UK News

from MediaFile:

Murdoch in good times and bad

By Sir Harold Evans The views expressed are his own.

There is a clear connecting thread between the events I describe in "Good Times, Bad Times" and the dramas that led so many years later to Rupert Murdoch’s “most humble day of my life.” I was seated within a few feet of him in London on July 19, 2011, during his testimony to a select committee of MPs with his son James at his side. Not many more than a score of observers were allowed into the small room at Parliament’s Portcullis House, across the road from the House of Commons and Big Ben. A portcullis is a defensive latticed iron grating hung over the entrance to a fortified castle, the perfect metaphor for News International, which perpetually sees itself as beset by enemies.

Murdoch, as chairman and only begetter of the giant multi-media enterprise News International (NI), was called on to defend his castle and himself as best he could for the outrages of hacking and police bribery inflicted on the British public by his News of the World and the cover-up that he and his company conducted over nearly five years. The paper Murdoch most affects to despise, the Guardian, was the instrument of his undoing.

It persisted with the unraveling story almost alone in the face of repeated denials, defamation and threats and the sloppy exonerations of News International by Scotland Yard and the Press Complaints Commission. Among those waiting patiently – one might say humbly – for admission to the Portcullis House committee room was Nick Davies, the back-packing Guardian reporter, who led the paper’s investigation courageously sustained by his editor Alan Rusbridger. It was cheering to think of the impetus for good contained in Davies’ little notebook as he assiduously scribbled away during the hearing.

Murdoch had begun badly on jetting into London, all smiles in a jaunty Panama hat and embracing his ex-editor and CEO Rebekah Brooks whom he called his “first priority”; she was arrested days later. He quickly sensed the vengeful public mood and made a well-publicized consoling visit to the family of Milly Dowler, the murdered schoolgirl. He apologized profusely enough for his soon-to-be-shuttered paper’s most outrageous invasion of privacy, the hacking into voice mails left for Milly, and the hacker’s erasure of messages to make room for more that the News of the World could milk for despicable “exclusives.”

Observers in the Portcullis room were divided on the efficacy of Rupert Murdoch’s testimony. Some thought his answers revealed a doddery, amnesiac jet-lagged octogenarian. He cupped his ear occasionally to ask for a question to be repeated; at one moment he referred to the Prime Minister David Cameron when he meant Alastair Campbell, Prime Minister Blair’s press adviser. Others saw the testimony as a guileful imitation of “Uncle Junior,” the ageing mentor to Tony, the capo in the Sopranos, who feigned slippered incompetence to escape retribution. I thought, on the contrary, that Murdoch was a good witness, more direct than his son James, who unnervingly sported a buzz cut reminiscent of Nixon’s chief of staff, Bob Haldeman. His father was as taciturn as James was loquacious. Murdoch père paused to run each answer through his shrewd mental calculations of the legal implications of his own words, occasionally smiting the tabletop in front in a kind of brutal authoritarian emphasis that began to make his wife Wendi Murdoch distinctly nervous. She leaned forward to restrain the militancy.

But Murdoch senior’s bluntness had the effect of rendering James’ testimony inconsequential. His father’s testimony in the Portcullis room had flashes of mordant directness, one of his more engaging qualities. When a committee member referred to the “collective amnesia” of his executives, he riposted, “you mean lying” and he was right. James, the eager mollifier, was too ready to seek refuge in convoluted references to “distinguished outside learned counsel” mixed with patronizing explanations for the plebs on how large corporations delegate small details like paying off villains.

from Felix Salmon:

A few Murdoch questions

After taking phone calls about Rupert Murdoch on Brian Lehrer's show this morning and then immediately doing an hour-long diavlog with Alex Massie on the subject, I'm beginning to get a little Murdoch-ed out. But there are three newish points that are worth raising.

Firstly, what was the mechanism by which it was agreed that Rupert and James Murdoch would appear in parliament together? Having James by his side was a godsend for Rupert, and James clearly took his role as a shield for his father very seriously. I'm sure the more aggressive MPs would have preferred to be able to grill Rupert on his own, as they did Rebekah Brooks. How did that not happen?

Secondly, according to Michael Tomasky, there is a strong case that News Corp really could be prosecuted under the Foreign Corrupt Practices Act in the US, were the Justice Department so inclined.

And thirdly, just check out the number of Murdoch defenses on the WSJ op-ed page over the past couple of days:

• The original, notorious, anonymous op-ed;
• A paean to Murdoch by Robert Pollock, the WSJ's editorial features editor;
• Bret Stephens arguing that the News of the World was less bad than the Guardian and the New York Times;
• An argument by two former Justice employees that News Corp should not be prosecuted under the FCPA;
• Holman Jenkins saying that phone-tapping was "tolerated, routine and abetted by official agencies";
• James Taranto attacking Joe Nocera's complaints about the WSJ; and
• James Taranto, again, the following day, attacking other Murdoch's attackers, and clamoring for press freedom.

I'm sure that there will be many more to come. But I'm sure this is far from what the Bancrofts expected when Murdoch promised them that the WSJ would enjoy total editorial independence.

Update: Here's Bloomberg's Max Abelson on those WSJ defenses of News Corp; he not only did it better than me, he also did it faster.

from Felix Salmon:

The Murdochs pass their parliamentary trial

The biggest surprise for me, at the Murdoch hearings today, was the lack of political theater and crocodile tears of remorse. I was expecting a ceremonial piling-on -- a group of politicians all jumping at a very rare opportunity to tell Rupert exactly what they thought of him, with the billionaire mogul just sitting there and taking the insults, reiterating over and over again just how very sorry he was about everything that has happened.

But that's not how it turned out at all. The politicians didn't grandstand nearly as much as their US counterparts are wont to do, and instead asked substantive questions. The Murdochs, for their part, spent more time blustering and denying knowledge of key events at key times than they did apologizing.

The defining moment of the hearing, at least until Rupert Murdoch got pied, was when Jim Sheridan asked him a straight question -- "Do you accept that ultimately you are responsible for this whole fiasco?" Rupert certainly gave a straight answer: "No."

The message, repeated ad nauseam from both Rupert and James, was clear: they're very important people running very large businesses, and they simply didn't know what was going on far below them in the News Corp org chart.

I doubt anybody really believes it -- not given Murdoch's longstanding reputation for being a hands-on micromanager where his newspapers are concerned. But in its own way, the Murdochs' decision to push back against MPs was a show of strength -- a clear sign that they were going to fight rather than let this scandal bring them down. Their regular professions of ignorance even with regard to very important questions -- whether News Corp is still paying Glen Mulcaire's legal fees, for instance -- were carefully pitched to come across as stonewalling rather than incompetence. James Murdoch, in particular, were quite impressive in his ability to answer questions at length, in borderline-incomprehensible language. As Dan Sabbagh says, he "had facts, information, and answers so long you couldn't remember (or care) what the question was."

So I'm with John Abell on this one: the hearing felt more like the end of the beginning rather than the beginning of the end.

But the Murdochs are by no means out of the wood. For one thing, Rupert Murdoch promised that if he were legally allowed to, he would stop paying Glen Mulcaire's legal fees. That's big: Mulcaire has been hiding behind a very expensive wall of lawyers for over four years now, and if that wall is taken away from him, he might well have no choice but to tell all. And more generally, the current police investigation into News International is quite likely to reveal an endemic culture of illegality at the News of the World, if not at other News International papers. Beyond that, there's the very real possibility that US authorities might find evidence of illegal activity on this side of the pond; that would set off a whole new news circus, complete with calls that Murdoch sell off all his news properties.

Constitution in crisis as tyrannical journalists devour cowed politicians

A sordid tale of excess and brutality, of a world dominated by journalists with their ears to the keyhole, of tyrannical newspapers wielding remarkable power and of a political class not only cowed, but consumed, by that power.

Sound familiar? With two of Britain’s most senior policemen out of a job, the prime minister under pressure for his serenading of News Corp and one of the world’s most powerful press barons, in the form of Rupert Murdoch, summoned to testify to parliament, it would be one way of describing the current state of affairs.

In fact, it is how Irish writer and wit Oscar Wilde saw the state of Britain 120 years ago.

“In old days men had the rack. Now they have the press. That is an improvement certainly. But still it is very bad, and wrong, and demoralising,” Wilde wrote in 1891, several years before a court case in which intimate details of his own private life became the centre of a media storm.

Wilde believed that in America “the President reigns for four years, and Journalism governs for ever and ever” but that its power there had been diminished in the eyes of the public having “carried its authority to the grossest and most brutal extreme”.

In England, having not been pushed to ”such excesses of brutality”, the press remained a really remarkable force: ”The tyranny that it proposes to exercise over people’s private lives seems to me to be quite extraordinary,” he wrote in his 1891 essay “The Soul of Man under Socialism”.

Then, as many are doing now, he debated whether newspapers had the power to mould peoples’ minds or whether they merely held up a mirror to the public mood.

from Felix Salmon:

Could News Corp end up in play?

The increasingly-fragile nature of Rupert Murdoch's hold on News Corp has refocused attention on its dual-class share structure. As John Gapper noted last week, such structures aren't particularly good for minority shareholders like you or me. And if you plug today's share price into the Breakingviews Murdoch discount calculator, you'll see that the company is trading at roughly 30% below its fair value. Or, to put it another way, if Murdoch and his voting control were to disappear tomorrow, the shares could jump a good 45%.

Murdoch has a seemingly inviolable 39.7% position in the Class B voting shares of News Corp. No one else comes close: the only other shareholder with more than 2% of the Class B stock is Prince Alwaleed, with his 7% stake. The Class B shares are exactly the same as Class A shares, with the single difference that Class B shares have voting rights at the annual meeting and Class A shares don't. Both classes of share trade on the Nasdaq; here's a chart of how they've behaved over the past few years. The blue line is the B shares, the red line is the A shares, and the yellow line is the difference between the two. It's currently about 45 cents per share, down from a high of $2.60 per share in April last year.

Why do the voting shares trade at a premium, if Murdoch always gets what he wants in any case? One reason is that if Murdoch's successor wants to adopt a single share class, the holders of B shares will want to be paid a premium for allowing that to happen. Another reason is that Murdoch himself is only interested in voting shares: if and when he looks to increase his own shareholding in News Corp, it's the B shares he's going to buy, and he'll happily pay a premium to do so.

But still: the fact is that Murdoch has only about a 12% interest in News Corp, and less than a 40% voting interest. What would happen if an aggressive corporate raider of some description came out with a knockout bid for the company at say $23 per share? Such a bid would come straight out of the Murdoch playbook -- it's how he bought Dow Jones. And even if Prince Alwaleed stuck loyally to Rupert's side, the rest of the voting shares could end up approving the deal.

What's more, under News Corp's certificate of incorporation, the holders of A shares do actually have a vote in the event that there's a vote on a takeover bid which would change control of the company. (See section 4(a)(i)(C).)

News Corp would not last long in its present format were any takeover bid to prove successful: it would surely be chopped up and sold off in pieces. But that just makes it that much more attractive to corporate-raider types -- there's a pretty predictable going rate for the cable, TV, and movie-studio assets, and even the newspapers would likely spark an interesting bidding war. I can certainly see Roger Ailes easily lining up funding to buy Fox News and turn it into an independent company.

None of this is exactly likely -- for one thing, there are precious few bidders out there with the wherewithal to raise $60 billion or so in takeover funds for a media company. In its decision today to put News Corp on ratings watch negative, S&P didn't say anything about the risk of a leveraged buy-out. And frankly you'd need to be more than a little crazy to enter into a hostile takeover bid against Rupert Murdoch.

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 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 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.

from MediaFile:

News of the World hacking scandal: UK’s Miliband speaks out

UK opposition leader Ed Miliband called on the British media to clean up its image and emphasized the need for a speedy public inquiry into the News of the World phone-hacking scandal. Watch clips of Miliband's comments at a Thomson Reuters Newsmaker event below:

Miliband to British media: "Clean up your image"

Miliband calls for judge-led inquiry into phone-hacking scandal

Miliband wants media watchdog scrapped

from MediaFile:

Rupert Murdoch’s global empire

A scandal rocking Rupert Murdoch's media empire deepened on Thursday with claims his best-selling News of the World paper hacked the phones of relatives of British soldiers killed in action. The latest allegations prompted News Corp to shut down the 168-year-old tabloid. Here's a look at the rest of the empire.