Bloomberg News

News Corp.’s James Murdoch May Need to Explain Contradiction

August 17, 2011

(Updates with lawyer’s comment in 16th paragraph.)

Aug. 17 (Bloomberg) -- A trove of documents and statements released by the U.K. Parliament in the News Corp. phone-hacking scandal implicates top former executives while contradicting testimony of Chief Operating Officer James Murdoch on what and when he knew about the illegal practices.

The contradictions mean Murdoch may be called to Parliament again to answer more questions about a confidential settlement he approved with one of the first known hacking victims, according to a statement issued by the Culture, Media and Sport Committee, which is investigating the scandal.

The documents and statements prompted lawmakers to request explanations for inconsistencies from several executives, including Andy Coulson, the tabloid’s former editor, and Les Hinton, who recently resigned as publisher and CEO of Dow Jones & Co. and had led News Corp.’s U.K. publishing unit.

The most critical new evidence the committee is working to get to the bottom of are accusations made in a 2007 letter from Clive Goodman, the former royal reporter at the center of the scandal. Goodman claims in the letter, which was released yesterday, that hacking was widespread at News of the World, editors discussed it during meetings and that he was promised his job back if he didn’t reveal the problem to law enforcement.

Devastating if Accurate

“The Goodman letter is devastating because, if it’s accurate, the whole foundation of the company’s defense and all the evidence they gave to all the inquiries was bogus,” said Tom Watson, a Labour Party lawmaker and member of the committee probing the allegations. “If Goodman’s accurate, then this is the smoking gun.”

Murdoch told lawmakers last month that he hadn’t realized until late 2010 that phone hacking was widespread at the News of the World. That’s been contradicted by Tom Crone and Colin Myler, two former executives of the tabloid, who said they informed him in 2008 about an e-mail that suggested more reporters were involved. They said Murdoch was told about it when they asked him in 2008 to approve a 700,000-pound ($1.2 million) settlement with Gordon Taylor, the chief executive officer of the Professional Footballers’ Association, who may have had knowledge of further interceptions by the paper.

Goodman’s letter to the head of human resources at News Corp.’s News International unit after he was sentenced to prison for phone hacking claimed he was wrongly fired.

‘Unfair Dismissal’

“From Clive Goodman’s letter of unfair dismissal and Tom Crone’s meeting with James Murdoch it appears many of the senior executives were becoming aware that phone hacking was a wider issue, the question is what did they do with that information,” said Damian Collins, a member of the parliamentary committee. “There still remains a lot of ambiguity about what knowledge James Murdoch had. It’s highly significant and we hope to get to the bottom of that.”

Harbottle & Lewis LLP, a London law firm hired by News Corp. to assist in looking into Goodman’s allegations about widespread hacking, said in its statement to the committee that Rupert Murdoch had been “inaccurate and misleading” in stating why the firm had been hired. It disputed statements by Murdoch and his son James that it had been engaged to give News Corp. a “good conduct certificate” and said its findings in its investigation were for “a wholly different purpose.”

James and Rupert Murdoch had overstated the limited scope of Harbottle & Lewis’s mission, which was to examine 2,500 e- mails for any evidence of hacking involved not just Goodman but five other News of the World employees, whose names were redacted from the statement at the request of the police, according to the firm.

‘Rested On’

Harbottle & Lewis rejected the evidence of James Murdoch that News International “rested on” the firm’s conclusions for his belief, until 2010, that Goodman was a rogue reporter.

The firm’s managing partner, Glen Atchison, said last month that Harbottle asked News International to release it from “professional duties of confidentiality” so that it could respond to “inaccurate statements” in Murdoch’s testimony. The request was granted, after initially being denied.

The committee wants four former executives, Crone, Myler, former News International human resources director Daniel Cloke and Jonathan Chapman, the unit’s former director of legal affairs, to return to give further testimony, it said yesterday.

Goodman, who was jailed for hacking phones, also said Coulson, the editor at the time, was fully aware of phone hacking. Coulson, who stepped down from his post at the newspaper after Goodman was jailed, resigned as U.K. Prime Minister David Cameron’s spokesman earlier this year and was arrested in July for questioning. He has maintained that he wasn’t aware of any phone hacking.

Serious Implications

“It could have serious implications for Coulson,” Niri Shan, the head of media law at Taylor Wessing LLP in London, said of Goodman’s letter. “He’s categorically denied he knew what was going on. Murdoch was at least one removed from the editorial meetings.”

Coulson’s lawyer, Jo Rickards, didn’t respond to a phone call or e-mail seeking comment. A spokeswoman for Crone and Myler didn’t respond to calls and an e-mail seeking comment. In letters to Parliament earlier this month Crone and Myler stood by their earlier testimony.

News Corp.’s Management and Standards Committee “is cooperating fully with the Metropolitan Police and is facilitating their investigation into illegal voice-mail interception at the News of the World and related issues,” News Corp. said in an e-mailed statement. “We recognize the seriousness of materials disclosed to the police and Parliament.”

‘Perverse’ Decision

The committee will offer Coulson, another former News of the World editor, Stuart Kuttner, Rebekah Brooks, who was the unit’s chief executive officer, and Hinton a chance to clarify their comments. Brooks said she was out of the country and couldn’t immediately provide all the data the committee wanted.

Goodman said in his letter Hinton’s decision to fire him after his conviction was “perverse” because his hacking activities had been carried out with the “full knowledge and support” of staff members, whose names were redacted in the letter. Other reporters also engaged in hacking without being fired, he said.

Four days after the date of the letter Goodman sent to Hinton, who had fired him, Hinton testified to Parliament that he believed Goodman was the only News of the World reporter who had hacked voice mails.

When he resigned last month, Hinton said in a statement that he, “watched with sorrow from New York” as the News of the World story unfolded and allegations of wrongdoing while he was executive chairman of News International emerged.

Ignorant

“That I was ignorant of what apparently happened is irrelevant and in the circumstances I feel it is proper for me to resign from News Corp. and apologize to those hurt by the actions of News of the World,” he said then.

Efforts to reach Hinton for further comment weren’t successful.

“There needs to be a great deal of scrutiny into what Goodman is saying,” Shan said. “There may be documented evidence one way or the other to show whether he’s right.”

The ex-royal reporter was paid 243,503 pounds to settle the case over his dismissal, according to James Murdoch’s letter to Parliament, which was published yesterday. That contradicts Brooks’ evidence in 2009 that they were forced to settle with Goodman because it could cost more than 60,000 pounds and the amount they agreed on was less than that. She’s being asked to clarify her statement, Watson said.

Gross Negligence

“Here’s a man who’s gone to prison for criminal wrongdoing, he’s sacked for gross negligence and he’s received a quarter of a million pounds as severance,” Watson said. “I don’t know any gross negligence case where that’s happened before.”

Prosecutors, the lawyer for the private investigator who did the hacking for Goodman and the sentencing judge in Goodman’s case all agreed other News of the World employees used the services of the investigator, Glenn Mulcaire, Goodman said. Goodman also specified who signed off on payments to Mulcaire, although the name of the payer was redacted.

Linklaters LLP, which represents the Management and Standards Committee of News Corp. board of directors, said in a separate letter an 85,000-pound settlement paid to Mulcaire to resolve a 2007 employment dispute was authorized by Hinton and News International’s then-finance director Stephen Daintith.

“As far as I am aware, no other member of staff has faced disciplinary action, much less dismissal,” Goodman said in the letter. “My conviction and imprisonment cannot be the real reason for my dismissal.”

Crone, the former News International legal manager, attended almost all meetings related to Goodman’s case and knew in advance he would plead guilty, Goodman said. The newspaper continued to employ him and said he could return to a job at the News of the World if he didn’t implicate the publication or its staff as part of his plea, according to the letter.

--With assistance from Thomas Penny, Kit Chellel and Tariq Panja in London and Linda Sandler in New York. Editors: Christopher Scinta, Patrick Oster

To contact the reporters on this story: Lindsay Fortado in London at lfortado@bloomberg.net; Erik Larson in London at elarson4@bloomberg.net.

To contact the editor responsible for this story: Christopher Scinta at cscinta@bloomberg.net


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