repeatedly behind its own story. It was better that Brooks’ resignation arrived late rather than never, but it had less effect for coming after the Murdochs gave her their public backing. The Murdochs even flip-flopped over whether to appear before next week's hearing at all.

In U.S. congressional hearings Rupert has come across reasonably well. But it's hard to win in these situations when you are the subject of the inquiry and the opprobrium. Former BP boss Tony Hayward tried stonewalling in front of U.S. lawmakers, a tactic that avoided self-incrimination but made him only more unpopular. Fred Goodwin, the former chief executive of Royal Bank of Scotland, hit back at UK parliamentarians but that didn’t win him any friends. Goldman Sachs boss Lloyd Blankfein came across as over-rehearsed and over-lawyered.

from FaithWorld:

Ireland attacks confessional secrecy after Catholic sex abuse scandal

(A Roman Catholic Croat confesses to a priest during a pilgrimage in Krasno, some 150km (93 miles) south of Zagreb August 15, 2009/Nikola Solic )

Ireland's prime minister has said Catholic clerics would be prosecuted if they failed to tell the authorities about crimes disclosed during confession, the latest blow to the prestige of the once-dominant Church. A report this week found that the Church concealed from the authorities the sexual abuse of children by priests as recently as 2009, and that clerics appeared to follow Church law rather than Irish guidelines to protect minors.

"The law of the land should not be stopped by a crozier or a collar," Prime Minister Enda Kenny told journalists on Thursday, referring to the hooked staff held by Catholic bishops during religious services. Kenny said his government would submit legislation to parliament that could jail clerics for up to five years if they failed to report to authorities information about the abuse of children.

The law will override the confessional privilege in Church law that prevents clerics from sharing information, he said. A series of revelations of rape and beatings by members of religious orders and the priesthood in the past have shattered the dominant role of the Catholic Church in Ireland.

Ireland's Foreign Minister Eamon Gilmore on Thursday summoned the Pope's representative, the papal nuncio, after the report said that the Vatican had undermined Irish guidelines on reporting sex abuse by referring to them as "study guidelines."

"We consider it absolutely unacceptable that the Vatican intervened here in a way which had the effect of undermining the efforts to deal adequately with the issue of child sexual abuse," Gilmore said. "We want a response from the Vatican."

from Breakingviews:

The Murdoch discount

By Jeffrey Goldfarb and Richard Beales The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Rupert Murdoch's political influence may be surpassed by his impact on the value of News Corp. The stock routinely trades more cheaply than media rivals largely because the company is run at Murdoch's whim. A Breakingviews calculator shows how big the Murdoch discount has become as a result of the scandal at the News of the World tabloid. The phone-hacking affair not only forced News Corp to shutter its most widely read newspaper but also has finally forced the company to withdraw a $14 billion plan to buy the rest of the British pay-TV operator BSkyB. The damage could extend to the company's American and Australian businesses. U.S. Senator Jay Rockefeller, for instance, has called on Congress to open an investigation that would accompany those under way in Britain.

The News Corp enterprise now trades at a paltry five times estimates of its EBITDA for the fiscal year 2012, according to analysts at Credit Suisse. That's 40 percent less than media groups like Walt Disney and Time Warner -- double the typical gap seen since 2002. Worse, the gap between News Corp's market value and the sum of its sprawling parts is widening, according to a Breakingviews analysis using divisional profit forecasts by Barclays Capital and comparable valuation data from Thomson Reuters.

The biggest and most valuable component of the empire is its American cable networks, including Fox News. Put them on a multiple of nine and they're worth more than $30 billion. The movie studio behind global blockbuster "Avatar" and the U.S. Fox broadcast network, home to hit shows like "American Idol" and "Glee," are lumpier businesses but together should be worth over $12 billion.

The publishing arm at the heart of News Corp's troubles warrants a lower multiple of four, between those of Britain's Trinity Mirror and the New York Times, or just over $5 billion. The Sky Italia satellite unit and various private stakes add north of $6 billion, and stakes in publicly traded companies bring another $10 billion-plus, three-quarters of which is accounted for by News Corp's 39 percent stake in BSkyB.

Ignore the unprofitable digital unit, tot it all up and strip out net debt of around $4 billion, and News Corp ought to be worth about $60 billion. The market values the shares almost 30 percent lower than that. For shareholders, that's the downside of Murdoch's clout writ large.

from FaithWorld:

Irish Catholic Church concealed child abuse even after new prevention rules in 1990s

(Cloyne Cathedral, 7 May 2009/John Armagh)

A government-sponsored report said on Wednesday the hierarchy of the Catholic Church in Ireland continued to conceal the sexual abuse of children by priests even after it introduced rules in the mid-1990s to protect minors.

Revelations of rape and beatings by members of religious orders and the priesthood in the past have shattered the dominant role of the Catholic Church in Ireland. But the latest report into the handling of sex abuse claims in the diocese of Cloyne, in County Cork, shows that senior-ranking clergy were still trying to cover up abuse allegations almost until the present day.

"This is not a catalogue of failure from a different era. This is not about an Ireland of 50 years ago. This is about Ireland now," Minister for Children Frances Fitzgerald told a news conference.

The report, which focuses on 19 priests who allegedly abused children during a period from January 1996 to February 2009, lists how the diocese failed to report all sexual abuse complaints to the police and did not report any complaints to the health authorities between 1996 and 2008. The bishop formerly responsible for the diocese, John Magee, falsely told the authorities that he was reporting all abuse allegations to the police, the report said. He resigned in March last year after a Church investigation said his handling of abuse allegations had exposed children to risk.

The report also criticized the Vatican as "entirely unhelpful" in describing guidelines on how to deal with abuse accusations as "merely a study document." The government will decide soon whether to summon the papal nuncio, the pope's representative in Ireland, over the matter, Shatter said.

from FaithWorld:

Catholic area riots after Protestant marches in Northern Ireland

(Nationalist youths and police in riot gear clash in the Ardoyne area of north Belfast July 12, 2011/Cathal McNaughton)

Police fired plastic bullets and water cannon at Catholic youths in Northern Ireland's provincial capital Belfast on Tuesday after rioting erupted when a Protestant parade passed their estate. Sporadic violence erupted across the British-ruled province on the culmination of a season of parades by pro-British Protestants to mark a 17th-century military victory, a tradition many Catholics say is provocative.

Around 200 people threw bottles, slates and petrol bombs in the mainly Catholic Ardoyne area of Belfast after police moved in to prevent them confronting the passing Orange Order parade. Two cars were set on fire and dozens of rounds of plastic bullets were fired. Police said a number of officers were injured.

Most of the 500 or so parades across the province passed peacefully, but police reported rioting in Londonderry, Newry and Armagh as well as the Markets area in central Belfast.

Three decades of fighting between mostly Protestant loyalists who want Northern Ireland to remain part of the United Kingdom and Irish nationalists, mainly Catholics, who want it to be part of a united Ireland tore the province apart during a three-decade period known as the "Troubles."

A 1998 peace agreement paved the way for a power-sharing government of loyalists and nationalists. Violence has subsided, but police say the threat from dissident groups opposed to the peace deal is higher than it has ever been since it was signed.

from Breakingviews:

James Murdoch should take a break from News Corp

By Chris Hughes The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

James Murdoch should stage his own tactical retreat and resign from News Corporation. The heir apparent to his father Rupert’s media empire has lost authority. That may not be entirely his fault. Underlings seem to have let him down, and his father has undermined him by backing Rebekah Brooks, the head of the group’s scandal-ridden UK newspapers, who reports to James. The best way for Murdoch jnr to regain control of his own destiny is to leave.

Murdoch inherited a hospital pass when he took charge of News Corporation’s European and Asian businesses in December 2007. It seemed that the phone-hacking scandal had been put to bed since a News of the World reporter and a private investigator had already been sent to jail. An internal inquiry had concluded no further action was needed and a law firm had seemingly endorsed that finding.

We now know Murdoch was wrong to rely on that. On multiple occasions over the next three years, News International (the UK newspaper business) brushed aside suggestions that the rot went deeper. Murdoch even agreed to pay hush money to somebody who complained of hacking and the company gave inaccurate information to a parliamentary inquiry. He now says he wasn’t in full possession of the facts at the time. But, at the very least, he seems to have failed to give adequate attention to the affair and grab it by the scruff of the neck.

Even now, Murdoch jnr doesn’t seem in control. One of the most obvious ways of restoring confidence would be to suspend Brooks -- who was editor of the News of World when some of the worst alleged practices took place and who is now in charge of all the UK newspapers -- until the police investigation is over.

It still isn’t clear why Murdoch hasn’t done a proper job. But every day that goes by, his personal reputation gets tarnished. He would be doing himself a favor by resigning. Who knows: if he then proved himself as an independent media entrepreneur, he might return to News Corp having proved himself, rather than as Daddy’s boy.

from Felix Salmon:

What damage could Rebekah Brooks do to News Corp?

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.