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07.21.11

Murdoch’s Secret Weapon

Wife Wendi may have the ninja reflexes, but Rupert Murdoch’s new consigliere Joel Klein is an expert at cleaning up messes—from New York City schools to Microsoft’s antitrust case. Lloyd Grove on his impact.

His reflexes aren’t as quick as Wendi Deng Murdoch’s. He just sat there, poker-faced, as the madcap pie-thrower set upon his boss. But Joel Klein is Rupert Murdoch’s secret weapon in the battle to restore News Corp. to its former glory.

The 64-year-old Klein, his balding pate housing a bulky brain, was a gloomy, dark-suited apparition sitting behind 80-year-old Rupert and his 38-year-old son James, just to the right of Rupert’s ninja wife, in Tuesday’s televised Parliamentary hearings on the phone-hacking and police-bribery scandal plaguing News International, News Corp.’s British newspaper division.

Wendi had already uncorked her now-famous hook by the time Klein had roused himself to his full 5-foot-9 height and calmly surveyed the situation.

Getting in the middle of another public dustup was the last thing on his agenda when he joined Murdoch’s media empire last November as a $2 million-a-year executive vice president, leaving his flap-prone post as chancellor of New York City’s school system to sit on News Corp.’s board of directors and advise the company’s entry into the for-profit education market. Klein is nothing if not savvy in the ways of big media companies; his wife, Nicole Seligman, is chief counsel for the Sony Corp.

“He’s the last man standing,” says blue-chip Washington lawyer Jamie Gorelick, who worked closely with Klein both in the Clinton White House counsel’s office and at the Justice Department, where she was deputy attorney general and Klein was chief of the antitrust division. “He’d left this crossfire of running the New York public schools for what presumably was going to be a nice, quiet entrepreneurial business. I don’t think he was expecting a cushy corporate sinecure. I think he was expecting to use some of the things he’d learned for some of the businesses surrounding education to offer some investments to News Corp.—and not be at the center of a major controversy.”

Today he is Murdoch’s consigliere, the point man overseeing the internal investigation of the scandals at the now-defunct News of the World and possibly other News Corp. papers, as well as supervising the company’s cooperation with British and American law enforcement authorities.

To hear Klein’s former associates tell it, he is perfectly credentialed for the task. At the White House, he grappled with the endless series of Clinton mini-scandals. At Justice, he oversaw the government’s epic antitrust litigation against the computer software giant Microsoft. And as New York Mayor Mike Bloomberg’s handpicked schools chancellor, he was a steely, occasionally iron-fisted, negotiator with the powerful teachers’ unions.

“He’s exceedingly smart and he’s a great lawyer—and Murdoch has to have somebody who will guide him through this whom he trusts,” says a teachers’ union official who asked not be further identified. “Joel will do everything he can to save the company. He’ll do enough to air some of their dirty laundry but probably not all of it. And he’ll be serving two masters, Rupert Murdoch and also his own ego.”

New York corporation counsel Michael Cardozo, the city government’s top lawyer, who had frequent dealings with Klein during his eight years as chancellor, calls him “extremely smart and a quick study. ‘Persistent’ would be a colossal understatement”—qualities that Cordozo says should serve Klein well in his current challenge.

As the government’s lead attorney in the 1998 Microsoft case, Klein put together a team of star litigators to press the argument that the software company was violating the Sherman Anti-Trust Act in its monopolistic bundling of operating systems and Internet browsers. It was Klein who recruited David Boies, whose merciless, three-day deposition of Microsoft CEO Bill Gates still stands as classic of lethal courtroom skill.

Joel did this already at the Justice Department,” Jamie Gorelick says. “He did this in New York City. That’s the good news for Murdoch that Joel is there.

“Joel Klein is good at cleaning up messes,” says Silicon Valley litigator Gary Reback, whose client Netscape was on the same side as the government in the action against Microsoft. “And he does it with a great deal of personal integrity.”

Before his tour at the Justice Department, Klein received his scandal management baptism by fire when Bill Clinton persuaded him to take the deputy White House counsel’s job that was left vacant when Vince Foster committed suicide in July 1993. Klein handled the Whitewater mess, among other problems, and managed to emerge with his reputation intact.

He quit the Justice Department in 2000 and briefly ran the German media giant Bertelsmann’s U.S. operation until Bloomberg installed him as chancellor to remake the hidebound, feather-bedded school system into a lean, mean education machine. Klein achieved a measure of success, and his background as a scrappy kid from Astoria, Queens, a bookkeeper and letter carrier’s son who did a stint teaching sixth-grade math during a break from Harvard Law School, prepared him to do battle with United Federation of Teachers president Randi Weingarten over test scores and tenure, among other sensitive issues. The two adversaries left the field of combat with a grudging respect for each other.

“Joel is one of the few attorneys I know who combines legal expertise with media and political experience,” says Washington legal crisis consultant Lanny Davis, another veteran of the Clinton wars. With News Corp., “he is doing the right thing trying to get out in front and causing the company and its leaders to take full responsibility,” says Davis. “Now the hard work begins—to get all the facts and narrative, who, what, when, where, and why—and try to explain all as soon as possible, consistent with prudent legal concerns.”

On Monday, Klein announced that prominent British barrister Lord Grabiner will head up News Corp.’s internal investigation, the results of which Klein will take to his fellow directors. It will be, the company promises, independent of the Murdochs.

“Joel did this already at the Justice Department,” Jamie Gorelick says. “He did this in New York City. That’s the good news for Murdoch that Joel is there. He’s been around for a long time. He’s seen a lot. He’s got excellent judgment.”