The parents of Milly Dowler told a UK inquiry into the News Of The World hacking scandal this morning that the family admonished Rupert Murdoch to “set things right” in July when he visited to apologize for the tabloid’s actions after their daughter was missing in 2002 and later found murdered. The paper had hacked into the 13-year-old’s cell phone and deleted voicemail messages, giving the Dowlers false hope. ”She’s picked up her voice mails Bob, she’s alive,” the girl’s mother, Sally Dowler, told her husband at the time she said in an appearance before the Leveson Inquiry. As the family and others waited to learn the girl’s fate she said that she “had to be on guard outside your front door” because reporters ”would come up to you when least expect it. They’d fire a question at you without introducing themselves.” She added that Murdoch was “very sincere” in his apology. But her daughter Gemma told him that she hoped he would use the scandal “as an opportunity to put things right in the future and have some decent standards and adhere to them.” Milly’s father, Bob Dowler, urged Murdoch’s News International and other media companies to “look very carefully at how they procure and how they maintain information about stories.” Sally Dowler said that she didn’t sleep for three nights after police told her that Milly’s phone had been hacked. Last month Murdoch agreed to pay the family $3.2M, and donate …
This will be another bad week for James Murdoch and News Corp as 21 witnesses including several celebs line up to tell a government inquiry how overzealous and unethical reporters turned their lives upside down. The investigation is led by Lord Justice Leveson who Prime Minister David Cameron asked to examine both the phone hacking at News Of The World, and problems with the country’s press culture. The parents of Milly Dowler, a 13-year-old who was murdered in 2002, will kick things off tomorrow. The NOTW scandal broke open this past July when it was disclosed that after Dowler was missing the tabloid hacked into the girl’s phone and deleted messages, giving her parents false hope that she might still be alive. Grant will follow them, and is expected to continue his assault on reporting tactics used by NOTW and the Daily Mail. Also due on Monday is the lawyer for actor Jude Law. On Tuesday the panel will hear from actor Steve Coogan and soccer star Garry Flitcroft. On Thursday Harry Potter author Rowling and one time Formula One chief Max Mosley will testify. Next Monday singer Charlotte Church and UK TV personality Anne Diamond will appear.
Coogan outlined his views in a biting commentary he wrote for The Guardian on Friday. “No amount of respectable, well-modulated management-speak from James Murdoch can disguise the direct link between
Observers I have spoken to predict that News Corp’s James Murdoch will be better briefed than he was in July — and may admit to a small mea culpa — when he returns to Parliament tomorrow to answer questions about the News Of The World phone-hacking scandal. He’s expected to continue to defend his inaction about the lawbreaking in the face of mounting evidence that he must have known more about the problem earlier in the process than he previously testified. Back in July, he denied knowing until late 2008 that phone-hacking at NOTW went beyond one rogue reporter. That would clear him of the charge that he authorized hush-money earlier in the year when he approved a $1.4M settlement for a hacking victim who knew that a second reporter was involved — on the condition that the victim he keep quiet about the matter. Since Murdoch testified, senior News International executives have gone public and said James must have known the gory details because they told him. And a devastating legal opinion has come to light from lawyer Michael Silverleaf, who worked for News International and pointed out that NOTW had a culture of illegal information-gathering. There is no smoking gun to contradict James, just vague notes written up after briefing meetings with him.
Hacking Update: James Murdoch “Already Had Knowledge” Of The Scandal Well Before Authorizing Payoff, Critic Says
Here’s yet another sign that James Murdoch is in for tough questioning on Thursday, when he appears before the Parliamentary committee investigating the News Of The World phone-hacking scandal: A newly released letter to the lawmakers says that Murdoch probably knew about the extent of the lawbreaking even earlier than one of his chief opponents originally thought. Former News International lawyer Tom Crone told the committee on Saturday that new evidence disclosed last week indicates that “Mr. Murdoch already had knowledge” of the seriousness of the problem on May 27, 2008, after he met with NOTW editor Colin Myler. Earlier, Crone and Myler had testified that they filled Murdoch in on June 10, 2008. Murdoch says that’s not true – it wasn’t until much later in the year when he learned that more than one reporter had commissioned phone hacking.
UPDATE, 2:35 PM: The comment about James came from News Corp president Chase Carey, filling in for Rupert Murdoch, who wasn’t on the quarterly conference call with analysts and reporters. Despite growing concerns about James’ role in the News Of The World hacking scandal, the deputy COO “has done a good job and we are not contemplating any changes,” Carey said. He added, in response to a question, that the company is taking “seriously” the strong opposition that several shareholders expressed at the recent annual meeting to many members of the News Corp board — which includes three members of the Murdoch family. “The board will, and is, discussing those votes,” he says. “The board continues to evolve. …. That being said, we’re proud of the board.”
In other matters, Carey says that “we’re not buying the (Los Angeles) Dodgers,” but didn’t elaborate. Sports costs are not a big concern for the company for now because “outside of Los Angeles, most of our contracts are long term,” he says. He’s also unfazed by the NBA strike, saying that “it’s not a significant financial event for us” although “we’d like to see them settle it.” Carey denied that Fox is offering make-goods ads for lower-than-expected initial ratings for The X Factor: ”We have the No. 1 show and make real money from it,” he says. “It came out a bit below where we targeted … but is building momentum.” Not much detail about the collapse of the auction for Hulu. Carey says that it ”has been a positive for us in terms of creating value” despite its “complicated ownership structure.” Carey also didn’t provide much insight into the new programming deal with DirecTV, although he says it’s “fair for both of us.”
Rupert Murdoch’s children saw a family counseling psychologist as recently as this past February to help them sort through their feelings about who should succeed their father as CEO of News Corp, Vanity Fair contributing editor Sarah Ellison reports in the magazine’s December issue. They agreed that James, who’s Deputy COO, should be first in line. But their opinions changed after the News Of The World phone-hacking scandal broke open in July. Elisabeth Murdoch, at Rupert’s suggestion, urged James to step aside before he testified that month at a UK Parliamentary hearing. Rupert changed his mind after a sleepless night. As talk grew about a possible arrest and jail time, Ellison reveals that Rupert’s estranged second wife Anna flew to London and urged her ex-husband to publicly back his son.
As for the NOTW case itself, Ellison supports an important claim by two of James’ chief opponents – ex-News International executives Tom Crone and Colin Myler — over whether they told him in 2008 that the scandal was broader than the company had acknowledged. Murdoch, who oversaw News International, says he believed that the lawbreaking was limited to a single “rogue” reporter as he authorized a $1.4M settlement with a hacking victim on the condition that he keep quiet about the matter. But Crone and Myler say Murdoch knew about an email in the case that showed a second reporter had been involved — suggesting that Murdoch’s settlement was a form of hush money. Murdoch …
James Murdoch isn’t going to succeed his father Rupert as CEO of News Corp — if you don’t believe that yet, then wait for November 10 when he’s due to testify again before the parliamentary committee investigating the News Of The World phone-hacking scandal. Media execs and close News Corp watchers tell me that James would have to perform a PR miracle to enhance his already tarnished reputation: He’s on the defensive after former NOTW legal affairs manager Tom Crone and editor Colin Myler testified in September that he knew more about the lawbreaking earlier than he has let on — raising the possibility that he was engaged in a cover-up. James’ testimony comes after institutional shareholders just made it clear that they don’t want him: Guardian columnist Dan Sabbagh called the News Corp Deputy COO “dead man walking” last week after 75% of voting shareholders aside from the Murdoch family, other directors, and Rupert’s ally Prince Alwaleed Bin Talal opposed James’ election to the board. Analysts and reporters will have a chance to raise more questions about the company’s governance Wednesday after News Corp reports its earnings for the quarter that ended in September.
A lot of people say James is in a similar predicament to the one that former Disney CEO Michael Eisner was in before he was forced out in 2005. Eisner initially fended off efforts by former board members Roy Disney and Stanley Gold to oust him from power. But their steady criticisms soured institutional investors to the point where Eisner’s presence hurt Disney’s stock and made it impossible to hang on.
It was bad enough that hundreds of Occupy Wall Street protesters stopped by his Fifth Avenue home on Tuesday to chant slogans about the unfairness of the tax system. The media mogul’s troubles also grew as he had to deal with a second UK newspaper scandal: The publisher of the Wall Street Journal Europe, Andrew Langhoff, resigned amid allegations that he had cut a deal to artificially inflate circulation figures by 41%. And that story began to unravel just as the UK Parliament’s Culture, Media and Sport Committee said it will interrogate Murdoch’s right-hand man Les Hinton on October 24 as part of its investigation into Murdoch’s other UK newspaper problem – the News Of The World phone-hacking scandal. This matter has already begun to loom large as investors prepare to converge in Los Angeles next Friday for News Corp’s annual shareholder meeting. Advisory firms Institutional Shareholder Services, Egan Jones, and Glass Lewis asked stock owners to reject several company board nominees — including Murdoch’s two sons, James and Lachlan — for failing to get to the bottom of the hacking allegations before the company was forced to close NOTW.
It’s not surprising to see that News Corp was one of 10 companies given an “F” grade by corporate research firm GMI Ratings for management or accounting practices that could make them risky bets for investors. But Discovery Communications — a Wall Street darling? The GMI Risk List, out today, slams the cable channel owner for having ”a complex system of share classes and director relationships” that give ”two principal shareholders disproportionate control over the company.” GMI adds that Discovery’s compensation practices “do not hold executives to stringent performance standards.” What’s more, there are “a number of concerns about expense recognition and the quality of the balance sheet, including high levels of goodwill and debt.” Discovery’s stock has risen about 200% over the last three years — a factor Fortune cited last month in naming it one of the “fastest growing companies” — although it’s off 2.6% in 2011.
As for News Corp, GMI notes that while there was a “short-term investment impact” in July when the News Of The World phone hacking scandal burst into the open “the company’s share price has rebounded to the level it enjoyed before the scandal broke.” But News Corp’s “poor governance contributed to its recent problems, and may continue to put investors’ interests at risk.” Despite the resignation of big names including News International CEO Rebekah Brooks and Dow Jones chief Les Hinton — as well as some changes on the board …
UPDATE, 9 AM: The UK’s Culture, Media and Sport Committee has set its schedule for the next round of evidence sessions in the parliamentary body’s investigation into the News Of The World scandal. The big name on the latest list is Les Hinton, the former Wall Street Journal boss and Rupert Murdoch confidante who resigned in July; he ran News Corp’s UK newspaper division News International when the hacking was most rampant. Hinton will testify October 24 via video link. Of course, the biggest fish — News Corp No. 2 James Murdoch, the company’s deputy COO and heir apparent to his father — is not on the list … yet. Both he and Hinton have already testified but were summoned back to the committee last month.
PREVIOUS, 5:03 AM: News Corp is acting like it will have a fight on its hands at the October 21 shareholders’ meeting, even though CEO Rupert Murdoch controls more than enough votes to pretty much dictate the outcome. In an SEC filing this morning, the company responded to advisory firms Institutional Shareholder Services and Glass Lewis, which urged investors to reject several board candidates including Deputy COO James Murdoch. News Corp says that it’s run by “sophisticated, world-class directors” who deserve to be re-elected. The company chafed at the advisory firms’ view that the board turned a blind eye to the News Of The World phone-hacking scandal. While the NOTW matter “could affect News Corporation’s results of operations and financial condition,” the company repeated its view that it ”has already taken decisive actions to hold people accountable and will take all prudent steps designed to prevent something like (the NOTW scandal) from ever occurring again.”
The News Of The World phone hacking scandal became more nettlesome for News Corp this morning: A key player, former NOTW reporter Neville Thurlbeck, issued his first public statement alleging that the company wrongfully fired him recently — and warned that “There is much I could have said publicly to the detriment of News International but so far, have chosen not to do so.” He says the company recently attacked him in off-the-record interviews. He called for everyone to “retain a dignified silence until we meet face to face in a public tribunal where the issues can be rigorously examined and fairness can eventually prevail.” He added, ominously, that “those responsible for the action, for which I have been unfairly dismissed, will eventually be revealed.”
Thurlbeck could be a dangerous opponent for the company and deputy COO James Murdoch. Thurlbeck was the intended recipient of the famous “For Neville” email in 2008. It included material hacked from the phone of Gordon Taylor, the former head of the Professional Footballers Association. The email is significant because it seemed to indicate that the illegal practice was more widespread than News Corp had acknowledged. At least two former NOTW execs say that Murdoch had seen that email before he agreed to a $1.4M settlement with Taylor on the condition that he keep quiet — leading some members of parliament to wonder whether Murdoch was engaged in a cover-up. Murdoch says he did not see the email before agreeing to the settlement. Thurlbeck was arrested in April on phone hacking charges.
Here’s Thurlbeck’s statement, which ran in The Telegraph:
News Corp COO Chase Carey: “Nothing We’ve Seen” To Support Allegations That 9/11 Family Phones Were Hacked
News Corp COO Chase Carey bobbed and weaved today when audience members at the Goldman Sachs Commmunicopia Conference asked questions that touched on the company’s hacking and police bribery scandals. “The media noise has been surreal around it,” he says. “The truth will come out. The issues will work their way out.” He did note that there’s “nothing we’ve seen” to support the allegation — which the Justice Department is investigating — that News of the World may have hacked phones of families of 9/11 victims. Carey wouldn’t rule out the possibility that News Corp might renew its effort to buy the 61% of BSkyB that it doesn’t already own. “We’ll continue to be a shareholder. … We have a lot of flexibility if and when something arises.” He added that he’s “not going to get into speculating” about whether UK officials might force News Corp to give up its current shares in the satellite power. As for the newspaper publishing business — which a lot of investors would like to see News Corp dump – Carey says the company should “take a fresh look at it.” But that could involve expanding operations such as Dow Jones and The Wall Street Journal. “There are things beyond (putting them on iPads) that we can do.”
If you look at News Corp’s stock price since July 4, you might wonder whether you’re peering into a parallel universe. This is a period during which the company’s been battered by damaging revelations from the News of the World phone hacking and police bribery scandals. But investors seem unconcerned. After an initial dive, News Corp stock rebounded and now almost exactly matches the performance of the overall market — the company and the benchmark Standard & Poor’s 500 index both are down about 10%. It’s easily explained. Investors like all the cash Rupert Murdoch’s cable networks generate. They’re delighted by News Corp’s begrudging agreement to repurchase $5B of its stock. Shares also are relatively cheap: Many investors still fear that Murdoch will make a crazy acquisition — like he did in 2007 when he spent $5B for Dow Jones. News Corp trades for about 10 times expected earnings while Viacom is close to 13.5, Comcast is about 12, and Disney’s around 11.3. So News Corp is a smart buy if you believe that the scandal will force Murdoch to placate investors and will blow over before it seriously damages the company’s finances. Similar cases often do.
But this one probably won’t — and it will be interesting to see how long it takes before investors become frightened. Investigations into possible lawbreaking at News Corp are just getting started. That’s a sobering thought when you consider how much has already happened since July 4, when The Guardian broke the scandal open with its report that NOTW in 2002 tampered with voicemails of a missing schoolgirl Milly Dowler, later found murdered. Murdoch had to abandon his $12B effort to buy the 61% of BSkyB he doesn’t already own. Many UK officials want News Corp to sell off its holdings in the satellite power. Meanwhile, Murdoch probably won’t be able to turn News Corp over to his son James. Parliament’s Culture, Media and Sport Committee says it will ask him to testify again as members bear down on allegations that James tried to cover up the extent of NOTW’s lawbreaking. Scotland Yard, embarrassed by reports that police accepted bribes to help NOTW phone hackers, is working the case hard and has already made 16 arrests. Potentially damaging evidence is still surfacing: Last week, News International said that it found “many tens of thousands” of emails and other documents about NOTW. Former News International CEO and NOTW editor Rebekah Brooks — one of the people who has been arrested — is among the many witnesses who’ll testify at a UK judicial inquiry that’s just beginning. The U.S. Justice Department is investigating whether NOTW hacked the phones of families of 9/11 victims. And News Corp faces dozens of civil suits. Hacking victims want to be compensated for their lost privacy. In addition, many shareholders want company directors to atone for rubber-stamping Murdoch initiatives that seemed to put his family’s interests ahead of investors’. Examples include News Corp’s $675M purchase of Elisabeth Murdoch’s TV company Shine — critics say the price was way too high — as well as the company’s failure to investigate NOTW’s hacking. Investors will have a chance to vent their anger at News Corp’s annual meeting Oct. 21: The company plans to fight a shareholder resolution that would strip Murdoch of the chairman title by requiring that the job be held by an independent board member.
News Corp COO Chase Carey continued the company’s effort to persuade Wall Street that all’s fine with its core media businesses — even as it struggles with multiple investigations into the News of the World scandal. “My role really hasn’t changed,” he said at the Bank of America Merrill Lynch Media, Communications and Entertainment Conference. “As time goes on the issues will get better flushed out, particularly some of the issues beyond the UK. … We’re going to cooperate fully and take the appropriate steps.” Carey said he “won’t get into hypotheticals” when asked if there were specific steps the company could take to put the scandal behind it. Nor did he indicate whether the company might split its newspapers from the growing entertainment and cable properties. ”We don’t have a plan to do so,” he said adding that “it’s an historical foundation for the business, but that doesn’t mean you don’t look at it with a fresh eye.”
Echoing the message other media execs delivered today, he says the national ad market “continues to be robust.” Local sales are slowing, but could pick up next year as political ads kick in.
The corporate governance suit against News Corp that several labor-backed pension funds have filed in Delaware is becoming more interesting — and potentially important. The group led by Amalgamated Bank, the New Orleans Employees’ Retirement System, and the Central Laborers Pension Fund today filed an amended complaint that says News Corp directors rubber-stamped decisions that led to nearly $1B in settlements and verdicts from privacy breaches and other problems at News America Marketing and NDS. These problems plus other incidents including the News of the World hacking scandals “were part of a much broader, historic pattern of corruption at News Corp, under the acquiescence of a board that was fully aware of the wrongdoing, if not directly complicit in the actions,” says the group’s lawyer Jay Eisenhofer of Grant & Eisenhofer. They have already told Delaware’s Chancery Court that News Corp’s execs and board violated their legal duty to protect shareholder interests when they agreed to pay $615M for Elisabeth Murdoch’s Shine Group TV production company — which the group calls “a sweetheart deal.” They also amended the complaint to include the NOTW scandal.
The decision by parliament’s Culture Media And Sport committee to recall James Murdoch and Les Hinton could be important. But it isn’t surprising. The committee investigating the News Of The World hacking scandal has a lot of questions about whether Murdoch may have tried to cover up the defunct tabloid’s lawbreaking now that two former executives have contradicted one of the News Corp Deputy COO’s key claims. Murdoch says he believed only one reporter had been involved with phone hacking in 2008 when he agreed to pay a hacking victim an astronomical $1.4M settlement on the condition that the victim keep quiet about the matter. At the time, the company publicly said that hacking was limited to a single rogue reporter. But former NOTW lawyer Tom Crone and editor Colin Myler recently told the committee that before Murdoch agreed to the payoff, he had seen an email that made it clear a second reporter could be implicated in the case. The committee also wants to know about News Corp payments to two people convicted of hacking: former NOTW reporter Clive Goodman and private investigator Glenn Mulcaire.
UPDATE, 9:10 AM: James Murdoch says Crone and Myler are wrong. In a statement released after the former NOTW execs testified at parliament, Murdoch says they “did not show me the email” that indicated in 2008 that more than one reporter had engaged in phone hacking. What’s more, Murdoch says that neither Crone nor Myler said anyone else was involved: “As I said in my testimony, there was nothing discussed in the meeting that led me to believe that a further investigation was necessary.” Murdoch adds that his memory of his meeting with them “is absolutely clear and consistent” in contrast to the former executives’ testimony, which the News International statement characterizes as “having been unclear and contradictory.”
PREVIOUS, 7:55 AM: Former News Of The World legal affairs manager Tom Crone and editor Colin Myler told a parliamentary committee investigating the Murdoch UK hacking scandal that James provided misleading testimony to the committee in July. Murdoch said he thought that only one reporter had broken the law in 2008 when he authorized an astronomical out-of-court settlement to a hacking victim on the condition that the matter be keep quiet. But Crone and Myler say they are “certain” James knew ahead of time about an email that indicates the case involved a second reporter — raising the possibility that the settlement was designed to cover up the breadth of the lawbreaking at NOTW. Crone was unable to recall many details about his meeting with Murdoch. “We had to explain the case to Mr. Murdoch and get his authority to settle, so clearly it was discussed,” Crone said. “I can’t remember the conversation and there isn’t a note of it. The conversation lasted about 15 minutes. It was discussed, but exactly what was said I can’t remember.” Still, Crone told the Commons Culture Committee that the payment wasn’t a form of hush money: He says that the hacking victim, Professional Footballers Association chief Gordon Taylor, had asked for the secrecy provision to protect his privacy. What’s more, Crone says that police already knew about the email.
UPDATE: If prosecutors decide to charge several people over the allegations surrounding former News of the World journalists, all the defendants would likely be tried at the same time, London’s Telegraph reports today. Because of the parallel police inquiries into phone hacking and police corruption, any trials are likely to be delayed until the spring of 2013 as detectives sift through thousands of documents. And since some of the possible defendants could face trial relating to both inquiries, the media is likely to be banned from reporting any of the evidence in any of the trials until all have been concluded.
EARLIER, AUGUST 19, 12:20 PM: We could hear some important revelations next week in the News Of The World scandal: Private investigator Glenn Mulcaire is expected to disclose by Friday who at the defunct tabloid asked him to hack the phones of six people including model Elle MacPherson, PR agent Max Clifford, and former Professional Footballers Association chief Gordon Taylor. The Telegraph reports that on August 1st Mulcaire lost his appeal of a court order to name names in the six cases — although he’s still fighting a different order to reveal who asked him to hack the phone of comedian Steve Coogan. The disclosure comes a day after Mulcaire sued News Corp for breach of contract: Last month the company stopped paying the legal bills for the PI who was convicted in 2007 of phone hacking.
News Corp may face a big problem with Glenn Mulcaire, the private investigator convicted in 2007 of hacking voicemail messages for News Of The World. Up to now he has largely kept quiet about what went on there — even appealing a court order that required him to name NOTW journalists involved in voicemail spying. But he seems to be sending a message that his days as a good soldier may be over following James Murdoch’s decision last month to stop paying Mulcaire’s legal bills. Murdoch appeared embarrassed when asked about the arrangement last month during his testimony before the parliamentary committee investigating the hacking scandal. Murdoch said that he was “as surprised as you are” to learn that his company was helping Mulcaire. Shortly afterward the PI fired a shot across Murdoch’s bow by issuing a statement saying that had been “effectively employed” by NOTW and “acted on the instructions of others.” Now Mulcaire says Murdoch’s decision is a breach of contract. In a case filed this week at U.K. High Court, Mulcaire says that in June 2010 News Corp promised to indemnify him against the legal costs and damages from his appeal. News International says it will “vigorously” challenge Mulcaire.