News Corp.'s Legal Headaches in the United States

The Atlantic
News Corp.'s Legal Headaches in the United States
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News Corp.'s Legal Headaches in the United States

American officials are moving forward with their probe into News Corp.'s business practice in the United States, and though we know a little bit more about the immediate next steps, the process could take years. According to a Wall Street Journal report, the FBI is preparing subpoenas for preliminary investigations on two separate charges: bribing police and hacking the voicemails of September 11 victims. News Corp. has vehemently denied any connection between the U.K. investigation and their American operations, but with new shareholder suits popping up seemingly daily, it looks like the company's legal team will probably have to reckon with the charges one way or another. With the Justice Department, the Securities and Exchange Commission, the FBI and various shareholders involved in various investigations and lawsuits, there are a number of possibilities for News Corp.'s immediate future in the States.

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FBI could levy charges over hacking the phones of September 11 victims. Two weeks ago, the Daily Mirror reported that News Corp. papers hacked into the phones of September 11 victims. If confirmed, the revelation could produce the American equivalent of public outrage launched by the report that News of the World hacked murdered teenager Milly Dowler's phone. News Corp. points to the Mirror's thin sourcing as proof of lack of evidence. Regardless, should the FBI confirm the hacks, they could bring criminal charges against News Corp. for illegal wiretaps or wire fraud, depending on how the hacks took place, and make extradition requests for the offending executives or journalists.

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News Corp. could face racketeering charges for widespread hacking incidents. Even if it turns out that News Corp. didn't hack the September 11 victims, there's evidence that other illegal privacy violations happened on U.S. soil. The agency is working with Jude Law who says that the Murdoch-owned Sun hacked into his phone while he was at JFK airport in 2005 and used information from a voicemail in four articles. If this is confirmed along with other multiple cases of phone hacking, News Corp. could face charges for not only wiretap or wire fraud charges but also racketeering, due to the widespread violations.

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Justice Department could charge News Corp. with violating the Foreign Corrupt Practices Act for bribery. The FCPA came about in 1977 during a time when "rampant corporate corruption overseas" led to foreign government officials bribing executives to win contracts. “Paying a police officer to get information about a pending investigation isn’t the typical FCPA prosecution," federal prosecutor and FCPA expert Roland Riopelle said. But if it's determined that the bribes "are felt to have international financial implications” by the SEC, the case could be brought before the Justice Department.

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SEC could seek to prosecute News Corp. in a civil suit. As a way around the criminal investigations, SEC officials could seek open a civil case. The Daily Beast's Michael Tomasky spoke to John Davis, a 15-year veteran of FCPA cases in Washington:

The SEC, he says, has every right under the statute to make a determination that what News International did in Britain constituted enough of a violation of U.S. standards and practices that the company deserves to be prosecuted civilly in the U.S. while defending itself against criminal charges in the U.K. “If you asked me today--and asked peers and colleagues of mine--if that would be a surprise, the answer is no,” Davis says.

Regardless of how the charges are levied, legal experts say that an out-of-court settlement is much more likely that a conviction.

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Shareholders will continue to sue. There have already been at least two cases of litigation from News Corp. shareholders in the U.S., one class action suit in Delaware and one in New York. Given the scale of the scandal and depending on what happens with the U.S. officials' investigations, it's easy to imagine more shareholders suing News Corp. for fraud or misconduct.

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