Bloomberg News

James Murdoch to Face Questions on $3.2 Million Settlements

July 19, 2011

(Updates with Miliband comment in 12th paragraph. For more coverage of News Corp., EXT3 <GO>.)

July 19 (Bloomberg) -- James Murdoch, deputy chief operating officer of News Corp., will be asked by British lawmakers whether settlements he authorized to victims of phone- hacking by a Sunday tabloid were part of a cover-up.

Murdoch, 38, faces questions over his approval of at least 2 million pounds ($3.2 million) to settle privacy cases filed by hacking victims and whether they were designed to conceal wrongdoing at the News of the World tabloid News Corp. shut down on July 10. He and his 80-year-old father, Rupert, will give testimony to the Culture Committee at 2:30 p.m. in London today.

Some of those payments, which Murdoch said on July 7 he regretted approving, were conditional on non-disclosure agreements. In the same statement, Murdoch said his company’s executives had misled Parliament. The policeman in charge of the original investigation accused News International, the U.K. publishing unit of News Corp., of “deliberately trying to thwart” him. Ten people have been arrested in a new probe.

“We want to get to the bottom of what happened and why none of this has come out until now,” Philip Davies, a Conservative lawmaker who sits on the panel, said in an interview. “They should have been aware of what was going on -- or certainly their company should have been aware of what was going on.”

Chase Carey

News Corp. is considering elevating Chief Operating Officer Chase Carey to chief executive officer, succeeding Rupert Murdoch, people with knowledge of the situation said. A decision depends on Murdoch’s performance before Parliament, said the people, who weren’t authorized to speak publicly. Murdoch would remain chairman, the people said. Executives are concerned Murdoch won’t do well answering questions, two people said.

The hearing will be led by Conservative John Whittingdale, 51, a former political secretary to Margaret Thatcher and aide to ex-Conservative leader William Hague. He achieved prominence last week when he threatened to use Parliament’s powers to force the Murdochs to give evidence.

The toughest questioning will come from Labour’s Tom Watson, 44, who has led the campaign to expose phone-hacking within Parliament for two years. It was he who in 2009 got News of the World editor Colin Myler to reveal that James Murdoch had approved at least one of the settlements.

Paul Farrelly, 49, also for Labour, will draw upon his background as a journalist with Reuters, the Observer and the Independent on Sunday.

Only Hacker?

News Corp.’s News International unit, which publishes the company’s U.K. newspapers, said after royal reporter Clive Goodman was jailed for phone-hacking in 2007 that he was the only News of the World employee who had acted illegally. The settlements authorized by James were for victims who had nothing to do with the royal family.

Alice Macandrew, a News Corp. spokeswoman, declined to comment before the hearing.

The committee will also question Rebekah Brooks, a former News of the World editor who quit last week as News International chief executive officer, after the Murdochs. Brooks was arrested by police and questioned for nine hours two days ago.

“What the public wants to hear is not just why it happened in the first place, but why it wasn’t cleared up,” opposition Labour Party leader Ed Miliband told reporters today. “Years and years of denial, years and years of saying that it was a small problem, rogue reporters and all of that, so I think they need to come clean on those kind of issues.”

‘Rogue Reporter’

Until January, News International executives stuck to the line that phone-hacking at the News of the World had been the work of a single “rogue reporter,” in the words of Andy Coulson, who resigned as editor of the paper following Goodman’s conviction. Coulson went on to work for U.K. Prime Minister David Cameron as director of communications, resigning in January. He was arrested July 8.

In private, the company was settling lawsuits. First it paid undisclosed amounts to Goodman and a private investigator, Glenn Mulcaire, who was jailed alongside him for phone-hacking. Goodman had been fired when he was sent to prison and sued for unfair dismissal. Mulcaire, who had been on a contract for the paper, did likewise. Les Hinton, then executive chairman of News International, told the Culture Committee in September 2009 he approved the payments. Hinton resigned from News Corp. July 15.

‘Hush Money’

“There was definitely a cover-up,” Chris Bryant, a lawmaker from the opposition Labour Party who is suing News Corp. over phone-hacking, said in an interview “Hush money was paid, and James Murdoch agreed the payments. The question is whether he got agreement higher up, and what he thought he was doing. That’s one of the questions.”

In April 2008, lawyers for Gordon Taylor, chief executive of the Professional Footballers’ Association, obtained documents from the police who had investigated Goodman and Mulcaire that included a transcript of voicemails left for Taylor on his own phone and left by him on the phones of two associates.

The transcript had been typed up by a junior reporter on the newspaper and marked “for Neville.” The only Neville on the News of the World at the time was Neville Thurlbeck, its chief reporter. Tom Crone, legal manager at News International told the committee in July 2009 that at this point the company decided to seek an out-of-court settlement.

Gagging Order

Before the end of the year the paper paid 1 million pounds in compensation and costs to Taylor and his colleagues, a payment Crone said was approved by James Murdoch. It required Taylor to agree a gagging order about the settlement. Crone left the company on July 13.

The Guardian newspaper reported the Taylor settlement in July 2009. Rupert Murdoch said he wasn’t aware of the payment. “If that had happened, I would know about it,” he said in an interview. The Culture Committee may ask him whether this was the first he learned of the case and how he responded.

It was the Guardian report that prompted the committee to begin asking its questions about phone-hacking. Hinton, Coulson, Crone and Myler, the News of the World editor at the time, all gave testimony and all insisted there was no evidence implicating any reporter other than Goodman.

Taylor’s lawyer, Mark Lewis, told the committee in September 2009 that News International’s lawyers threatened to seek an injunction to stop him from representing other phone- hacking victims.

‘Inconceivable’ Testimony

When the committee produced a report in February 2010, it said it found the testimony from the four News Corp. executives “inconceivable.” News International responded that the inquiry had “damaged and materially diminished” the reputation of Parliament, and that committee members had “repeatedly abused the public trust.”

Again, this contrasted with another out-of-court settlement, this time with the celebrity publicist Max Clifford, the previous month. Clifford has acknowledged settling the case, though he has refused to comment on reports in British media that he received around 1 million pounds.

New denials of wrongdoing from News Corp. followed a New York Times investigation in September. The Times cited unnamed former News of the World reporters as saying Coulson had ordered phone-hacking. News International questioned the newspaper’s reliance on anonymous sources, and said it contained “no new credible evidence.”

One of those sources was Sean Hoare, a former News of the World reporter. A man police said they believed to be Hoare was found dead at his home yesterday, according to police in Hertfordshire, north of London. The death is being treated as unexplained and isn’t thought to suspicious, the police said in a statement today.

Jude Law

By late last year, News International was facing a mounting number of lawsuits from celebrities such as actor Jude Law and soccer player Andy Gray. Some were also taking the police to court to get access to evidence to help their cases. It was these lawsuits that would force the company to change its line.

In January, News International handed the Metropolitan Police a cache of material, leading the force to begin a full- scale probe. In April, the News of the World admitted phone- hacking had taken place on a much wider scale than previously admitted, and said it would settle cases.

“News Corp. executives and non-executive directors have shown themselves completely unable to control what was going on in the paper,” Bryant said.

Two weeks ago, after the phone-hacking allegations spread to encompass Milly Dowler, a schoolgirl murdered in 2002, and the relatives of British war dead, James Murdoch said the News of the World had “failed,” and News Corp. closed the paper.

“James Murdoch said he didn’t know enough,” Lewis, who also represents Dowlers’ parents, said in a telephone interview. “The question to be asked is not what didn’t he know, but what did he know?”

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

--With assistance from Andy Fixmer and Ronald Grover in Los Angeles and Lindsay Fortado in London. Editors: Eddie Buckle, Anthony Aarons

To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net; Alex Morales in London at amorales2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net.


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