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Old accusations against News Corp. in U.S. could get new scrutiny

July 29, 2011 |  1:44 pm

While British lawmakers and law enforcement officials continue to investigate News Corp. and its now-shuttered News of the World tabloid for illegal phone hacking, old accusations of corporate espionage made against the media giant in the United States could receive new attention in the weeks ahead.

Over the last decade, there have been several lawsuits against units of News Corp. with allegations of corporate espionage -- specifically hacking into computer systems to gain competitive information. In some cases, the companies that made those claims were later acquired by News Corp. and the suits went away or were settled.

The statute of limitations has likely expired for the bulk of these cases, but they could provide a hook for a fishing expedition into the operations of News Corp. by the government to determine whether hacking is something limited to its British tabloid or part of the broader culture at the company.

"They absolutely will look at past conduct," said Rebecca Lonergan, a former prosecutor in the U.S. attorney’s office who now teaches at USC's Gould School of Law. Lonergan said past behavior is something that the government would factor in to determine whether a criminal investigation is merited.

Although the statute of limitations would make criminal investigations difficult, "the old information can be relevant to to a prosecution based on new, recent conduct, and can even be part of such a prosecution," said former federal prosecutor Anthony S. Barkow, executive director of the New York University School of Law Center.

The case getting the most attention right now is a 2004 lawsuit filed by a New Jersey marketing company called Floorgraphics against News America, a publishing unit of News Corp. Floorgraphics competed against News America in retail advertising and marketing. 

That suit, filed in federal court in New Jersey charges that News America "intentionally, knowingly, and without authorization, breached FGI's secure computer system and repeatedly accessed, viewed, took, and obtained FGI's most sensitive and private information," the suit said. The matter was later settled and News Corp. bought Floorgraphics in 2009.

Last week, Sen. Frank R. Lautenberg (D-N.J.) asked the FBI and Justice Department to revisit the Floorgraphics case as investigators look into accusations that News of the World reporters tried to hack into voicemails of victims of the Sept. 11 attacks.

"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.

News America is not the only News Corp. company accused of bad behavior. News Digital Systems (NDS) faced similar charges as Floorgraphics' almost a decade ago by three companies: Vivendi's French pay TV operator Canal Plus, and U.S. satellite broadcasters EchoStar and DirecTV.

NDS makes set top box software aimed at hindering piracy and theft. On its corporate website, it is described as a creator of the "technologies and applications that enable pay-TV operators to securely deliver digital content."

However, in 2002, Canal Plus, Dish and DirecTV all claimed NDS had violated their security systems to gain information about their own piracy protection methods in the hopes of undermining them and gaining a competitive advantage.

In the case of DirecTV and Canal Plus, both suits went away when News Corp. struck deals with the companies. In 2002 News Corp. bought Vivendi's Italian pay-TV platform Telepiu and in 2003, it took control of DirecTV.

A News Corp. spokeswoman declined comment.

-- Joe Flint

RELATED:

New York Post told to save any discussion of phone hacking

Will News Corp.'s British troubles follow company to U.S.

Has News Corp. scandal put cloud over James Murdoch?

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