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In lawsuit, investors claim 'a culture run amok' at Rupert Murdoch's News Corp.

July 11, 2011 |  9:41 am

Lawsuit agains Rupert Murdoch's News Corp. revised
The News of the World phone-hacking scandal continues to be an out-of-control brush fire for Rupert Murdoch's media empire.

Although Murdoch's News Corp. on Sunday shut down the 168-year-old tabloid in an effort to quell the controversy, British officials now are casting a wary eye on the company's bid to acquire 100% of Britain's largest pay-TV service -- British Sky Broadcasting. News Corp. currently owns 39% of BSkyB. Murdoch on Sunday flew to London to manage the crisis.

But on Monday, embers from the scandal touched down in the U.S.  A group of institutional investors led by Amalgamated Bank in New York revised a lawsuit filed earlier this year against News Corp. to include claims of "improper conduct" at high levels of the media company.  

Amalgamated Bank, which is leading the legal effort on behalf of several investment funds, first sued News Corp. in March in a Delaware court after Murdoch agreed to spend $675 million to buy daughter Elisabeth Murdoch's British television production company, Shine Group. 

The bank has been asserting that the 80-year-old media mogul operates News Corp. "as his own private fiefdom with little or no effective oversight from the board." 

On Monday, Amalgamated amended its complaint to fold in accusations stemming from the News of the World scandal. The lawsuit notes that at least two longtime Murdoch newspaper executives -- Rebekah Brooks and Andy Coulson -- have been implicated in the scandal. On Friday, Coulson, the former newspaper editor and a onetime aide to British Prime Minister David Cameron -- was brought in for questioning by Scotland Yard.  The entanglements between the newspaper, politicians and police have made the scandal front page news in Britain -- and the U.S.

The bank said Murdoch's son James Murdoch -- who in March was elevated to the No. 3 position within News Corp. as its deputy chief operating officer -- was deeply involved in the wiretap scandal. James Murdoch acknowledged that he authorized payments to some of the victims of the newspaper's phone hacking. He has been in charge of News Corp.'s European and Asian operations since 2007.  

"These revelations should not have taken years to uncover and stop," the bank said in its complaint, which now stands at 94 pages, compared with an earlier version that totalled 46 pages.

"These revelations show a culture run amuck [sic] within News Corp and a board that provides no
effective review or oversight," Amalgamated claimed. "In fact, Brooks was promoted while the scandal has been unfolding. Murdoch's son and fellow board member, James, has been personally involved in the cover-up of the extent of the scandal, as he finally confessed on July 7."

The bank contends that "given the close relationships with Murdoch, Brooks and Coulson, it is inconceivable that Murdoch and his fellow Board members would not have been aware of the illicit news gathering practices" at the News of the World.

"Yet, the Board took no real action to investigate the allegations until July 7, 2011, when Murdoch selected two of his codirectors to deal with the imbroglio," the lawsuit said.

A News Corp. spokeswoman declined to comment.

RELATED:

News Corp.'s News of the World debacle will have big aftershocks

News Corp. shares hammered in wake of British phone hacking scandal

News of the World: News Corp., competitors may as well be covering different scandals

-- Meg James

Photo: A photo illustration of various front pages of London newspapers reporting on the closing of News of the World. Credit: Stewart Stanley / Getty Images

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