Bloomberg News

U.S. Probe of News Corp. Hacking Said to Expand to Bribery

September 21, 2011

(Updates with murder victim in fifth paragraph.)

Sept. 21 (Bloomberg) -- News Corp., already facing three police inquiries in the U.K. as well as a Parliamentary probe of phone hacking by its employees, now faces an investigation into three matters on the other side of the Atlantic Ocean.

U.S. prosecutors are examining whether employees of Rupert Murdoch’s News Corp. tried to access the voicemails of 9-11 victims, broke antitrust or related laws and, according to a person familiar with the probe, bribed U.K. police for information.

The third line of inquiry was disclosed yesterday with news of a U.S. letter to the company requesting information on any bribes paid by its News of the World unit, said the person, who declined to be identified because the matter isn’t public. The letter is part of a Justice Department effort to determine whether News Corp. violated the Foreign Corrupt Practices Act, or FCPA, the person said.

“In any investigation you try to be as thorough as possible,” said Anthony Barkow, executive director of the Center on the Administration of Criminal Law at New York University School of Law and a former federal prosecutor. “They would try to uncover a pattern.”

News Corp. has come under scrutiny since revelations in July that its News of the World tabloid targeted the mobile- phone messages of murdered schoolgirl Milly Dowler in 2002. The company is also being probed over whether it paid police for story tips and used access to sensitive personal information to intimidate politicians.

Fallout From Disclosures

The disclosures led to the shutdown of the 168-year-old newspaper, resignations of News Corp. executives and the company’s abandonment of a bid for control of British Sky Broadcasting Group Plc, a pay-television broadcasting service.

Jerika Richardson, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, declined to comment on the probes. Suzanne Halpin, a spokeswoman for New York-based News Corp., declined to comment on the bribery inquiry.

The FCPA, enacted in 1977, makes it a crime for U.S. companies or their employees to pay agents of another government in an effort to win commercial advantage. Federal prosecutors have broad discretion to interpret the law and its definition of who qualifies as a government official.

News Corp. fell 1.7 percent yesterday on news of the letter, which doesn’t carry the same legal force as a grand jury subpoena. The company closed down 7 cents to $16.82 in Nasdaq Stock Market trading. Its shares have fallen 6.9 percent since July 4.

FCPA Investigations

In July, News Corp. retained attorney Mark Mendelsohn of Paul Weiss Rifkind & Garrison LLP, according to the Wall Street Journal, which is owned by News Corp. Prior to joining the law firm, Mendelsohn had overseen the Justice Department’s FCPA investigations.

News Corp.’s New York Post that month told employees to retain files related to any attempts at unauthorized access to third-party data, or illegal payments to government officials made to obtain information, according to a memorandum reproduced on The Poynter Institute’s Romenesko website.

Earlier this year, it was reported that reporters at News of the World had hacked the voicemail accounts of celebrities and Dowler, who had been kidnapped and murdered. U.K. investigators subsequently began looking into allegations that the tabloid’s staffers made payments to police officers in return for confidential information.

Hacking 9-11 Victims

Subsequently, in July, it was reported that the U.S. Federal Bureau of Investigation was reviewing allegations that News Corp. employees tried to access the voicemail of Americans killed in the Sept. 11, 2001, terrorist attacks on New York.

A U.K. newspaper reported that News Corp.’s reporters unsuccessfully tried to get a former New York City police officer to hack into the voicemail of victims. A person familiar with that probe said prosecutors have so far uncovered no evidence to support the claim.

Murdoch told the U.K. Parliament he has “seen no evidence of these allegations.”

Last week, the same Manhattan prosecutors who initiated the bribery probe and are pursuing the 9-11 inquiry asked to interview Robert Emmel, a former employee of News Corp.’s News America Marketing unit, according to a person familiar with that matter.

Emmel previously alleged “widespread illegal activity” at the company, according to court papers.

Coupons, Promotions

In papers filed in a News America Marketing lawsuit against him, Emmel described evidence given to lawmakers and regulators in 2006 as “substantial oral and documentary” information of the company’s “extensive billing and revenue-sharing fraud against its customers; its predatory and anticompetitive schemes against competitors” and “fraudulent inflation of its reported earnings unbeknownst to its shareholders.”

News Corp. has denied allegations of wrongdoing at the division, which prints and distributes coupons and in-store promotions for consumer packaged goods companies.

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

--With assistance from Karen Freifeld in New York and Erik Larson in London. Editors: David E. Rovella, Michael Hytha

To contact the reporter on this story: Greg Farrell in New York at gregfarrell@bloomberg.net; David Glovin in New York at dglovin@bloomberg.net; Tom Schoenberg in Washington at tschoenberg@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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