The Motley Moose - FBI

FOTHOM XXXIV: US Newscorp Prosecutions Loom after Bribery Arrests and Avon FCPA case

Peter Jukes — Mon, 13 Feb 2012 22:12:49 GMT

Whew! This has been an exhausting weekend of revelations and arrests as the Hackgate scandal at News of the World has spread, via an email hacking scandal at The Times, to the arrest of ten journalists, many of them senior, at Britain's most popular paper, The Sun.

Without doubt, from the multiple angry responses from NI journalists, the British arm of Newscorp is now at war with its corporate masters in the News Corp headquarters in New York. The latter are in charge of the 100 plus lawyers at the Management and Services Committee which is directly co-operating with 161 officers in the Met Operations Weeting, Tuleta and Elveden engaged in investigating phone, email hacking and bribery of state officials. It's the latter which are behind the recent spate of arrests, and directly threatens the News Corp base with the threat of prosecution under FCPA violations.

I haven't got long because all these developments have to be incorporated in my book with Eric Lewis, Bad Press: Fall of the House of Murdoch. But in short the DOJ, the FBI and the SEC have all been investigating News Corp since the summer. Mark Lewis, the sterling lawyer for the hacking victims is heading to New York this week to launch civil claims on this basis. In the meantime it's the FCPA violations which could land senior News Corp Executives in the dock.

There are so many sources on this, from Reuters, the NYT, even the WSJ, I'm just going to link to the most recent: Ed Pilkington on the US Guardian site:

News Corp executives at risk of US prosecution for 'willful blindness'

The perils to News Corp of an FCPA prosecution in the US against the company and its executives was underlined by the revelation that a grand jury has been convened in the case of Avon Products. The Wall Street Journal reported that US authorities are probing an internal audit report compiled in 2005 that found that Avon employees had bribed officials in China, yet the company only launched an official inquiry into possible violations three years later.
In the Avon case, the grand jury is likely to be asked to consider whether executives were culpable under the "willful blindness" provision of the FCPA.
Professor John Coffee, a specialist in white-collar crime at Columbia law school in New York, said that executives were at risk of prosecution in cases where they failed to ask relevant questions about a suspicious persistent pattern of payments. He gave the metaphorical example of a driver used by a Mexican drugs cartel to transport cocaine across the border who was aware that the vehicle contained a secret storage panel but made no attempt to find out what packages had been placed inside.
As part of its response to the billowing phone hacking scandal, News Corp has amassed the most formidable team of FCPA lawyers ever assembled. "They have appointed not just one of the best lawyers in this field, they have appointed most of the best lawyers," Coffee said.
"That's not normal defensive strategy," he added.

And in other 'news' (I use the term lightly in the Fox news sense), there are rumours that the government scientist David Kelly, who committed suicide after the Iraq invasion over allegations of sexing up WMD threat, could have been a hacking victim. Michael Wolff, Murdoch's official biographer speculates that James could be arrested this week. And dozens of tabloid journalists, more than happy to see others arrested in dawn raids or suffer trial by media, are whining loudly, in a liberal way, about human rights, due process, and innocent before being proven guilty.

Sweet is it in this dawn to be alive.

FALL OF THE HOUSE OF MURDOCH V: As Brooks - and Hinton! - Resign More on US Sleaze

Peter Jukes — Fri, 15 Jul 2011 22:03:05 GMT

Events are moving so fast this is already out of date: first the resignation of resignation of Rebecca Brooks as head of News International. For a small personal vignette of my encounter here, you can read the whole thing here.

But it's the US where Newscorp is based, and both Rupert and James are US citizens, and this is where the scandal will finally engulf him I believe. As Carl Bernstein said earlier this week, making the explicit comparison with Watergate these revelation "are the beginning, not the end, of the seismic event." He also stresses how important this US is to Murdoch

Murdoch associates, present and former-and his biographers-have said that one of his greatest long-term ambitions has been to replicate that political and cultural power in the United States. For a long time his vehicle was the New York Post-not profitable, but useful for increasing his eminence and working a wholesale change not only in American journalism but in the broader culture as well.., Then came the unfair and imbalanced politicized "news" of the Fox News Channel-showing (again) Murdoch's genius at building an empire on the basis of an ever-descending lowest journalistic denominator.... And finally, in 2007 The Wall Street Journal's squabbling family owners succumbed to his acumen, willpower, and money, fulfilling Murdoch's dream of owning an American newspaper to match the influence and prestige of his U.K. holding, The Times of London-one that really mattered, at the topmost tier of journalism.
Between the Post, Fox News, and the Journal, it's hard to think of any other individual who has had a greater impact on American political and media culture in the past half century.

If we live in an information economy, then Newscorp is the Standard Oil of the 21st Century. Murdoch built up both horizontal and vertical monopoly power in the UK and Australia, leading to vast inefficiencies, corruption and unaccountable political power.

That was his aim in the US also: so it's crucial to strike at the pillars of his power while they are beginning to crumble.

Now Rebekah Wade has gone (she "fucked the company" according to Elizabeth Murdoch), and her predecessor at News International, Les Hinton, has resigned as CEO of the Dow Jones ('Les is no more' as someone brilliantly put it)....

...the firewalls between the public outrage and the Murdoch family itself have fallen:
THREE DOWN; ONE TO GO

Les Hinton (left), Andy Coulson, Rupert Murdoch and Rebekah Brooks (nee Wade) appearing before the 2007 House of Commons Select Committee

Yes, so far, the Murdoch Family itself has remained immune, despite their clear control over their news empire. But how long can this last?

So these are the three crucial weaknesses in terms of breaking Murdoch's grip:

1. The FBI Investigation into Hacking of 9/11 Victims: as I diaried four days ago, this is the most emotive example of Murdoch's abuse of power - but in legal terms it is also the weakest link. So far all we have is an unnamed former policeman saying he was approached to provide victim's numbers. There is currently - unlike the UK - multiple sources, written proof, or named victims. As Ericlewis0 points out this morning, Eric Holder has confirmed the DOJ is conducting multiple investigations. This particular strand may well play out.... but it could be a long wait. It took 4 years after it was initially suppressed for the truth of the UK industrial scale phone hacking to be exposed.

2. Les Hinton oversaw that previous investigation/coverup in 2006/7. As the New York Times is reporting on its front page, Hinton is Murdoch's closest aide, an employee for 50 years, and now CEO of Dow Jones, and publisher of The Wall Street Journal. He is directly in the line for the previous cover-up as its inconceivable that Senior News International executives did not know about the sources of their major stories, especially given how famously hands on Rupert is with his editors.

UPDATE; strike that. Murdoch's ally of 50 years, Les Hinton has resigned. Results pouring in thick and fast. Now onto point three....

3. The Culture of Kompromat and Fear at Fox News and New York Post: I believe this is going to be the major source of forthcoming stories. We've already seen Fox New's comic inability to report on the biggest story of the moment, and the fawning obeisance of the channel's apparatchiks.

The Soviet Communist analogy is apt because for all his free market buccaneering bullshit, Murdoch is an apologist for the authoritarian regime in China, booted the BBC from his satellite broadcasting there for its impartial coverage, and as Howard Kurtz makes clear in the Daily Beast, he suppressed stories for his Chinese friends.

In a 2007 affidavit, Spiegelman said "accepting freebies, graft and other favors was not only condoned by the company but encouraged as a way to decrease the newspaper's out-of-pocket expenses...and that News Corp. attorneys had been instructed to 'look the other way.'" There was a policy of "favor banking," the affidavit said, "practiced on a much larger scale by Rupert Murdoch." In 2001, Spiegelman said in the document, "I was ordered to kill a Page Six story about a Chinese diplomat and a strip club that would have angered the Communist regime and endangered Murdoch's broadcasting privileges" as he was trying to get Beijing's approval for his satellite-television service.

The whole article is worth a full read because it shows that the culture of bribery, favour banking, and Kompromat - the publication/withholding of damaging material on rivals or allies - was rife in The New York Post.

This is exactly the modus operandi of News International in the UK, and it has created a culture of fear among celebrities, public figures, commercial rivals, politicians even senior Anti Terrorist officers. But mafia-style, that culture of fear only exists in the darkness, and once broken, collapses entirely, as the credibility of Murdoch's various news organs is completely shattered.

This is the moment to explode Murdoch's corrupt culture of fear, and keep pushing for more information, more coverups and lies.... As even Anne Applebaum has said It is in America that Rupert Murdoch faces ruin

In the end, though, it is not Murdoch's American properties that are most threatened by this scandal, it is his control of his publicly owned company.
News Corp's stock is in freefall: a massive American shareholder revolt may not be far off. One group of shareholders has sued the company in a Delaware court, arguing that the company board "provides no effective review or oversight".
(snip)
Words such as "nepotism" and "cronyism" are in the air. As are "corruption" and "mismanagement". They will be given extra weight if this story takes on any deeper political significance.
Shareholders and their lawyers are as likely to be members of the liberal establishment as anyone else: in America, the world's most litigious country, they are unlikely to keep their views to themselves.
As a result, News Corp's American properties will survive this scandal - but the Murdoch family's control of News Corp may not.

FALL OF THE HOUSE OF MURDOCH IV: Spitzer Slates Newscorp and Challenges DOJ

Peter Jukes — Thu, 14 Jul 2011 22:28:38 GMT

Yes, it's working. The storm of outrage is crossing the Atlantic to Newscorp's US base. As we've learned, the FBI have now launched an investigation into allegations of phone hacking by the Murdoch Empire thanks to the instigation of Pete King as I diaried yesterday. This is leading The Guardian and is featured heavily both on the the BBC, The New York Times and CNN.

Even Rupert himself is showing signs of flagging. He's just released a rather dispirited, desultory but defiant interview in his own Wall Street Journal in which the main message really seems to be:

I'm tired.

Though many of you have been sceptical that the US public or MSM would pay attention to this, it seems some of the massive public revulsion here in the UK is beginning to transfer to Murdoch's adopted homeland and commercial base - the United States.

But there's more to this than just law-breaking: there's Murdoch's nefarious role in law-making.
There's a more dangerous law for the owner of Fox News, with prima facie evidence needing investigation: as Eliot Spitzer has just written on Slate [UPDATE] the Foreign Corrupt Practices Act (FCPA) makes US citizens liable for their practices overseas.

Bribery, illegal wiretapping, interference in a murder investigation, political blackmail, and rampant disregard for both the truth and basic decency. The behavior of Rupert Murdoch's News Corp. in Britain has shocked even his closest allies and cynical British journalists. The Murdoch empire is falling apart-criminal behavior and disregard for basic ethics having permeated its highest ranks...
So how does all this concern Americans?...... the facts already pretty well established in Britain indicate violations of American law, in particular a law called the Foreign Corrupt Practices Act. The Justice Department has been going out of its way to undertake FCPA prosecutions and investigations in recent years, and the News Corp. case presents a pretty simple test for Attorney General Eric Holder: If the department fails to open an immediate investigation into News Corp.'s violations of the FCPA, there will have been a major breach of enforcement at Justice.

So Spitzer is laying down the gauntlet to Holder to do something about this, rather than avoid a confrontation leading up to the next election.

Guess what? Surprise surprise - maybe they saw what was coming round the corner - Murdoch has already donated $1,000,000 to the US Chamber of Commerce to lobby against this very law. The Guardian - a real guardian of British liberties in this important revolt - joins the dots:

Rupert Murdoch donated $1m to a pro-business lobby in the US months before the group launched a high-profile campaign to alter the anti-bribery law - the same law that could potentially be brought to bear against News Corporation over the phone-hacking scandal.
News Corporation contributed $1m to the US Chamber of Commerce last summer. In October the chamber put forward a six-point programme for amending the Foreign Corrupt Practices Act, or FCPA, a law that punishes US-based companies for engaging in the bribery of foreign officials.
Progressive groups in the US have speculated that there is no coincidence in the contemporaneous timing of the Murdoch donation and the launch of the chamber's FCPA campaign, which they claim is designed to weaken the anti-bribery legislation. "The timing certainly raises questions about who is bankrolling this campaign - if it's not News Corporation who is it?" said Joshua Dorner of the Centre for American Progress action fund.

When it comes to what our former Prime Minister Gordon Brown described yesterday as the "criminal-media nexus' this can't be a coincidence, and from UK experience the connection between a financial interest, media presence and lobbying clout is where the real abuse of power lies.

Just to reiterate, after countless diaries on this: News International, across its stable of four newspapers, has already had two employees jailed for phone hacking, and now 4,000 victims have been identified, just from one employee. Moreover, News International paid millions in gagging fees to some of these victims. We have clear evidence, beyond phone hacking, of cover-up, suppression of evidence and money handed to police officers and hush money for litigants.

The FCPA Act, brought into law under President Jimmy Carter, and more strenuously enforced under your current President, is targeted against US Citizens and Corporations that bribe foreign officials

Newscorp is a US listed company. Both Rupert and James Murdoch are American citizens.

So I urge my fellow Kossacks:

THE PHONE HACKING ALLEGATIONS ARE ONLY ONE PRONG. MAKE SURE NEWS CORPS IS INVESTIGATED FOR FCPA VIOLATION AS WELL.

And don't forget that Murdoch channelled a million dollars in lobbying money to get this law overturned

(PS: haven't even touched the extensive and multifarious UK news, but the Sergeant at Arms delivered a summons to Rupert and James Murdoch, who'd initially said they wouldn't appear at the Select Committee of the House of Commons next Tuesday: now they will)