News Corp.’s possible criminal problems in the U.S.

July 26, 2011

Rupert MurdochLast week, the U.S. Department of Justice announced that it was preparing subpoenas for the first U.S. investigation into the phone hacking scandal currently surrounding News Corp.

The Justice Department will be specifically probing into allegations that News Corp. employees bribed foreign officials (in violation of the Foreign Corrupt Practices Act) and hacked into the phones of 9/11 victims.

The announcement comes days after the FBI announced its own investigation into the phone hacking of 9/11 victims.

For those who haven’t been closely following the full story, here’s a brief overview.

The allegations and investigations against News Corp for its phone hacking actually started in 2005 and continued through 2007.

Those investigations ended concluding that the practice was limited to celebrities, politicians and members of the British Royal Family (along with the arrests or resignation of several News Corp employees).

The issue was mostly dormant until July 4, 2011, when the British newspaper The Guardian reported that the voicemail of murdered 13-year-old Milly Dowler was hacked (i.e. listened to and deleted) by the News of the World, a major British tabloid owned by News Corp.

This revelation sparked public outrage in Britain, and further investigations revealed that phone records of relatives of British soldiers killed in action and victims of the 7/7/2005 terror attack and their relatives may also have been hacked.

From there, the scandal exploded.

Because of a boycott by advertisers, News of the World ended its 168-year publication run on July 10.

Allegations, including additional hackings of records, such as of those of former British Prime Minister Gordon Brown, and of bribing police officers to obtain illicit information, began to surface.

Currently, because of the scandal, News Corp. is facing a wide array of actions by the British government, not to mention the public backlash it has caused.

With the actions by the U.S. DoJ and FBI, it looks like the company’s legal troubles are following it overseas.

How much will these investigations harm News Corp.?

It depends on what is found.

News Corp

If the only thing the investigations turn up is more misconduct by News Corp. employees and agents in Britain, even if those employees did hack records of U.S. citizens (i.e. families of 9/11 victims), the company will get off easy.

To be sure, they will face criminal sanctions and increased public backlash in the U.S.

However, that would be nothing compared to any revelations of News Corp. bribing police officers, public officials, or politicians in the U.S (for example, bribing U.S. Senators or local police for information).

If that were to happen, the company would face a very real chance of its broadcast licenses being stripped by the FCC – a death sentence for its local news outlets, not to mention its national Fox News cable news channel.

If these criminal actions are truly as endemic to News Corp. as many of the British investigations are suggesting, it’s possible, if not likely, that evidence of such misconduct in the U.S. will surface.

We’ll have to wait and see what the U.S. investigations uncover to know for sure.

Even without such catastrophic legal consequences from the criminal investigations, News Corp. still has a major public image battle to fight (not to mention civil suits from investors).

Either way, when the dust settles, News Corp.’s influence in the U.S. may be dramatically different than it was prior to the scandal.

For a more expansive overview of the scandal, check out this article from Reuters.