Rupert Murdoch and his wife Wendi Deng in London after appearing at the Leveson inquiry hearings on April 26, 2012. (Reuters)
London, May 2: A damning report on the hacking scandal at Rupert Murdoch’s British newspapers concluding that Murdoch is “not a fit person” to run a huge international company has convulsed Britain’s political and media worlds and threatened a core asset of Murdoch’s American-based News Corporation.
The parliamentary report, issued yesterday, found that three senior Murdoch executives misled parliament in testimony. It also alleges that the company sought to cover up widespread phone hacking that Murdoch’s News of the World, a tabloid newspaper now shut down, used to gather information about politicians, celebrities and other people in the news.
It has opened deep divisions between the main political parties, accentuated the challenge Prime Minister David Cameron faces in explaining his past ties to Murdoch and some of his top executives in Britain, and added new momentum to regulators’ scrutiny of Murdoch’s controlling interest in the British Sky Broadcasting network, or BSkyB, which is one of the most lucrative Murdoch investments.
It also offers new details that suggest further damaging revelations may lie ahead. Sprinkled through its 121 pages are tantalising references to potentially damaging sealed documents in dozens of lawsuits from the scandal, and an audio recording in police hands of a conversation between two News of the World journalists that may implicate an unnamed Murdoch executive.
The select committee that issued the report closed ranks in making many of its critical findings, but split, 6 to 4, on party lines over the specific censure of Murdoch as unfit for his responsibilities as head of one of the world’s most powerful media conglomerates. The governing Conservatives opposed it, while the Liberal Democrats, the junior partner in Cameron’s government, joined the Labour opposition in supporting it.
The partisan divide leaves Cameron as a de facto defender of Murdoch, while his Labour Party opponents have asked British regulators to move, on the basis of the report, towards reducing Murdoch’s 39.1 per cent controlling interest in BSkyB, the satellite broadcaster that produces a hefty profit for News Corporation.
The MPs rejected the defence of Murdoch, 81, that his executives kept him in the dark about the hacking, saying he “exhibited willful blindness to what was going on in his companies and publications”. It said the use of illegal reporting methods and the efforts to thwart inquiries into the practice came from a culture that “permeated from the top throughout the organisation and speaks volumes about the lack of effective corporate governance at News Corporation and News International,” its British newspaper subsidiary.
“We conclude, therefore, that Rupert Murdoch is not a fit person to exercise the stewardship of a major international company,” the report said.
While the long-term impact on Murdoch’s US-based News Corporation remains uncertain, the report at least initially cheered investors, some of whom have pressed for a change of leadership at the News Corporation and a reduced role for Murdoch and his family. The company’s share price rose about 1.25 per cent in early afternoon trading on Wall Street.
The parliamentary findings increase pressure on Ofcom, Britain’s broadcast regulator, which since last summer has been assessing the News Corporation to determine whether it is “fit and proper” to hold the BSkyB television license.
In the nine or so years of its existence, Ofcom has only once removed a television license on the basis that its owner had not met the “fit and proper” test — in the case of the broadcaster of a pornography channel.
Losing BSkyB would be a startling blow for the News Corporation, but one that could be mitigated by the reaction of analysts and investors, who have long urged that the company shed some minority-owned assets in an effort to raise its share price.
In its report, the committee did not use the full term “fit and proper” in condemning Murdoch, a distinction that John Whittingdale, the committee’s Conservative non-voting chairman, told the BBC was significant. Media commentators said the phrasing appeared to be an effort not to throw the committee’s weight fully behind the Labour Party push for a regulator-ordered sell-off of News Corporation’s BSkyB interest.
Murdoch released a message to News Corporation employees that sidestepped the criticism directed at him, stressing instead the company’s cooperation with the inquiry and his recognition of “mistakes we have made”.
“I recognise that for all of us — myself in particular — it is difficult to read many of the report’s findings,” the memo said. “But we have done the most difficult part, which has been to take a long, hard and honest look at our past mistakes.
In a statement from its New York headquarters, the company acknowledged “serious wrongdoing” but also said the committee was “wildly outside” its mandate in finding that Murdoch was “not a fit person”.