Rupert Murdoch not fit to run a major company, British panel says

The news just keeps getting worse for media baron Rupert Murdoch.

In a scathingly worded report growing out of the long-running British phone-tapping scandal, a parliamentary committee on Tuesday declared Murdoch “not a fit person” to run a major company — an embarrassing decree that has no immediate effect but further darkens the cloud over Murdoch’s British media operations.

Murdoch, the 81-year-old chief executive of New York-based News Corp., has been beset for many months by the scandal, which involved illegal prying by his British newspaper journalists and hired investigators into the phone accounts of hundreds of British celebrities, executives and newsworthy individuals. British investigators are also looking into accusations of widespread bribery of police and government officials and a coverup by executives of Murdoch’s British newspaper arm, News International.

The fallout hasn’t traveled across the Atlantic to the United States, where Murdoch and News Corp. own their largest and most profitable assets, including Fox News Channel, the Fox broadcast network and the 20th Century Fox studio.

But Justice Department attorneys and the FBI have been investigating whether any phone hacking took place on American soil, including the phones of families of victims of the Sept. 11, 2001, terrorist attacks. The investigation began last summer after the British scandal exploded. Attorney General Eric H. Holder Jr. has met with some of the victims’ families, and investigators followed up as recently as March, according to Norman Siegel, attorney for a group of 24 people related to the victims.

“From everything we know, [the investigation] is ongoing,” Siegel said.

News Corp. also faces a separate federal investigation into the bribery allegations in Great Britain. The question under review is whether payments made by News International’s journalists to British officials for story tips and other information constitute a violation of the Foreign Corrupt Practices Act, an American anti-bribery statute. Violations of the law can result in criminal prosecution, although the circumstances suggest that News Corp. would be more likely to face questions in a civil proceeding, said Richard L. Cassin, a lawyer who writes a blog about the FCPA.

The parliamentary report issued Tuesday was far harsher than most British observers had expected. It was approved by a 6 to 4 vote, with the four members from Prime Minister David Cameron’s Conservative Party staunchly objecting to the description of Murdoch as an unfit proprietor.

The report says Murdoch had “turned a blind eye and exhibited willful blindness” over the phone hacking, which took place at his now-closed News of the World tabloid. “This culture, we consider, permeated from the top throughout the organization and speaks volumes about the lack of effective corporate governance at News Corporation and News International,” it says.

The 121-page report includes a catalogue of criticisms, accusing three senior figures at News International of misleading the committee. The three include Les Hinton, the former head of News International, who the panel said was “complicit” in a coverup. The lawmakers also said Colin Myler, the former editor of News of the World and now editor at the New York Daily News, and Tom Crone, the tabloid’s former legal manager, “answered questions falsely” while testifying before the committee. Still, their “reluctance” to be honest with the committee was “understandable,” the panel said, given Murdoch’s “fearsome reputation.”

While embarrassing to Murdoch and his company, the report has no judicial or legislative force. The real power over Murdoch’s British holdings — particularly News Corp.’s nearly 40 percent stake in the lucrative British Sky Broadcasting (BSkyB) satellite TV service — is the Office of Communications, or OfCom.

The independent agency has the power to take a TV license away from anyone deemed “unfit” to hold one. It has been conducting its own probe into News Corp. but has given no time frame for its decision. On Tuesday, the agency issued a statement saying its officials were reading the parliamentary report “with interest.”

“Clearly, the big threat is to BSkyB; it’s the cash cow for Murdoch,” said Emily Bell, a Columbia University journalism professor and former head of digital operations for the Guardian newspaper in London. “OfCom has maintained its silence on this. But there’s no question that these are concerns that are hard to swat away.”

If the regulator were to rule against News Corp., it would probably mean that the media conglomerate would sell some of its stake in BSkyB and that James Murdoch — who resigned as BSkyB chairman last month — would also be removed from BSkyB’s board. Ofcom has turned down applicants for licenses but has revoked only one license in its existence. It has previously awarded a broadcast TV license to Richard Desmond, who had made a fortune with a string of adult TV channels.

The news from Britain prompted a Washington organization, Citizens for Responsibility and Ethics in Washington, on Tuesday to call on the Federal Communications Commission to revoke News Corp.’s licenses to operate 27 Fox TV stations, including WTTG (Channel 5) and WDCA (Channel 20) in Washington. The group said that U.S. law requires broadcast license holders to be of good “character” and that Murdoch’s role in the phone-hacking scandal had disqualified him.

The FCC investigated News Corp.’s control of the Fox licenses in 1995 after allegations arose that Murdoch had not been forthcoming in his original application to take over the stations in the 1980s, but the agency ruled that the company was fit to continue operating them.

Investors largely seemed to shrug off the day’s news. In trading on the New York Stock Exchange, shares of News Corp. were up 1.2 percent, to $20.08 per share.

The phone-hacking saga appears far from over in Britain with three related police investigations and a judge-led inquiry. The investigations keep dredging up more material, such as 163 pages of e-mails published last week that suggest the office of Britain’s culture secretary had inappropriate contact with a News Corp. lobbyist concerning News’s bid for full control of BSkyB last year. The company dropped the bid as the scandal widened last summer.

Adam reported from London.

Paul Farhi is The Washington Post's media reporter.
Karla Adam is a reporter in the Washington Post’s London bureau. Before joining the Post in 2006, she worked as a freelancer in London for the New York Times and People magazine.
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