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The story of Mordoch shows that press modules can be a new type of gangsters who are peddling "protection" to other business and even government officials.
Rupert Mordoch proved to be a ruthless businessman who managed to make loads money out of an enterprise whose success turns out to be largely based on criminal activity.
US law may enter the fray. A former Labor cabinet minister has alerted attention to the US Foreign Corrupt Practices Act, which makes an American company (News Corp) liable for colossal fines if any employee bribes a foreign official (the Met police) even if no one at head office knew. What's more, any whistleblower inside the company (sacked News of the World reporters), stands to win a percentage of that fine if they report acts of bribery.
Suddenly, what looked like a done deal is unraveling. Cameron's hiring of Coulson was part of his pact with Murdoch, willing and eager to sell press and broadcasting diversity to a monopolist who has made his fortune out of intimidating governments, avoiding taxes and trouncing regulators in exchange for political support.
Labor sank humiliatingly low in its dealings with the old monster. Cameron hit rock bottom. Now that Labor has broken the omerta and is opposing Murdoch unequivocally, Cameron will press on with this deal at his peril.
Americans are extremely interested in Rupert Murdoch's unfolding scandal in the UK. As I wrote a few weeks ago, it has striking parallels with Watergate, an observation I offer based on personal knowledge and experience. (I am sure I speak for many Americans when I shout out a thank you to the Guardian, whose journalism on the Murdoch story is every bit as good, and in many instances better, than the legendary work of the Washington Post during Watergate.) Many Americans wonder if this scandal will leap the Atlantic or remain "contained" in Britain. Because of Watergate, I have some familiarity with containment when it works and when it does not.
The answer depends on the width and depth of illegal behaviour. Cover-ups seldom work. At this time we know little about any cover up at News Corp, but hints have emerged. While not an ideal measurement of wrongdoing, I find there is usually a direct correlation between lawyers hired and the seriousness of the problem. Accordingly, I've been watching the lawyers who have become key actors in this story, and their actions suggest that this scandal will not be contained in the UK. Rather, with time, it will become an American scandal, although possibly with less consequences than in the UK, given the skilled legal team now at work.
News Corp has retained one of London's most expensive commercial lawyers, Lord Grabiner, who reportedly bills at £3,000 per hour. While Grabiner has a reputation for litigating miracles, it appears he was hired to give credibility to an independent management and standards committee investigation of the phone-hacking, police bribery and related criminal allegations. To assist Grabiner, News Corp retained the London office of a prominent Washington law firm, Arnold & Porter whose London partner, Kathleen Harris, happens to be an experienced criminal defence lawyer. Harris formerly served as a senior strategic policy adviser in the fraud business group at the Serious Fraud Office.
This UK self-investigation committee reports to Murdoch's top US attorney, a relatively recent hire: Joel Klein, who joined News Corp after a stint as chancellor of the New York City school system. Klein collects his reported $2m salary to bring the firm into the for-profit education business work which he has probably now set aside.
When the UK scandal erupted, Klein was with Murdoch at a conference in Sun Valley, Idaho. And Murdoch had an ideal fixer. Klein was too new to News Corp to be implicated in anything improper, plus he has impeccable legal credentials (Harvard Law, US supreme court law clerk, and a successful law practice). Klein had served as deputy White House counsel during Bill Clinton's Whitewater scandal, and as the assistant attorney general for antitrust. Known for his ego, persistence and integrity, Klein was placed in charge by Murdoch.
Klein in turn reports to Viet Dinh, a member of the News Corp board since 2004, a former assistant attorney general in the George W Bush department of justice, and currently a law professor at Georgetown University as well as a private attorney. Viet Dinh, another Harvard Law graduate and former US supreme court law clerk, is considered the conservatives' "Mr Fixit" in Washington DC legal circles. His law firm, Bancroft Associates, is known for its ability to get defendants off on legal technicalities. It appears Klein and Dinh have hired all the key players who might be helpful in dealing with News Corp's criminal problems in the US.
In addition to Arnold & Porter, Klein and Dinh retained another top Washington law firm, Williams & Connolly, and the firm's highly skilled criminal defence attorney, Brendan Sullivan, to assist with the criminal investigation in the US. Klein and Dinh retained Mark Mendelsohn, who until recently had been the deputy chief, fraud section, criminal division, of the US department of justice, and understands the department's thinking about prosecuting under the Foreign Corrupt Practices Act (which prohibits American businesses from bribing foreigners to assist their business, and appears applicable to some of the allegations against News Corp).
In addition, they hired Bush's former attorney general Michael Mukasey and former Manhattan US attorney Mary Jo White, both of Debevoise & Plimpton, to assist with the investigation. Criminal prosecutions are always a matter of discretion, and Klein, Dinh and their hires are friends and former associates of those who might undertake any prosecution of News Corp.
Klein and Dinh surely now know the full extent of their problems. If they could state that no person remaining in the News Corp organisation, or the corporation itself, was involved in any criminal misconduct, there would be no reason for them to remain silent. Such a statement would largely end the story. The fact that the lawyers have absolved no one suggests to me that they have discovered potentially serious problems. Only Murdoch is suggesting the scandal will remain in the UK, and he is not the most reliable source.
News Corp's board held its first meeting since the UK scandal erupted in Los Angeles on 9 August. What the lawyers did or did not report to the board is unknown. Following the meeting, on 10 August, Murdoch gave a less than illuminating public statement, largely absolving all of the company except the UK operations, during a conference call to financial analysts. Indeed, he claimed he was "shocked" to learn of the criminality at News of the World. (This was voice only, so we don't know if he winked or crossed his fingers when he made his claims.)
On 10 August, News Corp filed a report with the Securities and Exchange Commission that included a carefully vetted statement reporting the close of the News of the World "after allegations of phone hacking and payments to police. As a result of these allegations, the company is subject to several ongoing investigations by UK and US regulators and governmental authorities, including investigations into whether similar conduct may have occurred at the company's subsidiaries outside of the UK. The company is fully co-operating with these investigations." This statement is much less assuring than Murdoch's more sweeping assertion during the 10 August call.
If the problems are half as serious as the level of legal talent retained suggests, I would not be surprised if News Corp co-operates with the prosecutors to get this matter behind the organisation. Rupert might throw his son James to the wolves. If evidence of wrongdoing by senior figures is found, the lawyers can defend it while requiring the government to prove its case, but they cannot assist in a cover up a reality I learned the hard way. Rather they must withdraw from representation. And if that happens, we will all know they are fleeing a sinking ship.
A ruthless businessman makes loadsamoney out of an enterprise whose success turns out to be largely based on criminal activity. The police don't want to know, and the wheels of illegality are oiled by payments to corrupt officers. The politicians fawn over our ruthless friend because they are too scared to take him on. Al Capone's Chicago or Rupert Murdoch's London? Hard to tell, isn't it?
Margaret Thatcher sold her soul to Murdoch because he was willing to back her unequivocally when other media moguls weren't. She let this Australian turned American (for business reasons of course), who's never had much buy-in to British society, take over 40% of our media, leaving a legacy to all her successors that required them to conduct most of their business with him from their knees.
The Murdoch empire hasn't been all bad for Britain. Sky was a brave entrepreneurial gamble that nearly broke the bank, and has brought huge benefits to a wider community as well as massive profits for him.
But for the print media Murdoch has been a disaster, coarsening everything he touches.
Now the evils of his empire are apparent to all, what's to be done? Lots of people will want to put the press in the dock, but there are others more worthy of a good seeing to than the papers, some of whom, especially this one, have provided an invaluable public service picking up on all the wrongdoing ignored by the police, and ensuring that it can't go on being swept under the carpet.
Which, if it was left to the police, it would have been. It's hard to know how much further the Metropolitan police can sink in public esteem, but this has been another appalling week for them. And only a rigorous public inquiry will suffice to find out why they failed to investigate these obvious evils five years ago, and the full extent of the corrupt payments made to officers apparently only too happy, for cash, to assist the News of The World with their inquiries.
The politicians too come out of this badly. Why has David Cameron become a fringe member of Rebekah Brooks's social circle? Hasn't he got better things to do with his time? He better had from now on, methinks.
Cameron should screw his courage to the sticking place, and put in a call to Uncle Rupert in the States, and tell him he expects him not to further embarrass himself, or Cameron, by pursuing his bid to own 100% of Sky. It's inconceivable, after what was clearly institutionalised, and not merely isolated, criminality at the News of The World, that Murdoch's reward should be even more control over the British media.
Years ago, as national heritage secretary, I said the press was drinking in the last chance saloon it turned out it was me having my final round at the bar. I was a timely reminder to other politicians not to get above themselves.
Personally I am not for draconian press regulation. But I do think we can't go on with an organisation as inert and ineffective as the Press Complaints Commission. Regulation should be independent of the industry, but anyone who thinks there is an easy escape route out of these difficulties through the regulators should think again.
It would be nice if a neat distinction could be drawn between what is in the public interest, and what is merely what is of interest to the public. But it won't be easily achieved.
What we must avoid at all costs is the French situation where sexually primitive chaud-lapins like Dominique Strauss-Kahn can use their powerful positions to abuse women with impunity, knowing that by law the press cannot report what they do.
And as Jacques Chirac proves, it's a short step from being a sexual chaud-lapin to more pernicious acts of financial corruption.
I reiterate, we have to remember that it's thanks to some brave newspapers, and not to London's spectacularly useless bunch of plods, that all this wrongdoing is out there now, and can't be jammed back in without a lot of further bloodletting.
The criminal courts will, I hope, be very busy in the months and years ahead.
To comment on this story or any other about phone hacking, please visit our open thread
July 8, 2011 | guardian.co.uk,
Kowtowing to Murdoch will now be widely mocked. Cameron can only press on with the BSkyB deal at his peril
David Cameron at the No 10 press conference on 8 July, held in response to questions around the phone-hacking scandal. Photograph: Peter Macdiarmid/Getty
David Cameron's press conference was nearly a masterclass in damage limitation. How firm he sounded with his three-point actions, announcing two inquiries and the demise of the "failed" Press Complaints Commission. Yes, he would have accepted Rebekah Brooks's resignation. How shocked he was. It was "simply disgusting". Here was a wake-up call on the "culture, practice and ethics of the press" and, for now, the crucial BSkyB deal would be delayed. He strove with every sinew to show he gets it, he really does get the public outrage at the hacked phones of a murdered child and dead soldiers. But as the questions rained down, you could see the crisis slipping from his control. This was too little, too late, not quite grasping the changed rules of the old politico-media game.
Marina Hyde on Murdoch and politicians
- 'This is a land where a change in prime ministers constitutes the mere shuffling of Rupert's junior personnel'
He said "frankly" once too often, a word that rings alarm bells from politicians on the ropes. "We've all been in this together," he confessed. All the parties, "yes, including me", had cosied up to Murdoch, turning a blind eye to court political support. But paddling hard to stay afloat, he could not say the Murdoch bid should be stopped. He could not apologise for hiring a man who had already resigned over phone hacking. Every time he said he gave Andy Coulson "a second chance", that soundbite sounded weaker. What may some day do for him was his denial that he ever received private warnings, one from the Guardian, not to take Coulson into Downing Street, as further revelations were imminent. "I wasn't given any specific information I don't recall being given any information." Denials about who knew what often turn embarrassments into serious political danger.
At last Labour has kicked off the shackles: no more of the toadying to Murdoch that shamed Tony Blair and Gordon Brown. In this crisis Ed Miliband has made all the running and Cameron has been forced to follow, doing what he might not have done otherwise. Miliband was first to call for inquiries, first to call for axing the "toothless poodle" PCC, first to call for Rebekah Brooks's head. Above all, he is the one demanding the BSkyB bid be sent to the Competition Commission, pointing out the emptiness of Murdoch's assurances that Sky News would be independent.
He went further and called for a vote in the Commons on the take-over. He will use an opposition day debate on Wednesday for a vote on the BSkyB bid: there is a good chance the Lib Dems would vote with Labour against Murdoch how could they dare do otherwise? If they do, they are well and truly done for. Quite a few Tory MPs might join a vote against Murdoch. Over the years Labour leaders have been implored to regain their dignity and find the nerve to stand up to Murdoch. Ed wavered at first: he didn't dare strike out from the start. But now he has crossed that Rubicon there is no going back and it turns out to be liberating. The game has changed and any politicians creeping back to kowtow will be mocked from now on. The emperor lost his clothes.
Don't imagine this act of defiance will be painless or without consequence. Already a senior Miliband aide tells me they received a "very hostile" threat, not veiled at all, from a News International journalist warning: "You have made it personal about Rebekah, so we'll make it personal about you." Braggadocio maybe, but as the recipient of the threat said: "That's how they operate." And it can be terrifying. Bugging, blagging and Benji the Binman send shudders down many a spine. The spell is broken, but the terror may not be over.
In this whirl of arrests, denials and inquiries, keep your eye firmly fixed on the vital issue. Will Murdoch still get his hands on the rest of BSkyB? Other damage this government does can mostly be rectified but this would darken the future media landscape forever. It was Cameron's plan to gift Murdoch a power beyond imagining. How valuable? So precious that Murdoch was ready to cast away his highly profitable market leading newspaper selling 2.6m. To casual observers, it may not look important. He already owns 31% of Sky, so why not let him have the rest? Follow the money.
Already Sky's revenue is bigger than the BBC's: this merger would make far more. Bundling up the Times, Sunday Times and other papers with Sky News behind a paywall with sports and movie rights, puts them beyond serious competition. With this online blend, Murdoch expects to knock most other newspapers and their podcasting out of the market. Expensive shares to buy at first, within just two years huge sums would flow in. Buying up everything worth having, he would cripple the BBC always under Murdoch press attack.
Ofcom is the one regulator that might stop him: two years ago it did weaken Sky's grip on Premier League football and movies, forcing them to sell on the rights at a more reasonable price to others. Murdoch turned the pens of his papers against Ofcom and 10 days later Cameron made an unscheduled speech attacking "the quango state" in which, oddly, of all the quangos ripe for attack or ridicule, only one was singled out for the axe: Ofcom. Inside the industry, rightly or wrongly it was assumed Coulson was the conduit for this message from the News Corp puppet-master. So now Ofcom may get another chance to declare Murdoch not "fit and proper" to take over all of Sky. But if so, surely that must mean he is not "fit and proper" to own any of it?
Meanwhile, US law may enter the fray. A former Labour cabinet minister has alerted attention to the US Foreign Corrupt Practices Act, which makes an American company (News Corp) liable for colossal fines if any employee bribes a foreign official (the Met police) even if no one at head office knew. What's more, any whistleblower inside the company (sacked News of the World reporters), stands to win a percentage of that fine if they report acts of bribery.
Suddenly, what looked like a done deal is unravelling. Cameron's hiring of Coulson was part of his pact with Murdoch, willing and eager to sell press and broadcasting diversity to a monopolist who has made his fortune out of intimidating governments, avoiding taxes and trouncing regulators in exchange for political support. Labour sank humiliatingly low in its dealings with the old monster. Cameron hit rock bottom. Now that Labour has broken the omerta and is opposing Murdoch unequivocally, Cameron will press on with this deal at his peril.
August 4, 2011 | The GuardianThe FBI is widening its investigation of News Corporation's activities within the US to look at whether alleged computer hacking by one of its subsidiaries was an isolated case or part of a "larger pattern of behaviour", Time magazine is reporting.
Time suggests that the FBI inquiry has been extended from a relatively narrow look at alleged malpractices by News Corp in America into a more general investigation of whether the company used possibly illegal strong-arm tactics to browbeat rival firms.
The allegation of computer hacking was made by the retail advertising company Floorgraphics against the advertising branch of News Corp, News America. In a civil lawsuit against News Corp in 2004, Floorgraphics told a court that its website, protected by password security, had been breached 11 times over four months without authorisation.
The source of the alleged hacking was traced back to an IP address registered to News America in Connecticut.
Time has obtained a copy of a confidential fax sent in the same year by a major investor in Floorgraphics to News Corp's chief financial officer, David DeVoe. William Berkley wrote: "We have just discovered evidence that our proprietary and password-protected computer files has been breached by News America."
Berkley accuses the News Corp subsidiary of carrying out "some sort of corporate espionage" to obtain the password.
The CEO of News America was later promoted to be the publisher of the Murdoch newspaper the New York Post.
A spokeswoman for News Corp told Time that this was the only incidence of computer hacking that had been brought to the company's attention, and said News America had condemned the act as a violation of its standards.
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