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News Corp.'s U.K. Actions Under Scrutiny In U.S.

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News Corp.'s U.K. Actions Under Scrutiny In U.S.


News Corp.'s U.K. Actions Under Scrutiny In U.S.

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DAVID GREENE, host: The British arm of Rupert Murdoch's News Corp is offering to pay several million dollars to settle a claim at the center of the hacking scandal. The settlement money would go to the family of a slain girl whose cell phone voicemail was hacked by a News Corps tabloid. That's only the latest fallout in the phone-hacking and bribery scandal there.

Now, as NPR media correspondent David Folkenflik reports, the company is facing legal troubles here in the U.S.

DAVID FOLKENFLIK: The newest legal front for News Corp is called the Foreign Corrupt Practices Act, a 1977 law banning American firms from paying bribes to government officials abroad.

John Coffee is director of the Center of Corporate Governance at Columbia Law School, and he says the company is moving swiftly to contain the threat.

JOHN COFFEE: The most striking feature of the current standoff is that News Corp has pretty much assembled a dream team of all-star, foreign corrupt practice litigators.

FOLKENFLIK: That team includes former top federal prosecutor Mary Jo White, former U.S. Attorney General Michael Mukasey, and Mark Mendelsohn, formerly the Justice Department's chief enforcer of that very law.

COFFEE: You don't put all that investment into this without having some serious concerns about what might happen.

FOLKENFLIK: News Corp now admits private investigators working for Murdoch's News of the World in the U.K. paid British police officials for information from confidential databases, often to gain illegal access to mobile voice mail messages as they helped reporters pursue scoops.

Two police officers from an elite unit, for example, reportedly sold private contact information for the entire royal family for about $1,600. There are questions of whether senior Scotland Yard officials were also paid off.

In July, members of parliament grilled former assistant police commissioner Andrew Hayman. He'd enjoyed lavish dinners with top editors of the News of the World while leading an earlier inquiry into phone hacking by the tabloid.


UNIDENTIFIED WOMAN: Mr. Hayman, while a police officer, did you ever receive payment from any news organization?

ANDREW HAYMAN: Good God, absolutely not. I can't believe you suggested that.

UNIDENTIFIED MAN: Lots of people did.

HAYMAN: Oh, come on. I'm not letting you get away with that.

FOLKENFLIK: Hayman left the police force in 2007 and became a paid columnist for Murdoch's Times of London. Alexandra Wrage is president of TRACE, a not-for-profit firm that helps companies comply with anti-bribery laws. She says the law does not set a minimum level for improper payments that trigger prosecution.

ALEXANDRA WRAGE: News Corp is a U.S. company, and the FCPA - the Foreign Corrupt Practices Act - was designed to prohibit companies based in the U.S. or trading on U.S. stock exchanges from paying bribes to government officials - very broadly defined, certainly to include police officers - overseas.

FOLKENFLIK: And that also means it doesn't matter there are no concrete claims that this phone-hacking scandal involves illegal actions taken in the U.S., though the FBI is looking into that possibility, as well. There are actually two components to the law: the first is a criminal prosecution of a quid pro quo - a bribe.

The second, easier to prove, is a civil action against publicly traded companies for falsifying records by failing to disclose such improper payments accurately.

In 2008, another large conglomerate, Siemens, paid $800 million in U.S. criminal and civil fines for paying bribes and kickbacks abroad, and it agreed to sweeping changes to its management and governance practices. News Corp didn't respond to requests for comment for this story, but Rupert Murdoch and his son James have sought to maintain their control of the company amid the hacking scandal, even as the younger Murdoch has become personally embroiled in it.

Alexandra Wrage says she ultimately expects federal authorities to go after News Corp in this case, and that the company will yield.

WRAGE: I think there's a lot of background noise over which points the company could win and which the Department of Justice would be likely to win, or the SEC for that matter. And I just don't think that's going to be the final analysis. The final analysis is going to be, if it's as bad as it sounds, how quickly can they settle? What remedial measures will they have to implement, and how bad will the fine be?

FOLKENFLIK: Another effect of the law: Late last week, Mark Lewis, one of the lead lawyers for British victims in the hacking cases, told NPR he intends to use it to compel both Murdochs and other News Corp board members to submit to depositions under oath about just what they knew, and when.

David Folkenflik, NPR News, New York.


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