US Readies Rupert Murdoch Investigation

By Andrew S. Ross, SF Chronicle/Bloomberg News

24 July 11

"he truth has a way of coming to the surface. We're going to keep asking questions to make sure that no American laws were violated in this growing scandal."

So says Sen. Barbara Boxer, D-Calif., as the prospect of a US investigation into the doings of Rupert Murdoch's News Corp. appears to be getting serious.

The US Justice Department, responding to calls 10 days ago from Boxer and other US lawmakers to open an investigation, was reported Friday to be drawing up subpoenas in the matter. The Justice Department has also asked British police for cooperation in its investigations, Bloomberg News reported.

Whether the whole truth will ultimately emerge, or Murdoch's besieged media empire found to have broken US law remains to be seen. But more allegations that could buttress calls for a US inquiry continue to come out.

They included charges on Thursday that heir-apparent, James Murdoch was less than forthcoming in his testimony to the British parliament about his knowledge of illegal phone hacking at the now-defunct News of the World and hush money paid to one of its victims.

In a separate charge earlier in the week, a British parliamentary committee accused senior News Corp. executives of trying to "deliberately thwart" a police investigation into the affair.

"We don't intend to be spectators": While waiting for the wheels of justice to grind - probably slowly - one major California investor, in a public tongue-lashing, called last week for breaking up the Murdoch family's control of the business.

Referring to "a corruption of the governance system," Anne Simpson, a portfolio manager and governance watchdog at the California Public Employees' Retirement System, said that the company's dual shareholder structure - which gives Rupert Murdoch alone 40 percent of the voting stock - "is one way to pervert the alignment of ownership and control."

News Corp.'s "situation is very serious and we're considering our options. We don't intend to be spectators - we're owners," said Simpson. CalPERS owns approximately 7 million shares of News Corp., worth around $115 million at Friday's close.

"The serious situation is the hacking scandal," said Simpson.

What, us worry? While some US shareholders have filed a class action lawsuit against the Murdochs, charging "rampant illegality," another California investor appears far less concerned.

Thomas Perkins, co-founder and partner of Silicon Valley's Kleiner Perkins Caufield & Byers, and a so-called independent director of News Corp., came out four-square behind the company's senior team last week.

"I have a lot of faith in Rupert Murdoch. He's a great guy, he's a friend of mine. He's a genius," said Perkins in one of his various media interviews (not with this paper, although we asked).

Perkins said the board "supports top management totally," which, he insisted, "has been misled, by very bad people at a very low level in the organization."

"The next step is not to let the company go down the drain on this thing because we're focused on events in London that are a small percentage of our business overall. Our worry is the shareholders at this point. The British police will take care of the hacking victims."

Seems like Perkins, who screamed blue murder and resigned from the HP board when he discovered his own phone had been hacked, is only concerned about such illegalities when his own ox is gored.

Getting prepared: Despite attempts by News Corp. to confine the scandal to "bad people at a very low level," and to a division accounting for "1 percent" of the corporation's business, according to Rupert Murdoch, it is also well aware of the long arm of the law reaching from this side of the Atlantic.

The company has reportedly hired a former Justice Department attorney who has "extensive experience with the Foreign Corrupt Practices Act," according to the Wall Street Journal.

The attorney, Mark Mendelsohn, a partner in the Washington, DC, office of Paul, Weiss, Rifkind, Wharton & Garrison, was, until last year, "in charge of prosecuting suspected violations" of the FCPA, said the News Corp.-owned paper.

"He presided over a broad crackdown on corporate corruption abroad, levying record-breaking fines and prosecuting executives for bribery."