Sunday, March 18, 2012

#Leveson: Paul Valley On Murdoch's Sleaze...

Rupert Murdoch's luck may be running out, judging by a conversation I had with a group of British and US corporate lawyers. Across the Pond they see Murdoch's newspaper empire unravelling like a fraying sleeve. It seems that whatever wily move the Dirty Digger makes to salvage his position at his scandal-hit British papers, a new revelation pops up to deepen the crisis.
Murdoch first became alarmed when it became clear that his journalists had not only listened to celebrities' mobiles in search of gossip column fodder, but had hacked the phone of murdered schoolgirl Milly Dowler.

Rupert's dramatic response to the wave of public revulsion took everyone by surprise. He closed down the world's biggest newspaper, withdrew his longstanding bid to take full control of the money-spinning broadcaster BSkyB, and appeared before a parliamentary committee to announce himself "humble". But in the States, a US lawyer told me, it was felt Murdoch had not done enough to forestall a revolt by a third of shareholders at the annual meeting of his US holding company, News Corp.

Again, here in the UK it looked as if Murdoch had acted decisively after Scotland Yard revealed that up to 5,795 people might have had their phones hacked. He set up an internal Management and Standards Committee, which turned over 300 million emails and internal papers to police: 10 senior Sun journalists were arrested.

Another apparent coup was the hurried launch of The Sun on Sunday to replace the News of the World. But the very next day, the Leveson inquiry heard the gravest accusation yet against News International (NI) – that it had set up a secret payments system to bribe police and other public officials. He was snookered again.

Then, by lifting the suspension imposed earlier on the arrested hacks, lawyers suggest, he brought himself within the provisions of the much stricter 2010 Bribery Act 2010, which had just come into force. That has implications back in America thanks to the Foreign Corrupt Practices Act, which makes it illegal for US companies to bribe officials abroad.

From New York last week, Rupert's son James, who stood down as executive chairman of NI, sent an unsolicited letter to the parliamentary committee accepting responsibility for not uncovering wrongdoing at NI, but insisting he had not misled Parliament over the affair. The Murdochs hope to head off a damning report from the committee which could end their prospects of hanging on to even a minority share in BSkyB.

But just as Rupert was smiling at pulling off a deal to offload his stake in NDS – a US TV technology provider accused of computer hacking when James was on the board – he got news of the re-arrest of Rebekah Brooks on suspicion of conspiring to pervert the course of justice.

"Each time Murdoch has amputated too little and too late," one US corporate lawyer told me. The FBI has joined the US Treasury's Foreign Corrupt Practices investigation into News Corp and asked to see all witness statements being taken by Scotland Yard. And it is investigating a Murdoch subsidiary in Russia to see whether the entire company is shot through with "a culture of corruption".

News Corp could probably weather a rumoured $2bn fine. But the Murdoch reputation might not survive. And if Rupert, at 81, were to bow out, no one else high in News Corp has ink in their veins. That could mean the sale of all their London papers, which generate relatively little profit, but huge amounts of trouble.