Friday, July 22, 2011
[COMMITTEE TESTIMONY UP AND UNDER]
On Tuesday, Rupert Murdoch, chairman of News Corporation, and his son James Murdoch, chairman of several News Corp. properties testified before the Culture, Media and Sports Select Committee of Parliament in London.
They were answering questions about the News of the World scandal, in which an undetermined number of their employees illegally hacked into people's private voicemails, an inquiry that by week's end had narrowed to the Watergate question: What did the Murdochs know, and when did they know it?
When two of the tabloid’s former executives questioned James Murdoch’s testimony, claiming never to have seen a 2008 corporate email confirming wider newsroom complicity in the hacking, one member of Parliament notified Scotland Yard, asking for an investigation into possible obstruction of justice.
It may not sound terribly serious to be testifying before the Culture, Media and Sports Select Committee, but it is serious, as evidenced by the “we’re really sorry” statements at the beginning of the testimony to members of Parliament, both from James:
First of all, I would like to say, as well, just how sorry I am.
And from Rupert:
This is the most humble day of my life.
Sorry, humbled, but not to blame. This is MP Jim Sheridan addressing Rupert Murdoch:
MP JIM SHERIDAN:
Mr. Murdoch, do you accept that ultimately you are responsible for this whole fiasco?
MP JIM SHERIDAN:
You are not responsible? You're not responsible.
The people that I trusted to run it, and then maybe the people they trusted.
Since last week the scandal has worked its way into the highest levels of power in England. The Metropolitan Police Commissioner, Sir Paul Stephenson, resigned over his decision to hire a former News of the World deputy editor.
British Prime Minister David Cameron came under intense fire for hiring a former News of the World editor, Andy Coulson, as his press secretary. Coulson was arrested earlier this month for his role in the hacking.
Reuters finance blogger Felix Salmon watched the testimony and says that despite all the pressure they faced, the Murdochs seem to have prevailed, for the moment. He says media watchers waited in vain for a cinematic reckoning.
Some big dramatic moment when the Murdochs’ façade just completely fell apart, in the face of withering questioning by some tenacious MP. That kind of drama clearly didn't happen.
I think if there's going to be any real leadership changes at News Corporation, then it will only happen in the fall when the report start trickling out from Parliament and from the police.
Now fair enough, but their employees and former employees have been arrested, and they’re facing two separate shareholder revolts, one asking for more rigorous investigation at News Corp., and the other actually attempting to change the stock structure of the company. Let's talk about that one for a second.
MP JIM SHERIDAN:
News Corps. is like many media companies - The New York Times is one, Viacom is another - in that it has two classes of shares. It has voting shares and it has non-voting shares.
The Murdoch family, although it only owns 12 percent or so of the company as a whole, it controls the company through its 39 percent voting state. What the shareholders want is a normal publicly listed company, where the amount of votes you have is directly proportional to your shareholding. And, of course, Rupert Murdoch is never going to let that happen because it is unthinkable to him that he would just be a hired CEO, answerable to shareholders and not running the show himself.
Now, you hung onto every word of James Murdoch's testimony and Rupert Murdoch's testimony. Why do we care so deeply about this political scandal in corporate politics?
Rupert Murdoch is an incredibly powerful person in the U.S., through FOX News, in particular. The fact is that his company has been caught doing highly illegal things, basically controlling the police in the United Kingdom. And we have a scandal which could bring down an entire government.
That's a huge amounts of power for Rupert Murdoch to have in the U.K. And one has to ask whether he's really a fit and proper owner of the many television networks and channels and other media properties that he owns.
We have seen the Wall Street Journal in recent days come out with a series of op eds, at least seven of them, all sort of defending Rupert Murdoch in one way or another.
So he's clearly completely obliterated any semblance of independence of the Wall Street Journal, which with a very precious thing for many, many years. And it's dangerous to have an individual with that much power.
We've discussed our mutual obsession with this story. Is there one aspect of it that you think has not really broken through just yet that could turn out to dominate the narrative?
Well, we've known since Watergate that the cover-up is worse than the crime. And I think to date most of the attention has concentrated on the crime, and specifically on the voicemail hacking of Millie Dowler, this 13-year-old murdered schoolgirl.
So if and when the attention moves to News Corp.’s action in the cover-up phase, and this is the phase where James Murdoch was in control, and their attempts to pay victims of phone hacking millions of dollars to keep them quiet –
There was an attempt, allegedly, to delete millions of emails. Those emails might actually be coming out very soon. There’s a hacker group which seems to have got its hands on about 4 gigabytes’ worth of those emails. The contents of those emails could well be pretty explosive if people were indiscreet enough to actually say in an email that they needed to keep things quiet and covered up.
Then at that point it stops being a story about the bad actions of newspapers and starts being story about just how ill-behaved News Corp. executives are, up to and including James Murdoch himself.
There's the matter of Glenn Mulcaire, the private investigator who was convicted of originally of hacking voicemails. He's been operating with a team of News Corp.-hired lawyers for the duration.
But now during the hearings Murdoch was at pains to admit that he didn't realize that Mulchaire had been using News Corp. lawyers and that would be taken care of. And, lo and behold, it has been.
This is a fascinating story. I mean, one of the least credible parts of the whole testimony was when James Murdoch came out and said, I was shocked, I was shocked to learn that we were still paying Glenn Mulcaire’s legal fees.
But yet, somehow, he wasn't shocked enough that he would seek to actually stop doing that.
So eventually, Rupert said in public that they would stop doing that, and they have stopped doing that, without ever quite admitting that they were doing it in the first place.
Though Glenn Mulcaire is facing almost 40 different criminal investigations and civil charges and various other lawsuits. His legal fees have been astronomical. And He has said nothing for four and a half years about what happened. He was the man at the center of all of this. He knows where all the bodies are buried, pretty much.
And so, if He starts talking now that his extremely expensive legal defense has been taken away from him, then that could absolutely change the direction of the investigation.
Well, Felix, thank you very much.
Well, thank you.
Felix Salmon is a finance columnist for Reuters.