News Corp. tries to build good will in wake of hacking scandal
Looking to build some good will with British lawmakers, News Corp. said it would no longer pay legal bills for Glenn Mulcaire, the private investigator that was convicted in 2007 of hacking into phones for the media giant's now shuttered News of the World tabloid.
That News Corp. was still covering Mulcaire's legal tab was a subject of much interest to Parliament's Culture, Media and Sport Select Committee, which on Tuesday grilled News Corp. Chairman Rupert Murdoch and his son James, who is the company's deputy chief operating officer. Not only did the two endure verbal attacks during the hearing, but Rupert Murdoch also was pelted with foam by a spectator who then bore the brunt of the mogul's wife Wendi, who flung herself on the attacker and landed a blow.
In a statement, News Corp.'s Management and Standards Committee, which is the company's in-house watchdog, said it had decided to "terminate any arrangement to pay the legal fees of Glenn
Mulcaire with immediate effect." News Corp. also retained Harbottle & Lewis to answer questions from the Metropolitan Police Service and Parliament.
The moves are two of many the company has made in the last few days as it tries to put out a fire that threatens to tear through the global media conglomerate. News of the World was found to not only have hacked into the voice mails of celebrities and the royal family, but even victims of crime. Murdoch and his son tried to apologize to Parliament for the actions of News of the World while at the same time claiming to have no knowledge just how corrupt the culture within the paper had become.
Parliament members were not buying it though and many attacked the Murdochs for their handling of the crisis. Rupert Murdoch claimed he was unaware of what has going on at the paper, which Parliament member Tom Watson said "is revealing in himself what he doesn’t know and what executives chose not to tell him.”
Despite his lack of knowledge about the day-to-day operations of News of the World, Murdoch told the committee he was "the best person to clean this up."
The hacking debacle not only cost News Corp. the 168-year-old News of the World, it also derailed the company's plans to buy outright the powerful British broadcaster BSkyB. Two top executives at the company -- Les Hinton and Rebekah Brooks, each of whom had stints overseeing News of the World -- have had to resign, and Brooks was subsequently arrested. The imbroglio has spread to Scotland Yard, where two top officials also quit because of their close ties to News of the World.
In the United States, there continues to be a probe into whether there were attempts by News Corp. operatives to hack into voice mail accounts of 9/11 victims and their families, a claim that has yet to be substantiated. Asked about it by Parliament, Rupert Murdoch said there was no evidence of that.
Still, analysts are concerned that if News Corp. is found guilty of wrongdoing overseas or of violating the Foreign Corrupt Practices Act, it could affect the company's vast holdings here, which include television stations licensed by the Federal Communications Commission as well as the 20th Century Fox movie studio, the Fox network and the Fox News cable channel.
Some lawmakers and advocacy groups are also looking to turn the heat up on Murdoch and News Corp. Sen. Frank R. Lautenberg (D-N.J.) on Wednesday sent a letter to the FBI and the Department of Justice to remind the two agencies that News Corp. has been accused of bad behavior here in the past.
In an amended complaint filed in 2006 in a New Jersey federal court, a marketing company called Floorgraphics sued a unit of News Corp., alleging among other things that News Corp.'s News America hacked into its computer systems and took sensitive information. The suit was later settled and News Corp. ended up buying Floorgraphics in 2009.
Lautenberg said in his letter that in 2005 he was informed by Floorgraphics that the FBI and Secret Service launched an investigation into the company's allegations against News America. "I wanted to make sure that you were fully aware of the case of Floorgraphics and News America as it may be relevant to your current investigation," Lautenberg wrote.
The News of the World flap has so overwhelmed News Corp. that the company has four crisis communications consultants working with it. Besides longtime advisors Rubenstein Communications and Washington firm Glover Park, News Corp. has also retained the firm Edelman to advise it on its proceedings in Britain and Sard Verbinnen & Co., a financial communications firm.
News Corp.'s stock, which has taking a beating over the last week, was up for the second day in a row and was at 16.46 in midday trading.
-- Joe Flint