Bloomberg News

Cameron Says James Murdoch Still Has Questions to Answer

July 22, 2011

(Updates with Murdoch planning to write in eighth paragraph, shares in ninth. For more coverage of News Corp., see {EXT3 <GO>}.)

July 22 (Bloomberg) -- U.K. Prime Minister David Cameron said News Corp. Deputy Chief Operating Officer James Murdoch still has questions to answer over the hacking of phones by reporters at the News of the World newspaper.

Cameron made his comments after Murdoch’s testimony to lawmakers this week was challenged by two former employees of News Corp.’s U.K. newspaper unit, prompting one opposition lawmaker to ask the police to investigate.

“Clearly James Murdoch has got questions to answer in Parliament and I’m sure he will do that,” Cameron said in an interview with BBC television today in Warwickshire, central England. “News International has got some big issues to deal with and a mess to clear up. That has to be done by the management of that company.”

The widening phone-hacking scandal and its political backlash has forced News Corp. to close the 168-year-old News of the World and drop its 7.8 billion-pound ($12.6 billion) bid for British Sky Broadcasting Group Plc. At least 10 people have been arrested, including former News International Chief Executive Officer Rebekah Brooks and ex-News of the World editor Andy Coulson, who was Cameron’s press chief until January of this year.

Murdoch ‘Mistaken’

Tom Crone, a former lawyer at News International, and Colin Myler, the editor of the tabloid until this month, said Murdoch was “mistaken” about information he received on a settlement he authorized for a phone-hacking victim.

“We’re getting near to the core of this now, we’re getting nearer to the truth,” Tom Watson, an opposition Labour Party lawmaker, told the BBC in an interview in which he said he will refer the matter to the police. “If their statement is accurate it shows James Murdoch had knowledge that people were involved in hacking as early as 2008.”

A spokesman for London’s Metropolitan Police, which is investigating the hacking allegations, said by telephone it had received a letter from Watson.

Murdoch, 38, is planning to write to House of Commons Culture, Media and Sport Committee Chairman John Whittingdale to reassert he answered truthfully in his testimony to the panel on July 19, committee, according to a person familiar with the matter.

Shares Decline

News Corp. fell for the first time in four days and was 0.9 percent lower at $16.34 at 11:07 a.m. in New York.

Crone, Myler, the police and the Press Complaints Commission are casting doubt on James Murdoch’s explanation as to why News Corp. failed to investigate allegations of phone hacking in more depth. The police, whose 2006 probe stopped at the prosecution of reporter Clive Goodman and private investigator Glenn Mulcaire, have said the company obstructed their probe. The Press Complaints Commission, whose inquiry James Murdoch also referred to, has said it was lied to.

Chairman Rupert Murdoch should strengthen corporate governance rules and tighten internal controls, Saudi Prince Alwaleed bin Talal al Saud said yesterday.

“All of this is in motion already,” Alwaleed, whose Kingdom Holding Co. owns about 7 percent of News Corp.’s voting shares, said in a CNN interview on “Piers Morgan Tonight.” He said he wasn’t worried about the fallout from the hacking scandal at the now-defunct News of the World newspaper.

Statement of Support

The Saudi prince, 56, issued a statement of support for Murdoch and his son, James, on July 20, the day after they gave three hours of testimony in the U.K.’s Parliament.

In a statement, Myler and Crone said: “Just by way of clarification relating to Tuesday’s CMS Select Committee hearing, we would like to point out that James Murdoch’s recollection of what he was told when agreeing to settle the Gordon Taylor litigation was mistaken.

“In fact, we did inform him of the ‘for Neville’ e-mail which had been produced to us by Gordon Taylor’s lawyers.”

The “for Neville” e-mail was uncovered by lawyers working for Taylor, chief executive of the Professional Footballers’ Association, in April 2008. From one of the paper’s junior reporters and apparently intended for Neville Thurlbeck, the paper’s chief reporter, it contained transcripts of messages left for and by Taylor. In 2009 Crone told the Culture Committee that following the discovery of this e-mail, News International decided to settle with Taylor.

Client Confidentiality

Harbottle & Lewis LLP, the firm James and Rupert Murdoch told the Culture Committee on July 19 had given them a clean bill of health, has said it also wishes to respond to the testimony. The firm is seeking clarification from New York-based News Corp. about the extent to which its duty of client confidentiality is waived, according to a person familiar with the situation, who declined to be identified because the matter is private.

“News Corp. never did a full investigation and they’re still engaging in a cover-up,” Chris Bryant, a Labour lawmaker who is suing the company over phone-hacking, said in an interview. “Harbottle & Lewis were asked to do a very specific thing, and they did that thing.”

James Murdoch told the committee the company had “relied upon” Harbottle & Lewis’s report in its assertions that phone- hacking had been down to a single reporter. This has been the company’s position since at least 2009, when then News of the World legal manager Crone told the Culture Committee that the law firm’s investigation had answered the question: “Was anyone involved with Mulcaire, or doing this, that or the other?”

Outside Counsel

After the Murdochs had left Parliament on July 19, the Home Affairs Committee began a hearing with Ken Macdonald, a former Director of Public Prosecutions brought in as outside counsel to News Corp. earlier this year to look at a selection of e-mails from the Harbottle & Lewis file.

He described a much narrower remit for the law firm’s investigation, saying it had been commissioned as part of a defense of an unfair dismissal claim brought in 2007 by jailed royal reporter Clive Goodman. “The file was brought into effect to deal with that issue,” he said.

James Murdoch told the Culture Committee that Harbottle & Lewis “had issued a clear opinion that there was no additional illegality other than the two individuals involved before.” The firm responded by writing to Whittingdale, saying it had asked News Corp. to waive its obligation of confidentiality so that it could submit evidence.

News Corp. initially refused, before issuing a statement July 20 saying it would do so. A person familiar with the matter who spoke on condition of anonymity said Harbottle & Lewis was seeking further reassurance from News Corp.

‘Stunned and Shocked’

Harbottle & Lewis has its own questions to answer. Macdonald said it took him five minutes with the e-mails he saw from its files to conclude they showed evidence of “serious criminal offenses.” He reported to News Corp.’s board that they should be handed to the police. He said the “stunned and shocked” board accepted his advice “immediately.” Police have since opened a probe into whether officers took bribes from the newspaper for information leading to stories.

“There has been an awful lot that has not come out,” said Martin Moore, director of the Media Standards Trust. “It appears from the outside as though one of the reasons that hasn’t come out is deliberate, and now that those constraints seem to be falling away, we’ll hopefully learn a lot more.”

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

--With assistance from Alex Morales, Erik Larson, Jonathan Browning, Lindsay Fortado and Amy Thomson in London and Andy Fixmer in Los Angeles. Editors: Heather Harris, Tony Aarons, Eddie Buckle

To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net; Thomas Penny in London at tpenny@bloomberg.net

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


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