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News Corp.'s U.K. troubles officially land on shores of U.S.

July 14, 2011 |  2:11 pm

MURDOCHGENACHOWSKI

Despite its best efforts to contain the fire that is sweeping through its British media holdings to one side of the Atlantic, Rupert Murdoch's News Corp. is officially on the defensive on both sides of the ocean.

With the media giant already facing intense scrutiny from the British Parliament and Scotland Yard in connection with charges that the voice-mail-hacking habits of its now shuttered News of the World tabloid went beyond the royal family and celebrities and included victims of crime and terrorism, now the United States is getting involved as well.

The Los Angeles Times confirmed Thursday that the FBI is launching its own probe into whether operatives working for News Corp. newspapers hacked into the voice-mail accounts of victims of the 9/11 attacks here. A News Corp. spokeswoman declined to comment.

The move comes after several prominent politicians, including Sen. Barbara Boxer (D-Calif.) and Rep. Peter King (R-N.Y.), have called for investigations into News Corp. activities to see if any U.S. laws were broken by the company.

"If these allegations are proven true, the conduct would merit felony charges for attempting to violate various Federal statutes related to corruption of public officials and prohibitions against wiretapping," King wrote in a letter to the FBI.  "Any person found guilty of this purported conduct should receive the harshest sanctions available under law," the letter added. King is chairman of the House Committee on Homeland Security.

Although the hacking scandal has so far been largely contained to the News of the World, the company also has significant holdings in the U.S., including the Fox TV network, Fox News, the Wall Street Journal and the New York Post. There have yet to be any accusations that News Corp.'s U.S. media properties engaged in any illegal activities.

Also on Thursday, Federal Communications Commission Chairman Julius Genachowski told Congress that allegations of hacking by News Corp. should be investigated, although he did not say whether his agency would handle such a matter.

Still, the remarks from Genachowski, made at a congressional hearing on Internet privacy, are a shift from earlier this week, when he said he did not expect the FCC to get involved with the hacking scandal in any way.

Given that the FCC grants News Corp.'s Fox' the licenses to operate 27 television stations that reach almost 40% of the country and that the agency has a policy regarding character requirements for broadcasters, some watchdogs think the commission should be proactive on the issue.

Questions about how News Corp. operates in the United States "need to be raised now," Ilyse Hogue, a senior advisor at Media Matters for America, a nonprofit advocacy group, said earlier this week.

Often, the FCC will launch an investigation only after there are complaints or challenges to a broadcaster's fitness to hold a license. That approach is sometimes criticized as being akin to a fire department that sees smoke but waits until a someone calls in an alarm before responding.

"Waiting for proof beyond a shadow of a doubt where lines were crossed gets us to where the U.K. was," Hogue said, adding that "criminal investigations absolutely need to happen right away."

However, veteran Washington insiders have so far expressed doubt that the company's headaches in Britain could hurt its standing with regulators here, although they are closely monitoring the situation.

"If News Corp. or one of the Murdochs or other senior officers or directors got a criminal conviction, maybe, on a really good day, with wind at your back, calm seas, and a nuclear turbine you might get something going," attorney John Hane of Pillsbury Winthrop Shaw Pittman has said. "But I really doubt it."

Rebecca Arbogast, a media analyst at Stifel, Nicolaus & Co., said on Tuesday that "a lot of people might argue what was going on there indicated something less than high character, but I do not see the government stepping in and doing anything here." Later in the week, the firm acknowledged that the story still had legs and bore watching, but did not think it was necessary to hit the panic button.

"We continue to believe it is very unlikely that News Corp.'s actions, particularly if confined to the U.K., will lead to the company losing its U.S. broadcast licenses," it said in a report.

Earlier this week, News Corp. pulled the plug on its $12-billion-plus ambitions to acquire the 60% stake of powerful British satellite broadcaster BSkyB that it doesn't already own. Despite the retreat, the company continues to be attacked by rivals and lawmakers in Britain. Murdoch and his son James, seen by many followers of the company as most likely to eventually succeed his father at the top of the media behemoth, are expected to testify before a parliamentary committee next week.

In an interview published Thursday by the News Corp.-owned Wall Street Journal, Rupert Murdoch said the harm to the company from the scandal is "nothing that will not be recovered" and that the company has "a reputation of great good works in this country."

When asked if the constant coverage was wearing on him, the 80 year-old mogul said he's "just getting annoyed" and that he'll "get over it."

-- Joe Flint

RELATED:

FBI opens probe into Murdoch's News Corp.

Murdoch and son to appear before Parliament

Will News Corp.'s U.K. problems follow company to U.S.?

Photo: FCC Chairman Julius Genachowski, left, with News Corp. Chairman Rupert Murdoch at the Wall Street Journal's All Things Digital conference in June: Credit: All Things Digital

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