"Mr Chapman, who was in charge of this [the investigation of hacking etc.], has left us. He had that report for a number of years. It wasn't until Mr Lewis looked at it carefully that we immediately said, :We must get legal advice, see how we go to the police with this and how we should present it.:" (July19, p. 36)
Rupert takes a swipe at Chapman for sitting on the report that never existed for a period of time that is entirely irrelevant since there was no report in the first place. Like son, like father. This report is the fig leaf used to cover the naughty secret of News Corporation --- they never investigated phone hacking in general, never tried to clean house. Now, in the context of a real investigation, Rupert and James Murdoch are relying on a fictional report that Rupert claims was hidden for years. The report never existed. At the very least, they are showing extreme contempt for Parliament.
In their testimony on July 19, he Murdochs referenced their outside legal counsel in the context of the review of the email investigation, Harbottle and Lewis LLP. The law firm provided an utterly devastating response to the committee that supported Jon Chapman's version of events -- a simple review of emails on one case, no wider investigation. The firm also added some devastating comments regarding how their involvement was used by News Corporation to imply some legal clearance. The law firm went further, clearly stating that it had never provided a "clean bill of health" to NoW.
"There was absolutely no question of the firm being asked to provide News International with clean bill of health which it could deploy years letter in wholly different contexts for wholly different purposes. If News International had ever approached the firm (as it should have done) to seek consent for the 29 May 2007 letter being deployed before Parliament as evidence of its corporate innocence, the Firm would not have agreed without further discussion. The reason for that is that the exercise which was done in 2007 was simply not one which was designed to bear the weight which News International now seeks to place upon it." (Response of Harbottle and Lewis LLP to the Culture, Media and Sports Committee and Home Committee, pp. 9 , 10)
A Development to Watch in the United States
The Guardian reported that News Corporation had settled three law suits brought by competitors for a total of $655 million dollars. (guardian.co.uk, July 17) This is of interest since one of the cases, that of Floorgraphics, is being reviewed by the Department of Justice as part a broader investigation of the Murdoch companies requested by Senator John D (Jay) Rockefeller two weeks ago. How guilty do you have to be to offer up $655 million to avoid going to court?
A Murdoch Family Dilemma -- The BSkyB Media Property
News Corporation views its US media properties as its prizes. However, there's considerable business at stake in the UK placed at risk by the charges of illegal activities and potential charges of contempt of Parliament. The corporation was candid about the risks their recent SEC filing. Deadline New York reported this from the News Corporation SEC Annual Report: "(We) are not able to predict the ultimate outcome or cost" of law enforcement investigations in the UK and U.S.," it says. The proceedings "could damage our reputation and might impair our ability to conduct our business" in ways that "could affect the Company's results of operations and financial condition."
An imminent risk is the highly profitable BSkyB cable network, the largest broadcaster in the UK. The are over 10 million subscribers and close to 5.9 billion Sterling in revenue ($9.7 billion) for the 12 month period ending June, 2010. Pre-tax profits hit 875 million Sterling ($1.4 billion). News Corporation owns 39% of the network and planned to purchase the remaining 61% of the company, pending regulatory approval. That seemed a lock in January. After the Guardian's July 4 expose of NoW's phone hacking of the by then dead kidnap victim, Milly Dowler, things began to collapse. Just days after the Guardian article by Nick Davies, News Corporation announced it was withdrawing it's bid for the remaining 61% of the company.
James Murdoch is the Chairman of the Board for BSkyB. The board recently endorsed James and his position as chairman.
At stake now is the 39% ownership share currently held by News Corporation. By UK rules, the owner of major media properties needs to be a "fit and proper person."
Damian Collins is a Conservative MP and member of the committee that heard evidence from the Murdochs on July 19. Yesterday, Bloomberg News reported Collins saying that a "contempt of Parliament" finding against Murdoch would threaten his role as Chairman of the highly profitable BSkyB UK entertainment network. Collins said such a finding, "would raise the question about whether someone can pass the fit-and- proper person tests required to hold a broadcasting license if they have been found to be in contempt of Parliament."
If and when James Murdoch is found in contempt of Parliament, there is a stark choice for Rupert Murdoch and his family enterprise -- leave James in place and lose BSkyB, hardly acceptable, or remove James from the position of chairman of the board. The latter choice would be the second demotion for James in just a few weeks. Rupert Murdoch announced that his chief operating officer, Chase Carey, would become chairman of News Corporation should Murdoch become "suddenly incapacitated." James Murdoch had been groomed for that role and was the likely heir up to this point. James may lose his position as head of the most lucrative media network in Europe. as well.
The ultimate nightmare scenario is a public outcry demanding that News Corporation sell off its 39% interest in BSkyB or a move by Parliament or the coalition government to force a sell-off.
This would bring to life the recent SEC filing by News Corporation. If it lost BSkyB entirely, that would take $3.8 billion away from the company top line (the 39% of BSkyB revenues). The investigations and findings could have a devastating impact on the ability to conduct business, particularly if News Corporation loses BSkyB entirely. This would "affect the Company's results of operations and financial condition" by reducing gross revenues from $32.7 billion to $29 billion almost overnight. That's a start.
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