News Corp. (NWSA:US) Chairman Rupert Murdoch is “not a fit person” to lead a major international company, U.K. lawmakers said, after his British unit misled Parliament about the extent of phone hacking at its News of the World tabloid.
Murdoch “turned a blind eye and exhibited willful blindness to what was going on in his companies,” the House of Commons Culture Committee said in a report today that split lawmakers along party lines on critical findings. “This culture, we consider, permeated from the top throughout the organization and speaks volumes about the lack of effective corporate governance at News Corp.”
The report may increase the likelihood that U.K. regulator Ofcom concludes News Corp. is unfit to hold a broadcasting license and asks the company to reduce its 39 percent stake in British Sky Broadcasting Group Plc. (BSY) The phone-hacking scandal prompted News Corp. to abandon a 7.8 billion-pound ($12.7 billion) bid for the rest of BSkyB, the U.K.’s biggest pay- television provider, last year. Tim Bale, a Sussex University politics professor, said he was surprised by the report’s strong language.
“It’s clearly not good news,” he said in a phone interview, adding that the report contained “really serious” accusations. “They clearly must have been hoping that the committee would have been more measured and more cautious.”
While the report contained “hard truths” for News Corp., it has already confronted the problems documented in it by conducting internal reviews of its newspapers, providing evidence to authorities and setting up internal controls to prevent hacking or bribery from occurring in the future, the New York-based company said in a statement today.
The company’s investigations into its Times, Sunday Times and Sun newspapers uncovered “no evidence of illegal conduct other than a single incident reported months ago,” Murdoch said in a separate statement. About a dozen reporters at the Sun have been arrested, though not charged, in a police investigation into bribery. News Corp.’s internal investigators have been handing over information to the police.
“We certainly should have acted more quickly and aggressively to uncover wrongdoing,” Murdoch said. “We deeply regret what took place and have taken our share of responsibility for not rectifying the situation sooner.”
‘Above the Law’
Three executives at the News International unit -- Les Hinton, Tom Crone and Colin Myler -- gave misleading testimony to the committee in 2009, the panel said in London. The company failed to disclose documents and made statements that “were not fully truthful,” and Murdoch, 81, and his son James must ultimately take responsibility, the lawmakers said.
The 11-member committee has been working on its report since July, when the Murdochs were summoned to testify about their roles in the scandal. Father and son told a media-ethics inquiry last week that underlings, particularly Crone and Myler, were to blame for their failure to detect any wrongdoing at the now defunct newspaper.
“The News of the World and News International misled the committee about the true nature and extent of the internal investigations they professed to have carried out in relation to phone hacking,” the panel said. “Their instinct throughout was to cover up rather than seek out wrongdoing.”
The six Labour and Liberal Democrat lawmakers on the committee voted to conclude that Rupert Murdoch is “not a fit person” to lead a major international company and the four members of Prime Minister David Cameron’s Conservative Party voted against it. One of them, Louise Mensch, said they “felt that was ultimately outside the scope of a select committee.”
“Rupert Murdoch clearly is a fit and proper person to run an international company,” said Philip Davies, another dissenting Conservative. “He’s been running businesses since before I was born. We’ve seen absolutely no evidence to suggest that Rupert Murdoch was aware these things were going on.”
Labour’s Tom Watson argued those in charge needed to take responsibility. “We found News Corp. carried out an extensive cover-up of its rampant law breaking,” he told reporters. “The two men at the top of the company need to answer for that.”
The division along party lines may lead to further suggestions that Cameron and his Conservatives are too close to Murdoch. Culture Secretary Jeremy Hunt is under pressure to resign following the publication of e-mails last week which showed his office had been providing information to News Corp. about the government’s position on the BSkyB bid when Hunt was in charge of deciding on whether it should be allowed.
The report was skeptical of Murdoch’s claim the hacking and the cover-up had all been at too low a level for him to know about. “In his testimony to us and also the Leveson Inquiry, Rupert Murdoch has demonstrated excellent powers of recall and grasp of detail, when it has suited him,” the committee said.
Ofcom has said it will draw upon the report for its decision on News Corp.’s fitness to hold a broadcasting license. The regulator asked News Corp. last week to provide documents from civil phone-hacking lawsuits as it decides whether the matter has compromised the company’s ability to run BSkyB, and it said today it will assess the new evidence.
The lawmakers are “not the people ultimately to decide whether someone is a fit and proper person, and it’s not over until the fat lady, in other words a regulator, sings,” Sussex University’s Bale said.
Police probes into phone and computer hacking and bribery have led to about 45 arrests, including former News of the World editors Rebekah Brooks and Andy Coulson, once Cameron’s communications chief. News Corp. closed the Sunday tabloid in July and later replaced it with a Sunday edition of the Sun.
After the hacking scandal first became public in 2006, with the arrest of a reporter, Clive Goodman, and a private investigator, Glenn Mulcaire, the company’s “containment approach” was to blame the crime on one “rogue reporter,” the panel said. It then shifted blame to “certain individuals,” including Myler and Crone, “whilst striving to protect more senior figures,” notably 39-year-old James Murdoch, News Corp.’s deputy chief operating officer.
Myler and Crone “cannot be allowed to carry the whole of the blame as News Corp. has clearly intended,” the committee said. “The whole affair demonstrated huge failings of corporate governance.”
The two men, summoned before the Culture Committee last September, denied having misled it in 2009.
Hinton didn’t tell the truth about payments to Goodman and the extent of his knowledge of the voice-mail allegations, the lawmakers said today. Crone misled the panel about the significance of the first legal settlement with a victim of hacking, while he and Myler lied about their knowledge of the participation of other News of the World employees in criminal activity, according to today’s report.
“I stand by the evidence that I gave the committee,” Myler said in an e-mailed statement today.
Crone said the same, adding that the committee was misinterpreting his earlier testimony.
“I accept that there are valid criticisms of my conduct in this matter, but for the second time in a week, I seem to be the subject of serious allegations which lack foundation,” he said.
In a separate statement, Hinton said he also denied the accusations. “I have always been truthful in my dealings with the committee and its findings are unfounded,” he said.
Parliament as a whole will be asked to vote on whether the men are guilty of contempt. The committee chairman, John Whittingdale, said it wasn’t clear what the punishment could be, because no one has been found guilty of it for decades.
BSkyB gained 1.9 percent to close at 691 pence in London trading. That was below the 700 pence per share News Corp. offered to pay last year for the remaining 61 percent stake.
Analysts including Sanford C. Bernstein’s Claudio Aspesi said today Murdoch could decide to sell the stake in the pay-TV operator. BSkyB had risen as high as 850 pence before newspaper reports in July that News of the World employees intercepted murder victim Milly Dowler’s voice mails in 2002.
News Corp. rose as much as 2 percent in New York. The stock had risen 9.9 percent this year before today.
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