30 Jun 2014

What does the phone-hacking trial mean for News Corp?

The acquittals of Rebekah Brooks and five other defendants at the phone hacking trial was good news for Rupert Murdoch. But what, asks Martin Hickman, is the longer-term outlook for his global empire?

After five years of aggravation over the News of the World, the acquittals of Rebekah Brooks and five other defendants at the phone hacking trial was good news for Rupert Murdoch.

With Ms Brooks, it’s partly personal. She and the 83-year-old newspaper proprietor have a close relationship. As the veteran newsman remarked in the turbulent days of July 2011, she was his “priority”. As a former chief executive of News International, his UK newspaper group, Ms Brooks was also the most senior figure in the American’s business empire to be charged with criminal newsgathering.

Whatever relief he may have upon hearing those verdicts on Tuesday, though, the longer-term prognosis for Mr Murdoch’s global empire is altogether more troubling. Hacking has already wreaked havoc with his plans: he was forced to close the News of the World, lost the £7bn BSkyB bid, and had a “humble day” in front of MPs when he couldn’t remember much about his $60bn multi-media global empire.

News Corp has spent more than $400m dealing with the fallout from phone hacking, including settling more than 700 civil suits from victims.

Corporate charges?

By far the most damaging allegation before court 12, though, was that senior managers knew about the wrongdoing. Tuesday’s only guilty verdict – against Andy Coulson – proves that one of Mr Murdoch’s editors plotted to hack phones.

But in June 2012, even before the jury began work, three News of the World news editors (Greg Miskiw, James Weatherup and Neville Thurlbeck) had pleaded guilty at Southwark crown court to conspiring to hack voicemails. Mr Justice Saunders, the hacking trial judge, will sentence them and Coulson next week.

These convictions leave the door open for corporate charges. The Regulation of Investigatory Powers Act 2000 (RIPA) – the legislation under which the hackers were convicted – states that where an offence was “committed with the consent or connivance of, or to be attributable to any neglect on the part of a director, manager, secretary or other similar officer of the body corporate… he (as well as the body corporate) shall be guilty of that offence and liable to be proceeded against and punished accordingly.”

That means News International (re-branded News UK), publisher of the Sun, Times, and Sunday Times, could end up in the dock of an English court. Indeed, in May 2012 the Metropolitan Police formally told News International it was under investigation for a corporate breach of RIPA.

Regulatory approval

Worse still, the Guardian has reported that detectives from the Metropolitan Police have informed Mr Murdoch that they want to interview him as a suspect in its ongoing inquiry into hacking, Operation Weeting.

Any prosecution could affect Mr Murdoch’s highly cash-generative US TV stations, which – unlike his ailing British newspapers – require regulatory approval. As in UK TV, you must be a fit and proper corporation to run a TV station.

Interestingly, in June 2012, less than a month after being informed of the corporate investigation, Mr Murdoch announced he was splitting his business into two: News Corp remained in existence, but the more profitable TV and film assets such as 21st Century Fox and Fox News were hived off into a separate entity: 21st Century Fox.

How much the TV licences are under threat will hinge on the US regulators and News Corp’s lawyers, who will no doubt argue that the wrongdoing was a virus in the British newspaper arm rather than a heart defect in the body corporate.

Another problem

But even if it escapes lightly from the Metropolitan Police’s investigation, News Corp may face another problem in the United States, where it is listed on the New York Stock Exchange. The US Foreign Corrupt Practices Act bars companies trading in America from bribing foreign employees.

The Metropolitan Police’s Operation Elveden into bribery has already convicted prison and police officers for taking bribes from the Sun. Directors found guilty of breaching the FCPA can be jailed for five years, though the typical penalty is a large fine. Mr Murdoch, of course, can afford to hand over hundreds of millions of dollars without too much humility.

There is little doubt, though, that he is running out of time to recover from the hacking cancer. Now 83, by his own account he had “a bad back accident” this year. He has been firing fewer barbs on Twitter of late.

Although he has wriggled out of many a trap before, the “Dirty Digger” is looking more physically and reputationally frail. It does seem that after an extraordinary career spanning seven decades and three continents, we are finally seeing the beginning of his end.

Then again…

Martin Hickman is a freelance journalist who co-wrote Dial M for Murdoch. He is publishing an inside account of the trial by Peter Jukes at hackingtrial.com. He is a member of Hacked Off.