Authors: David Folkenflik
Murdoch's World (30 page)
EACH WEDNESDAY, political junkies in the UK settle around their televisions and computer screens to watch Prime Minister's Questions, the weekly sessions in which the parties joust over questions devised to test the head of the queen's government.
As the second Wednesday of July approached, Cameron's rhetoric was shifting daily, as though an inexorable tide were pulling him to the ground held by his foes. All three parties prepared to join as one to denounce
News Corp and force it to abandon the acquisition of BSkyB.
On Monday, July 11, News Corp did something unexpected. It pulled its promise to spin off Sky News so it would not be under direct leadership of News Corp. That concession, made to ease Cabinet approval of the takeover, no longer held. The decision set off a chain of bureaucratic consequences. The British regulatory agency OFT, the Office of Fair Trading, judged that the proposed merger raised questions of media concentration; Jeremy
Hunt referred the decision to the Competition Commission. This referral would tie up the decision for months, an outcome that News Corp had been laboring to avoid. Hunt also noted that OfCom, the separate communications regulator, was suddenly reviewing whether News Corp was a “fit and proper” owner of BSkyB at all.
Yet Hunt's seemingly unwelcome referral for review would have the ameliorative effect of delaying consideration to a time when emotions might not run so high and so hot. This process might give politicians a chance to rant against the Murdochs, get it out of their system, and yet allow the deal to be resurrected, Lazarus-like, the following year.
This time
the Murdochs blinked. The company's ranking non-Murdoch chief operating officer, Chase Carey, acknowledged reality: the deal for outright ownership of BSkyB had collapsed. He announced News Corp was withdrawing its bid for the company entirely.
Still the public anger did not subside, as fresh developments arrived almost hourly. Police told Prince Charles that he had been targeted for hacking. So had his wife, Camilla, the Duchess of Cornwall. “There
needs to be
root-and-branch change at this entire organization,” Prime Minister Cameron told the House of Commons. “What has happened at this company is disgraceful. It's got to be addressed at every level. And they should stop thinking about mergers when they've got to sort out the mess they've created.”
Former prime minister
Gordon Brown declared his belief that the
Sunday Times
had misrepresented itself to obtain his private financial records. There were suggestions that turned out to be unproven that the
Sun
paid off hospital workers to secure medical documents confirming that his infant son had a diagnosis of cystic fibrosis, he said. The
Sun
and Rebekah Brooks rejected claims about the story on Brown's child. A parent of a child with a similar condition had, in fact, alerted the paper, Brooks made clear. The parent had said he hoped the Browns would talk about the diagnosis and give some comfort to families in like situations. Brooks had been sensitive to the pain the story would cause, reached out to the Browns, and even received a letter from Sarah Brown thanking her for the care she took in doing so. Several years later, Brooks attended a pajama party to mark Sarah Brown's fortieth birthday with a select group of women friends.
By the summer of 2011, however, the Browns' mood had changed. Standing in the back benches of the House of Commons, consigned there in part, he felt, by the decision of the Murdoch papers to abandon him two years earlier, Brown said he had been punished for challenging the company's plans for consolidation. The scandal, Brown said, was “not the misconduct of a few rogues or a few freelancers but, I have to say, lawbreaking often on an industrial scale, at its worst dependent on links with the British criminal underworld.”
Others trained their fire on Brooks as well. Murdoch's chief outside investor, the
Saudi prince Al Waleed bin Talal, told the BBC, “For sure, she has to go. You bet she has to go.”
Evidence suggested the most fearsome of consequences:
seepage to the States. On July 11 the
Mirror
reported that a former New York
City police officer, unnamed, had been approached by reporters for
News of the World
. They offered to pay the ex-cop, now a private investigator, to hack into electronic phone records for people who had been killed in the 9/11 attacks. “The PI said he had to turn the job down. He knew how insensitive such research would be, and how bad it would look.” The
Mirror
, it appeared, had not spoken to the unidentified police officer directly, and the third party it quoted was equally anonymous. Yet US lawmakers took the story seriously. Several senators, all Democrats, urged an investigation into whether the Murdoch tabloids had engaged in similar acts in the US.
The liberals were joined by congressman Peter King, chairman of the House Homeland Security Committee, a center-right Republican who generally made common cause with the
New York Post
and Fox News.
King wrote to FBI director Robert Mueller: “It is revolting to imagine that members of the media would seek to compromise the integrity of a public official for financial gain in the pursuit of yellow journalism.” More than 150 of his constituents had died in the 9/11 attacks.
The FBI should pursue any such offenses aggressively and make sure they were prosecuted to the fullest extent of the law, King wrote: “The 9/11 families have suffered egregiously, but unfortunately they remain vulnerable against such unjustifiable parasitic strains.”
Lawyers for News Corp in New York spotted dangers on two fronts. Any prosecution could give grist to those who wanted to challenge the ongoing waivers that the Federal Communications Commission had granted News Corp, including those regulations about owning too many stations in the same town. They barred networks from owning a stake in the production companies that created the television shows on the air and banned “cross-ownership” of newspapers and major TV stations in a single metro area.
At various points, Murdoch circumvented, challenged, and even arguably violated these rules. When Murdoch created a fourth network
from the core of Metromedia's television stations, he had to become a naturalized US citizen. The new Fox network did not air a full slate of shows, a technicality that enabled him for a time to sidestep the financial syndication regulations (preventing a network's ownership of TV production companies that create the shows it broadcasts). Later, News Corp won a waiver from the FCC to produce shows it had developed. Murdoch sold the
Chicago Sun-Times
in 1986, after owning it just two years, to acquire a station in that city; he later sold the
Boston Herald
after Senator
Ted Kennedy inserted language into a spending bill banning the ownership of a TV station and a newspaper in the same city. (The
Herald
retaliated by publishing every unflattering shot of Kennedy it could find of the senator's shirttails askew, his jowls flapping.) In 2001
the FCC gave Murdoch yet another waiver when he acquired ten television stations held by Chris-Craft, including WWOR, which served New York, despite already owning WNYW and the
New York Post
there. He held on to WWOR after the waiver lapsed.
Those rules, in Murdoch's estimation, stood for the kind of government interference that had complicated his company's growth in Australia, primarily for the benefit of the public broadcasters and the establishment papers that competed with his properties. Lobbyists helped the company skirt such regulations, which the company saw as archaic given the proliferation of digital media, as well as cumbersome.
During the scandalous summer of 2011, regulators might well become less pliant. Under federal law,
the possibility of prosecution loomed as well. The 1977 Federal Corrupt Practices Act banned US companies from bribing government officials abroad. Such payments were felonies, though hard to prove. But illegal payments to police officers fell squarely within that definition.
A second provision of the law did not require so complicated a burden of proof. A company whose shares were publicly traded in the US had to register bribes to public officials in publicly filed documents. A failure to do so represented a violation of civil law. In 2008, the
German conglomerate Siemens reached a settlement with the federal government for $800 million to resolve charges that it had paid bribes and kickbacks abroad. (Siemens did not admit having paid bribes.)
In mid-July 2011, News Corp stock dropped more than 11 percent in a week, as major investors proved jittery not just over the fate of the BSkyB acquisition but also the costs of legal implications in the UK. The corporation lifted its expansion of
an already planned stock buy-back program to $5 billion from $1.8 billion, a quick boost for the value of shares.
SUCH WERE the pressures that coalesced around News Corp by mid-July. Questions were becoming increasingly urgent for Murdoch's closest executives in the US and the UK, Les Hinton atop Dow Jones and the
Wall Street Journal
, and Rebekah Brooks was in the thick of it. Hinton, at worst, was accused of misleading Parliament in assuring lawmakers that such wrongdoing was limited. Brooks was in the thick of it. (The settlements by News International went a long way toward convincing the public of its guilt.)
MPs who had earlier concluded they had been deceived were angered again. On Thursday, July 14, John Whittingdale, the Conservative chairman of the investigating committee before which
Brooks and Hinton had previously appeared, told reporters that Brooks had agreed to testify again. But Murdoch father and son had told the committee they were too busy, Whittingdale said, though James offered another day in August.
“It is James Murdoch who has said publicly that executives from the
News of the World
misled [P]arliament in the evidence that they gave to the committee in our previous inquiry,” Whittingdale said. “Therefore we are extremely anxious to ask him about that, and we did not feel it was justified to delay until August.”
The Parliament's deputy sergeant at arms delivered summonses to the offices of the two Murdochs and Rebekah Brooks at Wapping. It was the first time Parliament had ordered a summons to compel testimony in almost two decades.
By the next day, News Corp stock had fallen an additional 5 percent. Sky's market cap had dropped about 16 percent in just eleven days. Within hours of each other on Friday, July 15, Brooks and Hinton resigned. “I have believed that the right and responsible action has been to lead us through the heat of the crisis,” Brooks wrote to News International employees. “However my desire to remain on the bridge has made me a focal point of the debate. This is now detracting attention from all our honest endeavours to fix the problems of the past.”
Hinton, too, protested his innocence and ignorance once more. “I believed that the rotten element at the
News of the World
had been eliminated; that important lessons had been learned; and that journalistic integrity was restored,” Hinton told his staff. He testified in good faith, if wrongly, but his ignorance was irrelevant: “It is proper for me to resign.”
Hinton and Rupert Murdoch exchanged statements of warm appreciation. But Hinton was stunned. “Resignation” was a kind gloss to put on his firing. “All the executives used to have
a joke within News Corp: Rupert will be loyal to you right up until the very day when he's not,” a former senior official at News Corp told me. Over time Hinton and others understood not to take their ousters personally. You signed up for it.
Brooks's departure was accompanied by a new mechanism for overseeing the internal corporate inquiry. News Corp created a new independent management and standards committee to investigate possible criminal activity and present it to the authorities. The two former assistant US attorneys general already linked to the companyâJoel Klein and Viet Dinhâwould oversee the review.
But Murdoch also revived a bit of swagger. “The Company has made mistakes,” he said. “It is not only receiving appropriate scrutiny but is also responding to unfair attacks by setting the record straight.” The Murdochs gave warning: as they prepared to step into the halls of Parliament, they would once more exercise what they felt was their right to determine what constituted fair criticism.
