James Murdoch name tied to News Corp scandal
JAMES Murdoch's name is "inextricably linked" with News Corporation's failure to deal properly with phone hacking at News International, an influential shareholder group has claimed, adding that the arrests at the Sun signalled a "new phase" in the growing scandal.
PIRC has long been petitioning for Mr Murdoch to step down from the boards of News Corp, where he is chief operating officer, and BSkyB, where he is chairman, but on Tuesday stepped up its campaign.
It said in a note to its members on Tuesday, that the arrests had threatened shareholder value at News Corp, and exposed the flaws in its "organisational culture".
"For investors it is at board level that reform may still be required. James Murdoch's name...is inextricably linked to the company's failure to deal with the hacking issue much earlier, with questions still outstanding over what he knew and when," it said.
Five Sun journalists were arrested at the weekend as part of Operation Elveden, the police investigation into alleged corrupt payments, on the basis of evidence handed over by News Corporation's influential Management Standards Committee (MSC).
PIRC warned that the arrests had caused "divisions" within News International and damaged its standing further.
"The company has already issued a public defence of the paper and a commitment to its future but this is unlikely to steady nerves. No-one expects that these arrests will be the last. The role of the MSC is also creating divisions within the company, with some journalists seeing it as selling them out," it said.
It also highlighted the growing legal threat overseas. Whilst it is the row over phone hacking at the News of the World that has garnered most airtime in Britain, the alleged corrupt payments to police and other officials leave News Corp business most dangerously exposed in America.
The Federal Bureau of Investigation, the Department of Justice and the Securities and Exchange Commission have all launched investigations into allegations of bribery under the US Foreign & Corrupt Practices Act (FCPA), which were stepped up a gear earlier this month.
News Corp has already racked up $104m (£66.3m) in charges relating to the cost of the investigations on both sides of the Atlantic, and has warned it is unable to predict what the final bill will be. If it is found guilty of FCPA breaches, it could be fined billions of dollars.
Senior executives including Mr Murdoch, deputy chief operating officer of News Corp, would also be vulnerable if they authorised bribes or knew about the practice and failed to take action.
News Corp sources say it is cooperating fully with the investigations. In doing so, it is thought to be attempting to see off any potential charges of "wilful blindness" by the directors.
However, PIRC also said in its note to its members that the hacking and bribery scandal had been exaccerbated by News Corp's behaviour. "Its approach seems informed by a kind of 'never retreat, never apologise' mindset, as seen in its aggressive (and mendacious) attacks on politicians and rival papers when the allegations of widespread phone hacking first emerged in 2009," it said.