The phone-hacking scandal engulfing Rupert Murdoch’s British media operations threatened to cross the Atlantic on Wednesday, with calls by several lawmakers for investigations into whether Murdoch’s News Corp. violated U.S. laws.
Following a British newspaper’s report that Murdoch’s London-based journalists had tried to tap into phones of victims of the Sept. 11, 2001, attacks, Democratic Sens. Jay Rockefeller (W.Va.), Barbara Boxer (Calif.), Robert Menendez (N.J.) and Frank Lautenberg (N.J.) urged federal agencies to examine whether any U.S. phone accounts were hacked. So far, there are no signs of that occurring.
The critics also included the first prominent Republican, Rep. Peter King (N.Y.), who ripped Murdoch’s “yellow journalism” in a letter to FBI Director Robert S. Mueller III requesting an inquiry. King chairs the House Committee on Homeland Security.
The unfolding scandal has imperiled Murdoch’s British operations, leading to the withdrawal Wednesday of his $12 billion offer for the country’s largest satellite television operator, British Sky Broadcasting Corp. But it so far hasn’t touched his much larger and more profitable U.S. holdings.
News Corp., based in New York, is primarily a U.S. company, and any impairment of its U.S. operations could seriously damage the empire Murdoch has almost single-handedly assembled since inheriting two ailing Australian newspapers from his father in 1952. Among others, News Corp.’s businesses include the Wall Street Journal, the New York Post, the networks Fox TV and Fox News Channel, and 27 TV stations, including WTTG (Channel 5) and WDCA (Channel 20) in Washington.
The scandal has led to media speculation that Murdoch’s U.S. TV-station holdings could be challenged under federal requirements that license holders be of “good character.”
But that seems a long shot. Revocation of a broadcast license by the Federal Communications Commission has been rare throughout its history, especially since the FCC deregulated its licensing requirements in the 1980s, said veteran communications lawyer Andrew Jay Schwartzman. Further, the agency probably would examine only conduct involving the stations’ management in deciding on a license challenge, not behavior that took place in a foreign operation.
“The short answer is, based on what we know has happened so far, none of his licenses are in jeopardy,” Schwartzman said.
Rockefeller, chairman of the Senate Commerce Committee, is the first high-ranking American lawmaker to weigh in on Murdoch’s troubles. The West Virginia Democrat said he would “encourage” federal agencies to investigate whether News Corp. employees violated any U.S. privacy laws, especially relating to victims of the Sept. 11 attacks. “If they did, the consequences will be severe,” he said in a joint statement with Boxer.
Rockefeller and Boxer appeared to be responding to an article in London’s Daily Mirror, which reported that journalists from News Corp.’s defunct tabloid, News of the World, had contacted an unidentified New York City policeman to get private phone records of British citizens who had died in the World Trade Center. The policeman was quoted as saying he declined to turn over any records.
The Mirror’s report, however, has not been corroborated by any other news organization nor confirmed by official sources.
Lautenberg asked the Securities and Exchange Commission and Justice Department to investigate whether News Corp. employees had broken a law prohibiting American companies from bribing officials abroad. Journalists at News of the World allegedly bribed British police officers to gain information, a potential violation of the U.S. Foreign Corrupt Practices Act. “Further investigation may reveal that current reports only scratch the surface of the problem at News Corp.,” Lautenberg wrote.
Separate from News Corp.’s American media properties, News of the World maintained a Hollywood bureau and bragged about scoops involving American celebrities Lindsay Lohan and Britney Spears at the time it was hacking thousands of phones in Britain.
With the exception of King, Republican officials and their supporters have remained mostly silent about Murdoch, who last year directed a $1 million contribution to the Republican Governors Association on behalf of News Corp.
At the same time, Fox News Channel has given the story scant coverage compared to rivals CNN and MSNBC.
The scandal has also given ammunition to liberal groups, such as Washington-based Media Matters for America, that believe Murdoch has used his U.S. media assets to advance a conservative agenda.
Murdoch’s British newspapers — the tabloid Sun, the Times of London and the Sunday Times — have given him outsize influence over the country’s politics, but they are a small and diminishing part of News Corp.’s overall business. News International, the company’s British newspaper subsidiary, accounted for just 17 percent of News Corp.’s $33 billion in annual revenue last year and were considered marginally profitable.
By contrast, British Sky Broadcasting was a cash cow. A formerly failing company, it is Britain’s most lucrative pay-TV broadcaster, counting one in every three British homes as a subscriber. It consists of the Sky News channel as well as a more profitable satellite, Internet and digital phone operations.
Sam Hart, media analyst with Charles Stanley in London, estimated the company’s pre-tax profit for the 12 months ending June 30 at $1.47 billion.
News Corp. already owns 39 percent of the company, and had been seeking to buy the remaining 61 percent from public shareholders in a deal worth $12 billion. The withdrawal of its bid Wednesday marks a major hit to its long-term plans.
“It was central to News Corp.’s strategy, so for the time being, they have obviously been thrown off course,” Hart said.
After falling precipitously for several days, News Corp. stock traded up slightly Wednesday, closing at $16.36 per share.
Also Wednesday, a top News International attorney left his job. Tom Crone had overseen legal affairs for the British subsidiary for nearly 25 years, and was among the executives who approved a series of cash payments in 2007 to people who had threatened legal action against the News of the World for violating their privacy.
Things figure to get worse before they get much better in London. British authorities are now reviewing the company, seeking to determine if it remains a “fit and proper” media organization. If government officials determine that its illegal practices run deep, Hart said the company could be forced to divest itself of all or part of its current BSkyB stake.
Murdoch’s withdrawal from the BSkyB bidding came amid a wave of national outrage over the scandal, which exploded last week after the Guardian newspaper reported that News of the World reporters had hacked the phones of the families of dead British soldiers and a 13-year-old girl abducted and slain in 2003.
Prime Minister David Cameron, who won the support of Murdoch’s papers for his Conservative Party’s bid in the last election, called Wednesday for the company to “clean its stables.”
He reiterated an earlier statement that Murdoch should accept the resignation of Rebekah Brooks, News International’s chief executive. Officials are attempting to call Brooks, Murdoch and his son James, a News International executive, to testify in Parliament next Tuesday.
Brooks, who was editor of News of the World from 2000 to 2003 when some of the worst of the hacking cases allegedly took place, reportedly has offered to resign. But Murdoch hasn’t accepted. “She was right to resign,” Cameron said Wednesday on the floor of the House of Commons. “That resignation should have been accepted. There needs to be root and branch change at this entire organization.”
No matter the outcome, Rodney Barker, professor of government at the London School of Economics, said Murdoch’s mystique will never be fully restored.
“We tend to think of the business world as a world run by people who are hardly human,” Barker said. “Once it begins to look like Rupert Murdoch is not the unstoppable force that he has always been, the shine goes off a bit, the shares go down and people start saying someone else should take over. He’s harmed his profitability, [and] in the end his reputation is irreparably damaged anyway.”