News Corp. has slammed the study as partisan, but experts say it has left the media company open to attack on everything from Justice Department investigations to television licensing renewals
A U.K. parliamentary committee's searing indictment of Rupert Murdoch on Tuesday may trigger legal headaches for him in the United States and spur opposition to the renewal of News Corp.’s television licenses, according to legal experts.
In a blistering report, British lawmakers found that phone hacking and bribery were rampant at News Corp.'s now shuttered tabloid News of the World.
But perhaps more damaging was the conclusion that top executives at the media empire were more interested in masking corruption than in cleaning it up. That could lead the U.S. Justice Department to closely examine whether or not the company violated the Foreign Corrupt Practices Act, attorneys and analysts told TheWrap.
“Based upon the evidence that has surfaced so far and reflected in the report that was issued today, the basic elements of an FCPA case would seem to be present," Mark J. MacDougall, a former federal prosecutor and an attorney at Akin, Gump, Strauss, Hauer & Feld, told TheWrap.
"Whether the Department of Justice chooses to pursue a [Foreign Corrupt Practices Act] case against News Corp, or anyone associated with the company, is really a matter of the prosecutors’ discretion in Washington,” he said.
Under the act, companies like News Corp. that are registered with the Securities and Exchange Commission are prohibited by law from bribing public officials abroad and required to maintain internal controls.
A spokesman from the Justice Department declined to comment.
Craig Newman, a corporate attorney at Richards, Kibbe & Orbe, told TheWrap that in the near-term, the findings of the parliamentary committee are likely to be reflected in a series of legal challenges that take place in the United States.
In particular, Mark Lewis, the English lawyer who has been involved in the phone-hacking cases in the U.K., said recently that he has teamed with U.S. lawyer Norman Siegel, and is weighing filing suits against the company in this country.
"If and when these New York lawsuits are filed, I think you’re going to see a more intense focus on this phone hacking issue," Newman said. "The temperature has been turned up substantially."
Then there's the question of television licenses. Angela Campbell, a professor of media law at Georgetown University, said the study's findings may impact the company's ability to renew its licenses with the Federal Communications Commission. She said that the commission requires that broadcasters have good character.
"The commission has to be able to trust that any representations a company makes are accurate, and this report raises serious questions about News Corp.'s candor and trustworthiness," Campbell said.
A spokesman from the FCC declined to comment, but on the heels of the parliamentary report, a nonprofit group called the Citizens for Responsibility and Ethics in Washington petitioned FCC Commissioner Julius Genachowski to revoke the 27 Fox broadcast licenses News Corp. holds in the United States.
Beyond the legal ramifications, the parliamentary report could further stain a company already blemished by scandal and could provide fresh embarrassment to its founder. In stark terms, the study concluded that Murdoch's tepid response to the scandal demonstrated that he was "not a fit person" to lead his sprawling media empire.
"To say the report paints an unflattering picture of News Corp. and its operations is probably the understatement of the day," Newman said. "News Corp. as news-gathering organization finds itself in a hugely uncomfortable position. It's supposed to be the watchdog of governments and corporations, but instead it finds itself under the magnifying glass."
In a statement after the report's release, News Corp. acknowledged that there was "serious wrongdoing" at News of the World, but labeled the report "highly partisan." It noted that the 10-person parliamentary committee voted along party lines, with lawmakers from Britain's Conservative faction reportedly unhappy over the conclusions about Murdoch's fitness to lead.
For its part, News Corp. says it has instituted reforms and is now cooperating with authorities.
"As we move forward, our goal is to make certain that in every corner of the globe, our company acts in a manner of which our 50,000 employees and hundreds of thousands of shareholders can be justly proud," the company said in a statement Tuesday.
Not everyone agreed that News Corp. would face legal problems. Preston Padden, a law professor at the University of Colorado and former lobbyist for both the Walt Disney Company and News Corp., said that the report is nothing more than a political attack administered by members of Britain's Labor Party.
"There is zero chance that the Justice Department or the FCC is going to do anything because of a political swipe by members of one party in the British Parliament," Padden said. "It's the British equivalent of Nancy Pelosi saying she doesn't agree with John Boehner."
Some legal experts agree that the committee's criticism will carry little weight with investigators in this country. U.S. officials are more likely to take their cues from an investigation by British law enforcement officers than they are from foreign politicians, said Matthew Reinhard, a lawyer with Miller & Chevalier who specializes in white-collar crime.
However, Reinhard argues that the study's findings about what it characterized as "willful blindness" among News Corp. executives regarding the extent of the hacking and bribery signals that ignorance is no longer an excuse when it comes to corporate corruption.
"This speaks to the tone at the top," Reinhard said. "They allowed a culture to fester where they kept themselves deliberately in the dark. It should be a wake up call to executives that you cannot turn away from bad news. You have an obligation to investigate."
Beyond issues of corporate governance, former prosecutors like MacDougall were not impressed by what the report said about News Corp.'s handling of its role as public watchdog.
“We rely on the media, here and in Britain, to lift the curtain on government corruption and corporate wrongdoing — at every level of society," he told TheWrap. "If the evidence ultimately shows that News Corp. was itself engaged in widespread misconduct in generating the news, as described in the parliamentary report, then this case will be around for a very long time.”