News Corp investors step up claim for damages
Independent shareholders in News Corp are stepping up their legal campaign against Rupert Murdoch, his son James and the rest of the board, saying a pattern of illegal activity revealed by the hacking scandal in the UK extended into its subsidiaries in the US.
The investors are asking a US court to break the boardroom stranglehold of the Murdoch family and to compensate shareholders for scandals that they say have hurt the business reputation and the share price of the company.
Yesterday, their lawyers revealed a new, broader complaint that includes allegations of wrongdoing at News America Marketing (NAM), an advertising firm specialising in marketing inside shops, and at NDS, a firm until recently controlled by News Corp that produces smart cards for use in satellite decoders.
NAM has paid almost $1bn (?730m) in fines and settlements related to the allegation that employees hacked into the computer system of a rival firm. And NDS was accused of illegally extracting software codes from competitors' cards and posting the information online. James Murdoch was on the board of NDS when the allegations first came to light in 2002.
"For more than a decade, News Corp subsidiaries have engaged in improper practices that have subjected the company to financial and reputational damage," the lawsuit alleges. "This misconduct was so pervasive that the board must have either been aware of the wrongdoing or was deliberately indifferent to the corporate culture that encouraged this type of behaviour."
Dissident shareholders have taken to the courts because they see little chance of unseating the Murdochs through other channels, since most of the shares carry no voting rights.
The lawsuit was launched last year by a trio of activist investors. The original object of their fury was News Corp's $615m (?449.5m) acquisition of Shine, a television production company created by Elisabeth Murdoch, done to bring Rupert Murdoch's daughter back to the company. News Corp is yet to file a response to the suit.
Jay Eisenhofer, a lawyer for the trio, said that News Corp would have cleaned house years ago if it were not run as a "personal fiefdom" of Rupert Murdoch.
In a separate development yesterday it emerged that James Murdoch is to be recalled for a fresh grilling before the British Parliament in an attempt to resolve conflicting evidence over his knowledge of the extent of phone hacking at the 'News of the World'.
Mr Murdoch, the chief executive of News Corp in Europe and Asia, will be asked to help tie up "one or two loose ends" following his dramatic appearance alongside his father before the Commons media select committee in July.
The decision follows evidence given by two former senior executives that they were "certain" that James Murdoch had been told in detail in 2008 about an email which made it clear that hacking went beyond a single "rogue" reporter.