Sexual Harassment Isn't Only Concern For Murdochs - Lesser Known Scandal Could Affect $14B Deal For the Murdochs, who control Fox News as part of a larger media empire, getting rid of Bill O'Reilly is a move to regain full control of the European broadcasting giant Sky in a $14.6 billion deal.
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Beyond Sexual Harassment, Lesser Known Scandals Could Cost The Murdochs A $14B Deal

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Beyond Sexual Harassment, Lesser Known Scandals Could Cost The Murdochs A $14B Deal

Beyond Sexual Harassment, Lesser Known Scandals Could Cost The Murdochs A $14B Deal

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ARI SHAPIRO, HOST:

The sexual harassment scandals at Fox News could trip up the Murdoch family's hopes of growing their media empire. British regulators are considering whether the Murdochs are fit and proper owners of the European broadcast giant called Sky.

Meanwhile, a lesser-known scandal in the Murdoch family's media empire has been hiding in plain sight. And this one has a much bigger price tag. It involves allegations of computer hacking, accusations of fraud, questions of political influence and payouts exceeding $900 million. NPR's David Folkenflik reports.

DAVID FOLKENFLIK, BYLINE: This story centers on a pretty anonymous Murdoch division called News America Marketing, which does advertising in retailers like supermarkets and drugstores. Here's Ken Chandler, the former publisher of Rupert Murdoch's New York Post.

KEN CHANDLER: News America Marketing was a crucial part of the company because it generated so much revenue.

FOLKENFLIK: News America Marketing was run by a Murdoch executive named Paul Carlucci.

CHANDLER: And he wanted to win and win at all costs.

FOLKENFLIK: A pair of brothers named George and Richard Rebh found that out the hard way. They founded a small company called Floorgraphics in Princeton, N.J., with a new niche - advertising on decals slapped on the floor of supermarket aisles. They met for dinner with Carlucci one day in 1999. Here's what George Rebh later said Carlucci told them.

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GEORGE REBH: You should know that I work for a man who wants it all and doesn't understand anyone telling him he can't have it all.

FOLKENFLIK: This is from sworn testimony first obtained and broadcast by CNN in 2011. That man who wants it all? Of course, Rupert Murdoch. Carlucci went on, according to Rebh's testimony, to make a clear threat - stay out of the retail marketing business. Rebh testified he sought clarification.

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REBH: So let me see if I understand this. You can get into our business and compete with us but if we were to get into yours, you'll destroy us? And he said that's right.

FOLKENFLIK: Paul Carlucci later denied saying he would destroy Floorgraphics, yet Steve Marquis told me a similar story. Marquis was a former vice president at News America. In December 1999, executives from the ANP regional supermarket chain told him Floorgraphics had earned their account. News America had lost it. Marquis said he fled in a panic to News America's holiday party, expecting to be chewed out, yet Paul Carlucci was a happy man.

STEVE MARQUIS: Paul gives me a high-five, gives me a hug and essentially tells me that we're going to get the resources we need to go crush these guys.

FOLKENFLIK: A few years later, the Rebhs realized their computers had been repeatedly hacked over a several month period. Their contracts and future plans had been compromised. The IP address involved in the hack belonged to a News America account. The company admitted the hack but claimed it was impossible to figure out who was behind it. The late Senator Frank Lautenberg was among the lawmakers pushing for a criminal prosecution but it never happened. The Rebhs seethed, telling others they were informed the damages were insignificant.

New Jersey's top federal prosecutor was then Chris Christie, now the state's Republican governor. Floorgraphics started ailing. It sued News America, which paid $29.5 million to settle the case. In 2011, a huge hacking and bribery scandal erupted at the Murdoch's British tabloids. Lautenberg turned attention again onto the Murdochs and on to Christie's failure to investigate the Floorgraphics case.

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FRANK LAUTENBERG: There is evidence that News Corporation has been involved in a broad range of misconduct, reaching the highest levels of the New York-based company and involving actions in the U.K. and the U.S.

FOLKENFLIK: In late 2011, Fox News chairman Roger Ailes hired a former Lautenberg adviser as a political commentator - Julie Roginsky. According to what Roginsky told others, Ailes kept pestering her over Lautenberg's possible investigations. If Roginsky's name sounds familiar, she sued Ailes and Fox News earlier this month, alleging he sexually harassed her. News America ended up paying another $600 million to two big competitors and paying an additional $280 million to some of its clients who had accused it of fraud.

For years, the Murdochs feared blowback from the British hacking scandal might cost them TV licenses in the U.S. Now, the question arises whether their plans for growth in the U.K. might be tripped up by their American controversies, including the drive for supremacy in the supermarket. David Folkenflik, NPR News, New York.

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