Rupert Murdoch's grip on his global media empire was under direct threat last night as the first moves began in America to oust him as chairman of News Corp.
The 81-year-old's company faces investigations for corporate negligence after a devastating report by an influential Commons’ select committee declared the mogul unfit to run an international business and said he oversaw a culture of “wilful blindness”.
The unexpectedly damning verdict also increased the pressure on News Corp's 39% shareholding in the British broadcaster BSkyB.
The select committee accused Mr Murdoch's closest lieutenant of 50 years of misleading Parliament.
Rupert Murdoch was “not a fit person to exercise the stewardship of a major international company”, it concluded, in a judgment that divided MPs on the Culture, Media and Sport committee. He had “turned a blind eye and exhibited wilful blindness”, they said.
Mr Murdoch's “self-portrayal” to Parliament as a hands-off proprietor was a “misleading account of his involvement and influence with his newspapers”.
His son James, who quit this year from control of the company's European operations, was guilty of “wilful ignorance”.
Three of the Murdochs' once-loyal lieutenants — the News of the World lawyer Tom Crone, the paper's former editor Colin Myler and Les Hinton — were singled out in the report as having been complicit in a cover-up.
The findings leave the door open for investigators on both sides of the Atlantic to launch new inquiries into whether those at the helm of the company can be held responsible for its failings.
Change To Win, a union advisory group for US pension funds, last night joined calls from some shareholders for Mr Murdoch to step down and formulate a succession policy, declaring “this is a company in crisis”. The company was found to have made false statements, to have failed to disclose documents and to have shown an instinct to cover up rather than deal with wrongdoing after private investigator Glenn Mulcaire and former NOTW royal editor Clive Goodman were jailed for eavesdropping on voicemails in 2007.
Mr Myler, in a statement from New York, said the conclusions were affected by the “fragmented picture” which had emerged from evidence given by witnesses and by constraints within which the committee had operated.
Responding to the renewed pressure on the board in New York, News Corp said last night that “hard truths” had emerged. The company said it regretted the committee's analysis and branded some findings “unjustified and highly partisan”.
News Corp claimed to have already “confronted and acted on” the failings documented in the report.
Story so far
News Corp is already facing legal problems in the US, including a potential investigation under the Foreign Corrupt Practices Act arising from the actions of journalists and executives in its UK newspaper arm.
The repeated allegations from MPs of “wilful blindness” and “wilful ignorance” against the the Murdochs and unnamed directors of News International appeared carefully crafted to raise alarm in America by echoing legal terms that suggest criminal liability for corporate wrongdoing.
Company didn’t just mislead Parliament...
By James Cusick
Perhaps the most succinct summary of the Media Select Committee's report came from one of the Labour MPs who helped write it. “We have been led up the garden path,” Paul Farrelly said.
Beyond its conclusion that News International (NI) and the News Of The World (NOTW) “misled Parliament”, the report contains a number of damning findings.
News International's misleading investigations:
In 2006, Clive Goodman, then the royal editor of the NOTW, and Glenn Mulcaire, a private investigator, were arrested on suspicion of illegally intercepting voicemails. They were convicted and jailed in 2007. News International still insists it carried out internal investigations to try to discover if there were others involved but, says the committee, these investigations were part of “an elaborate strategy to exaggerate evidence in support of the company's innocence”.
The beginning of the cover-up:
When Goodman came out of jail in 2007, NI paid him a year's salary of £90,000. Les Hinton, then executive chairman, authorised a further £153,000. This amount was described in the report as “extraordinary — it is impossible not to question the company's motives”. Of Mr Hinton's evidence on the pay-off the report added there was “a deliberate effort to mislead the committee”.
Keeping Mulcaire off the radar:
The committee found NI was determined to cover up the extent of phone hacking and was willing to meet all Mulcaire's legal bills to prevent him from revealing, in court, the names of those who instructed him at the NOTW.
Keeping Taylor out of court:
The footballers' union boss Gordon Taylor launched a hacking claim and settled out of court for £700,000. The report found “keeping the settlement out of the public eye was absolutely central to the agreement”. NI's legal boss, Tom Crone, “misled the committee” about what lay behind negotiations with Taylor.
'Rogue reporter' line exploded:
The report says the Taylor deal was done to “buy silence” and to avert future civil claims. Settling at £700,000, said the report, indicated “some senior people at NI were aware that the 'rogue reporter' claim was untrue”.
Keeping silent on real evidence:
In their evidence, Mr Crone and the NOTW editor at the time, Colin Myler, offered assurances that nothing would be found on hacking beyond Goodman. The report says categorically: “This was not true”. Both Mr Crone and Mr Myler “deliberately” avoided disclosing what they knew.
Verdict on Rupert Murdoch:
The report concludes Rupert Murdoch did not take steps to become fully informed about phone hacking. In MPs' words, he “exhibited wilful blindness to what was going in his companies and publications”. Although the committee was split on whether this conclusion should appear, these words jump out of page 70: “Rupert Murdoch is not a fit person to exercise the stewardship of a major international company.”
News Corp revolt may see tycoon unseated after AGM
If Rupert Murdoch believed his appearance at the Leveson judicial inquiry last week would quell the ever louder outcry over his and his company's conduct, he was wrong. By far the most damning judgement of this report is reserved for the 81-year-old chairman and chief executive of News Corporation.
By concluding that he is unfit to run a major international company (the majority verdict of the five Labour MPs and the Liberal Democrat MP Adrian Sanders, but not of its four voting Conservative members) the Culture Committee increased the pressure on the tycoon.
He already faces a shareholder revolt at News Corp's next annual meeting due in October, where there is a motion to unseat him.
The US Department for Justice may also take into account the committee's findings when considering whether News Corp directors permitted or wilfully ignored a newsroom culture that bribed police and public officials in the UK — potentially a criminal offence punishable by a fine or five years in jail under American law.
Demanding that News International lifts legal privilege on the work done by its lawyers Burton Copeland during the original phone hacking investigation in 2007 will focus attention on the contents of that hitherto undisclosed file.
The verdict that its subsidiary News International “corporately” misled Parliament will not help News Corp win public sector contracts.
Ofcom, the media regulator, will use these parliamentary words in its assessment of whether or not News Corp should continue to hold its 39% stake in BSkyB — by far its most lucrative business in the UK.
The report raises the stakes for politicians defending their previous relationship with the Murdochs, and sets the bar high for Lord Justice Leveson for his report on how things went so badly in British newspapers.
The MPs' verdict is clear, at least as far as Rupert Murdoch is concerned: collectively his company and his executives orchestrated a cover-up which repeatedly misled Parliament, the Press and the public about the scale of vast law-breaking at its Wapping HQ in London.