Rupert Murdoch's News Corp. Scandal

04.30.12

Murdochs Await Parliament’s Judgment With Select Committee Report

The future of James Murdoch’s career—and even News Corp’s future with Britain’s lucrative BSkyB—could rest on a report expected early Tuesday from the Select Committee. Peter Jukes on why the stakes couldn’t be higher.

Tuesday’s long-delayed report from the Department of Culture, Media, and Sport Select Committee looks set to seal the career of James Murdoch, and could well determine not only his continuance on the board of BSkyB but even News Corp.’s controlling stake in Britain’s richest broadcaster.

The stakes couldn’t be higher. This Select Committee was the venue both James and his father, Rupert, were forced to attend when the news of the hacking of murdered teenager Milly Dowler turned the long-running allegations against the now-shuttered News of the World into a national scandal.

The report has been delayed because of the extraordinary number of arrests—now more than 40—in subsequent investigations into alleged police bribes and phone hacking. Britain’s attorney general has been called in to advise the committee on how to avoid contempt of court proceedings for those who have been arrested. This includes News International’s CEO, Rebekah Brooks, who faces three possible charges, among them conspiracy to pervert the course of justice. The committee’s report has to be careful not to prejudice any pending criminal trials and therefore must avoid commenting on any related issues.

It is widely believed the focus of the report will be on Brooks’s immediate boss, James Murdoch, who was News Corp. head of Europe at the time, and his much-debated claim that he knew nothing about the extent of phone hacking, even though in 2008 he authorized a $2 million payout to one of the earliest victims, Gordon Taylor, head of the soccer-players association. This was more than 20 times any previous British court settlement for invasion of privacy. During his Leveson testimony, Rupert Murdoch called the amount “incredible.”

James Murdoch’s senior in-house lawyer, Tom Crone, and News of the World editor Colin Myler, recommended settling at this extraordinary level because legal disclosure had uncovered a document, the now-famous “For Neville” email, which indicated phone hacking had been rife at the Sunday tabloid. They insist they told James Murdoch at the meeting in May, and earlier this year an email chain surfaced during police searches that confirmed he had been briefed on the problem.

Video screenshot

James Murdoch testified before the Leveson Inquiry.

Appearing before the committee last November and again before the Leveson Inquiry last week, James Murdoch said he hadn’t read to the bottom of the email chain, sent to him over a weekend, because he was with his kids. Mark Lewis, a Manchester lawyer who pursued the early phone-hacking settlements, has said of Murdoch’s version of events: “Having to choose between incompetence and criminal cover-up, it’s understandable James chose incompetence.”

In a previous report the committee accused New International executives of “collective amnesia”; the language Tuesday could be a lot stronger.

There is likely to be no good conclusion to this for James Murdoch either way. Despite a four-page unprompted letter apologizing to the committee for his oversight, his account of events directly contradicts those of Myler and Crone.

What will be key about the DCMS report is if it suggests that some kind of corporate cover-up of phone hacking has taken place and how far up the management tree it might go. In a previous report the committee accused New International executives of “collective amnesia”; the language Tuesday could be a lot stronger. If James Murdoch is accused of lying to Parliament, remaining as an executive board member of BSkyB, his last major directorship in the U.K., would be difficult. Such an accusation also could be a factor in the ongoing Operation Apple investigation by the regulator, Ofcom, which could force News Corp. to divest some of its holdings in the broadcaster if senior management fails a “fit and proper” person test.

The committee is evenly split politically, with an equal number Labour and Conservative members, with the Liberal Democrats holding the deciding vote. There are believed to be a range of viewpoints on the committee, but in one of the most high-profile parliamentary hearings in recent years, a minority report is thought to be unlikely. And though it was recently disclosed that News Corp. met with some of the committee members, the recent antagonism of Rupert Murdoch toward David Cameron is unlikely to play well with the committee’s Conservative members, who might be expected to be supportive of News International.

The report will be released to the public at 6:30 a.m. Eastern Time on Tuesday.