Bloomberg News

News Corp. Inquiry Turns on Staff Ahead of U.K. Hearing

November 10, 2011

(Updates with Australian chief resigns in 12th paragraph.)

Nov. 9 (Bloomberg) -- News Corp.’s internal investigation of phone hacking and bribery has found evidence that more reporters participated in the scandal, information it shared with police who made an arrest last week, according to two people familiar with the probe.

Sun reporter Jamie Pyatt was arrested last week as News Corp. prepares for deputy Chief Operating Officer James Murdoch to face lawmakers in parliament again tomorrow on why he didn’t act more quickly to stop unlawful behavior at the company’s newspapers. Before Pyatt’s arrest, Matt Nixson, an editor at the Sun tabloid, was fired and a file on him was given to police, said the people, who declined to be identified because the investigation is confidential.

News Corp. closed the News of the World Sunday tabloid and formed the Management and Standards Committee in July to deal with the phone-hacking scandal after it emerged that reporters at the paper deleted phone messages on a murdered girl’s mobile phone. Media analyst Chris Goodall said the company should have acted sooner to investigate the practices.

“Crisis management handbooks would not have told them to handle this problem this way, no question” said Goodall, who advised the U.K. government on News Corp.’s failed bid for all of pay-television operator British Sky Broadcasting Group Plc. “For a public company this would have been grossly irresponsible, but News International isn’t a public company.”

Family Control

Last month, News Corp. shareholders lodged a protest vote against Chairman Rupert Murdoch and his sons, following an annual meeting at which investors called for governance changes and an end to voting practices that cement the family’s control. James received the highest percentage of votes against his election to the company’s board, at 35 percent.

Initial reports from celebrities and politicians who believed they had been hacked by reporters at the News of the World tabloid dated back to 2006. A July report by the Guardian newspaper that hacking had spread to include the phone of murdered schoolgirl Milly Dowler, hampering a police search when she was still missing, triggered a public outcry.

News Corp.’s internal standards committee initially assisted with the police investigations and lawsuits.

This was in line with the company’s decision earlier this year to settle civil suits and comply with police investigations rather than attempting to uncover more evidence of hacking in the newsroom or disclose what had been revealed in lawsuits, said one of the people who was close to the company’s U.K. operations at the time.

Sun, Times

The committee is now carrying out inquiries into its U.K. newsrooms. News Corp. is reviewing e-mails and interviewing reporters at its remaining U.K. titles, the Sun, the Times and the Sunday Times, for signs employees hacked into voice mails or e-mails, or hired private detectives improperly, two people familiar with the investigation said last month.

Nixson, who hasn’t been arrested and has sued News Corp. over his firing, declined to comment. Contact details for Pyatt weren’t available via the Internet and the U.K. phone directory.

Paul Durman, a spokesman for the standards committee in London, declined to comment. News Corp. spokeswoman Miranda Higham declined to comment, referring questions to News International. Daisy Dunlop, a News International spokeswoman, said the company is cooperating with police, declining to comment further.

17 Arrests

Separately, News Corp. said Kim Williams will head its News Ltd. Australian division from Dec. 5 after the resignation of John Hartigan. Rupert Murdoch will become chairman of the unit. The changes come a day after the start of a government inquiry into Australia’s print media, where News Corp. controls more than half of the nation’s newspaper readership with titles including the Herald Sun, Daily Telegraph and the Australian.

The phone-hacking scandal in the U.K. has lead to at least 17 arrests and the resignations of top executives, including Les Hinton, the head of the Dow Jones unit, and the former CEO of News International Rebekah Brooks.

James is scheduled to testify before the House of Commons Culture, Media and Sport Committee for a second time tomorrow.

In July, when he appeared alongside his father Rupert, James denied he’d been told in 2008 about an e-mail that showed hacking had gone beyond a single reporter at News of the World. Within days, the tabloid’s former editor, Colin Myler, and a News Corp. lawyer, Tom Crone, said they had told him about it in a meeting in June that year.

’Powerful Case’

In October, Julian Pike, outside counsel for the company, said there had also been a meeting in May 2008 between Myler and Murdoch when evidence of phone hacking may have been discussed. Pike said he had told News Corp. that in 2008 that there “was a powerful case to support a culture of illegal accessing of information” at the newspaper.

James Murdoch joined News International as chairman in December 2007, after the alleged hacking took place.

The lawmakers are scheduled to question him from about 11:00 a.m. London time tomorrow. He hired Jeremy Sandelson, global head of litigation at law firm Clifford Chance in London.

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

The dispute between James Murdoch and Myler and Crone centers around an e-mail that was produced by police and showed transcripts of hacked voice mails and had been passed around the News of the World newsroom.

’Seriousness’

Myler and Crone met with Murdoch for less than 15 minutes in 2008 to discuss the settlement of a privacy complaint filed by Gordon Taylor, chief executive of the Professional Footballers’ Association. They said in September they told him the company had to settle because Taylor’s lawyers had produced a transcript of voice mails typed by a reporter at the newspaper and marked “for Neville.”

“I think everybody perfectly understood the seriousness and significance of what we were discussing,” Myler told the lawmaker committee at the time. Asked if he had told Murdoch that this appeared to be a reference to Neville Thurlbeck, the paper’s chief reporter, Crone replied, “I’ve got a feeling I probably did.”

James Murdoch has said neither Myler nor Crone told him that wrongdoing extended beyond reporter Clive Goodman and private investigator Glenn Mulcaire, who both went to jail in 2007.

Michael Grade, the former chairman of U.K. broadcaster ITV Plc, said last week News Corp. should have disclosed all the information about phone hacking as soon as they discovered it. Grade compared the crisis with ITV’s response to the 2007 premium-rate phone line case where consumers paid to enter competitions they had no chance of winning.

“It was commercially inept, frankly,” Grade said. “The thing we did differently to News International is that we got to the bottom of it ourselves.”

--Editors: Simon Thiel, Anthony Aarons

To contact the reporters on this story: Amy Thomson in London at athomson6@bloomberg.net; Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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