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Category: Elisabeth Murdoch

Shareholders add corporate espionage charges to News Corp. suit

Photo: Rupert Murdoch. Credit: Louis Lanzano / AP Contending that corruption is rampant throughout media giant News Corp., a group of shareholders have added allegations of corporate spying to a complaint against the company's chairman and chief executive Rupert Murdoch and other board members.

Tuesday's action amended a lawsuit filed in March in a Delaware court by the New York-based Amalgamated Bank, which manages several investment funds that have stock in News Corp. 

The suit maintains that News Corp. board members have failed shareholders by allegedly shirking their responsibility to oversee the media company's practices and business decisions.

News Corp. declined to comment on the litigation.

"For years, highly improper (and at times illegal) conduct has been carried out throughout News Corp. subsidiaries around the world without any board oversight or restraint," the amended complaint said.

The latest allegations center on suspected corporate espionage that occurred more than a decade ago at two of the company's U.S. business units, News America Marketing, which distributes coupon inserts for newspapers, and News Digital Systems Group, which provided TV set-top software to deter the theft of satellite signals.  

"Two subsidiaries, News America Marketing and NDS Group, were accused by multiple parties of stealing computer technology, hacking into business plans and computers and violating the law through a wide range of anti-competitive behavior," the lawsuit said.

The suit went on to say that News America "attempted to drive its competition out of business, by among other things, illegally hacking a competitor’s password-protected website" nearly a dozen times over a several month period. 

Eventually, News Corp. paid more than $650 million in settlements to three of News America's competitors. It also bought one of those rivals, a New Jersey marketing company called Floorgraphics Inc.

The Amalgamated lawsuit initially centered on issues of nepotism after News Corp. paid $675 million for Elisabeth Murdoch's London-based television production company. The complaint has since grown to include charges related to the British phone hacking scandal and, now, the corporate espionage.

Also included in the suit is a reference to a deal Murdoch made to buy News Corp. shares from mogul John Malone as part of a deal to sell satellite broadcaster DirecTV to Malone's Liberty Media.

That deal, the suit alleges, "protected Murdoch but gave up what could have been a multibillion-dollar profit on News Corp.'s investment in DirecTV."

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 -- Meg James

 Photo: Rupert Murdoch. Credit: Louis Lanzano / AP

Rupert Murdoch's compensation swells to $33.3 million in 2011

RupertMurdoch3Story

News Corp. Chief Executive Rupert Murdoch continues to be one of the most richly compensated executives in America -- collecting $33.3 million for fiscal year 2011.

The 80-year-old media mogul's salary and stock package soared 46% over 2010 because of the addition of a $12.5-million bonus.  

The company's top executives have been struggling to contain widespread damage from the British phone hacking scandal. The crisis exploded in July with revelations that reporters for Murdoch's now-defunct News of the World tabloid in London eavesdropped on cellphone messages of royal family members, celebrities, sports figures, crime victims and fallen soldiers. 

Rupert Murdoch and his son James Murdoch, who runs the company's European operations, are expected to be called before a high court later this year to account for the scandal.

Rupert Murdoch qualified for the full amount of his target bonus in 2011 because of his leadership "through the recent economic downturn, positioning the company for long-term growth and ongoing strategic development," according to the News Corp. proxy which was filed with the Securities and Exchange Commission on Friday morning.  The company's fiscal year ended June 30.

In 2010, Murdoch collected $22.7 million.  Each year he receives an $8.1-million base salary, an amount which has long raised the eyebrows of corporate governance experts because it is not linked to the company's financial performance.  Murdoch also was paid $8.5 million in stock awards.

His second-in-command, Chief Operating Officer Chase Carey, received $30.2 million in fiscal 2011.  Carey's compensation included a $4-million base salary, a $10-million bonus and $15.2 million in stock awards.

James Murdoch, 38, who has been under increasing pressure for his handling of the British phone hacking crisis, was paid $17.9 million.  He received $3 million in salary, $8.3 million in stock awards and a $6-million bonus.

James Murdoch's compensation soared 74% over 2010 when he received $10.3 million.  He was elevated to the No. 3 position in the company in late March -- three months before the phone hacking scandal exploded into front page news in Europe, Australia and the U.S.

James Murdoch is expected to be called back before a committee of the British Parliament to further explain his role in the scandal.  After he answered questions this summer, two former associates challenged his account of when he first learned of the widespread nature of the illegal activities at the News of the World. 

James Murdoch "played an important role during fiscal 2011 in developing the company's key businesses and investments in Europe, Asia and the Middle East," the filing said. He also "successfully transitioned into his new role as deputy chief operating officer ... expanding his responsibilities."  

Roger Ailes, chairman of the popular Fox News Channel, received $15.6 million in compensation.  That included a $5-million base salary, a $1.5-million bonus, $8 million in non-equity incentive compensation and nearly $282,000 for corporate jet privileges, a car and driver, and personal security.

Chief Financial Officer David F. DeVoe's compensation package topped $18.2 million -- more than double the $7.1 million he received in 2010.  DeVoe's compensation jumped because of the addition of a $5-million bonus and $9.5 million in stock awards.

News Corp. separately said that it was nominating James W. Breyer, a venture capitalist, to serve on the company's board of directors.  Two directors are stepping down -- Kenneth E. Cowley and Thomas J. Perkins.  Five years ago, Perkins resigned from the Hewlett Packard Co. board after that company had hired an investigator to obtain his phone records.

News Corp. did not say why Perkins or Cowley, both longtime directors, were exiting after the company's annual meeting in October. 

News Corp. had planned to nominate Murdoch's 43-year-old daughter, Elisabeth Murdoch, to the board. However, in August she delayed her nomination in the wake of the company's various controversies, including shareholder lawsuits filed after News Corp. paid $675 million to buy her London-based TV production company Shine Group. Of that amount, Elisabeth Murdoch received $214 million.

In a departure, News Corp. said it would hold its annual meeting with shareholders Oct. 21 at the Fox lot in Los Angeles.  News Corp. typically holds its annual meeting in October near the company's headquarters in New York.

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Photo: Rupert Murdoch. Credit:  Ben Gurr / Reuters

Elisabeth Murdoch makes $214 million on Shine sale

Rupert Murdoch's daughter Elisabeth Murdoch collected $214 million from the sale of her British TV production company, Shine Group, to her father's media company earlier this year.

In April, News Corp. paid $675 million to buy Elisabeth Murdoch's 10-year-old company Shine, which produces such TV programs as "The Biggest Loser" and "MasterChef." Of that amount, approximately $480 million was earmarked for Shine's equity partners, News Corp. said in its annual report filed Monday with the Securities and Exchange Commission.

ElisabethMurdoch Until now, it was unclear exactly how much Elisabeth Murdoch made on the sale. 

Elisabeth Murdoch was the majority shareholder, owning 53% of Shine, a company that she steadily built by acquiring small TV production companies in various countries. In 2008 she bought U.S.-based Reveille, which produces "The Office" for NBC.

Sony Pictures Entertainment owned a 20% interest in Shine.

News Corp. said $135 million of the purchase price went to retire Shine's debt and pay other liabilities. Another $60 million, part of the $480 million attributed to equity, has been set aside in escrow to "satisfy any indemnification obligations," the company said. Elisabeth Murdoch, the document said, "is entitled to her proportionate share of amounts that are released from escrow," meaning she will likely receive more than the initial $214-million payment.

The purchase of Shine by News Corp. quickly became controversial, triggering shareholder lawsuits. In one, a New York bank representing several investment funds alleged that Rupert Murdoch operates News Corp. as a "family candy store" to pursue pet projects and reward his children and other family members. That suit, filed in a Delaware court, contends that Shine was worth far less than the $675 million that News Corp. paid.

When News Corp. announced in March that it was buying Shine, Rupert Murdoch said that Elisabeth Murdoch, 42, would be joining him and her two brothers -- Lachlan and James -- on the News Corp. board.

However, earlier this month, following the filing of the shareholder lawsuits and a phone-hacking scandal that has roiled the company and the British political establishment, News Corp. said that Elisabeth Murdoch had decided to delay her appointment to the board. 

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Photo of Elisabeth Murdoch. Credit: Tim Matthews / Allstar

Elisabeth Murdoch won't join the News Corp. board as planned

 Elisabeth Murdoch

The furor over Rupert Murdoch's management of News Corp. continues to reverberate. 

The mogul's daughter, Elisabeth Murdoch, had been scheduled to join her father and two brothers on the board of News Corp. after selling her British television production company to News Corp. earlier this year. However, on Friday, the company announced that those plans -- announced in March by Rupert Murdoch, chairman and chief executive of the media conglomerate -- had been put on hold.

"Elisabeth Murdoch suggested to the independent directors some weeks ago that she felt it would be inappropriate to include her nomination to the board of News Corp. at this year's annual general meeting," Viet Dinh, one of News Corp.'s independent directors, said in a statement distributed by News Corp. Dinh is chairman of the media company's corporate governance committee.

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

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.

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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

Elisabeth Murdoch's Shine International moves headquarters to London from L.A.

Elisabeth Murdoch's rapidly growing international sales and distribution arm for her TV production company Shine is buttoning up its headquarters in Los Angeles and moving to London.

ElisabethMurdochShine International, which sells such successful television formats as "MasterChef" and "The Biggest Loser," will keep a small presence in L.A., the company said in a statement Tuesday.

However, the division's president, Chris Grant, has decided not to relocate to Britain. He will stay on with Shine for six months to help with the transition.

Grant's exit comes in the wake of the resignation of Howard T. Owens, the longtime managing director of Shine's U.S. television company Reveille. Owens' employment contract ends in June. He is being replaced by Eden Gaha, executive producer of "Celebrity Apprentice."

Owens' and Grant's departures are significant because they represent the completion of the management change-over from the Ben Silverman era of Reveille to one that better reflects the tastes and discipline of Murdoch, the daughter of News Corp. Chairman Rupert Murdoch.

Silverman, the former NBC programmer, sold Reveille -- which had been something of a seat-of-the-pants operation with big credits including the U.S. remake of "The Office" -- to Murdoch in 2008 for about $125 million. Silverman relied heavily on four executives, including Owens and Grant, to run the operation, and Silverman's underlings stayed on with Reveille after Murdoch acquired the production company.

“At this stage of the company’s growth, Shine International needs its headquarters alongside our teams that manage and exploit group formats, brands and digital rights, with local sales experts in our global production centers," Shine Group President Alex Mahon said in a statement. She will assume overall responsibility for Shine International in the interim.

The restructuring does not affect former Fox Studios chief Emiliano Calemzuk, who continues as chief executive of Shine Group Americas, in charge of operations in the U.S., Canada and South America. 

Executive Vice President John Pollak will continue as sales head through the end of the year. Martin Rakusen, senior vice president for business and operations, plans to relocate to the London office.  BenandSteve

“I am incredibly proud of the substantial growth that Shine International has achieved since we started the company, and particularly in the last few years since joining the Shine Group," Grant said in the statement. "L.A. is my home and rather than relocate, it is also a good time for me to allow my colleagues to build on the success we have, together, created.”

In addition to the London headquarters, Shine International will have offices in France, Germany, Australia and the Nordic region.

-- Meg James

Top left photo:  Elisabeth Murdoch. Credit:  Tim Matthews / Allstar 

Bottom right photo:  Ben Silverman with Steve Carell of "The Office." Credit:  Chris Carlson / Associated Press

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