Tuesday, 24 April 2012

Phone hacking: despite appearances the centre of gravity has moved West

With the Murdoch’s due to appear at Leveson this week and Labour MP Tom Watson publishing his new book, Dial M for Murdoch, you could be forgiven for thinking that the UK remains at the centre of the phone hacking crisis engulfing the Murdoch media empire.

You’d be wrong.  Almost out of sight is a development which threatens News Corporation in the US, as opposed to News International in the UK and that is very, very significant.  The Dowler family lawyer, Mark Lewis, now claims that he is representing four individuals whose phones were hacked on US soil.  At least one is a US citizen.  Others are, apparently, coming out of the woodwork daily.

According to a Guardian report last week, there is evidence that Fox News, Murdoch’s US cable TV operation is now implicated.  For News Corporation, the holding company, this is a nightmare come true. 

If phone hacking has crossed the Atlantic then senior management at News Corporation could find themselves in the dock.  Federal law states that an individual who violates telecommunications privacy for commercial purposes can face five years in prison with a 10 year tariff for a subsequent offence.   What’s more, civil courts can also offer damages in relation to the profits gained by the violators with punitive damages possible thereafter.

How big a deal is this?  Let’s put it this way.  In the US, News Corporation's cable properties constitute over 60 per cent of operating income for the company.  With News Corporation making circa $1.06bn (£888m) net profit in their last quarterly filing to the SEC it is clear that any implication that Fox has been up to dirty tricks has massive implications.

However, it doesn’t stop there.  The Met Police’s investigation of bribery of public officials also has the potential to cross the Atlantic if it hasn’t already.  The Foreign Corrupt Practises Act offers the opportunity for the SEC to investigate the operations of News International in the UK but prosecute senior officials of News Corporation in the US.

The big question is, where does all this end?  My own view is that a number of very high profile people, some of whom have had access to the very highest levels of UK government (you know who I mean!)  are going to prison.  Probably for perjury, possibly for bribery and possibly for perverting the court of justice. 

Unfortunately James Murdoch, who was recently spirited out of the country to a new position in the US, in an attempt to distance him from phone hacking, may find that New York is uncomfortably close to the SEC headquarters in Washington DC.


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