James Murdoch could face criminal charges on both sides of the Atlantic
As phone hacking scandal leaves News Corp open to prosecution, James Murdoch looks less likely to inherit empire
By Dominic Rushe and Jill Treanor
Friday 8 July 2011 20.18 BST
JAMES MURDOCH AND NEWS CORP could face corporate legal battles on both sides of the Atlantic that involve criminal charges, fines, and forfeiture of assets, as the escalating phone-hacking scandal risks damaging his chances of taking control of Rupert Murdoch's US-based media empire.
As deputy chief operating officer of News Corp – the US-listed company that is the ultimate owner of News International (NI), which in turn owns the News of the World, the Times, the Sunday Times and the Sun – the younger Murdoch has admitted he misled parliament over phone hacking, although he has stated he did not have the complete picture at the time. There have also been reports that employees routinely made payments to police officers believed to total more than £100,000 in return for information.
The payments could leave News Corp – and possibly James Murdoch himself – facing the possibility of prosecution in the US under the Foreign Corrupt Practices Act (FCPA) – legislation designed to stamp out bad corporate behavior that carries severe penalties for anyone found guilty of breaching it – and in the UK under the Regulation of Investigatory Powers Act 2000 which outlaws the interception of communications.
Tony Woodcock, a partner at the City law firm Stephenson Harwood, said section 79 of the 2000 Act enabled criminal proceedings to be brought against not only a company, but also a director or similar officer where the offense was committed with their "consent or connivance" or was "attributable to any neglect on their part."
Woodcock said, "This could embrace a wide number of people at the highest level within an organisation, such as a chief executive – not just the individual who 'pushed the button' allowing the intercept to take place or someone (perhaps less senior) who encouraged or was otherwise an accessory to the offense, such as an editor."
While the UK phone-hacking scandal has been met with outrage in the US, the hacking itself is unlikely to prompt Washington officials into action. But because NI is a subsidiary of the US company, any payments to UK police officers could trigger a justice department inquiry under the FCPA. The 1977 Act generally prohibits American companies and citizens from corruptly paying – or offering to pay – foreign officials to obtain or retain business.
The Butler University law professor Mike Koehler, an FCPA expert, said: "I would be very surprised if the US authorities don't become involved in this [NI] conduct." He said the scandal appeared to qualify as an FCPA case on two counts: first, News Corp is a US-listed company, giving the US authorities jurisdiction to investigate allegations; and "second, perhaps more importantly, the act requires that payments to government officials need to be in the furtherance of 'obtaining or retaining' business. If money is being paid to officials, in this case the police, in order to get information to write sensational stories to sell newspapers, that would qualify," he said.
Koehler said the US justice department was increasingly keen to bring cases against individuals as well as companies, because prosecuting people brought "maximum deterrence." He added, "Companies just pay out shareholders' money. There's not much deterrence there."
Tom Fox, a Houston-based lawyer who specializes in FCPA cases and anti-corruption law, said most corporate cases were settled before going to court. But for individuals who are successfully prosecuted the penalties are severe. In 2009 the former Hollywood movie producer Gerald Green and his wife, Patricia, were jailed for six months in the first criminal case under the FCPA. The Greens, whose credits included Werner Herzog's Rescue Dawn, were convicted of paying $1.8m in bribes to a government official in Thailand in exchange for contracts to manage the Bangkok international film festival.
FCPA charges can carry up to five years in jail for each charge, but the Greens' short prison sentence was not the harshest element of their sentencing. The "biggest hammer" prosecutors hold is forfeiture of assets, said Fox. "The Greens lost everything. Their house, savings, retirement plan. They are destitute now."
Bringing an FCPA case against the company would be far easier than bringing an action against James Murdoch. As yet there appears to be no evidence that he was directly linked to authorizing the police payments. "If you don't know about it, that is a valid defense for an individual," said Koehler.
In New York, media executives believe that, with or without an FCPA case, James Murdoch has already fatally damaged his chances of taking his father's crown. One said, "There has been a sense of unraveling at News Corp for a while. The Daily, MySpace, Project Alesia – they look like News is chasing rainbows. [Rupert] Murdoch is looking old. It affects his ability to appoint an heir and I don't think James even has the backing of his family any more."
Speculation is that Chase Carey, the chief operating officer, is most likely to take the top slot when and if the media mogul steps aside.
"He is the ultimate Murdoch operative. He is not interested in the trappings of the media business. What would he do? Close the New York Post [YAY! -Marie], sell the Times. Why not? It's a rational thing to do."
http://www.guardian.co.uk/media/2011/ju ... CMP=twt_gu