Murdoch admits One.Tel bonus scheme was 'sloppy'

Lachlan Murdoch's business judgement was under scrutiny yesterday after he told an inquiry into the collapse of an Australian telephone company that he did not "waste time" thinking about massive bonuses paid to the two managing directors.

Mr Murdoch, the chairman News Corp's Australian subsidiary News Ltd, told a liquidator's inquiry into the failure of One.Tel that he largely left it up to his friend James Packer to monitor the company's conduct. Mr Murdoch, Rupert's son and heir, ploughed A$575m (£200m) of News Corp funds into One.Tel, which folded in May last year.

Mr Packer, son of Kerry and chairman of the Australian media empire Publishing & Broadcasting Ltd, also invested heavily in the company. Both men became directors. The inquiry heard yesterday that an emergency board meeting was called during the Sydney Olympics in September 2000 following a public outcry sparked by the disclosure that A$15m in bonuses had been paid to One.Tel's founders, Jodee Rich and Brad Keeling.

"It was agreed Mr Packer would persuade them and aggressively ask them to pay back the bonuses," Mr Murdoch said. The efforts proved unsuccessful. The pair told Mr Packer "they had paid taxes, they didn't have the money and felt they were legally owed the money". Mr Murdoch conceded the bonus agreement was "sloppy", but said he regarded the paymentsfair. If shareholders benefited from a rise in the stock price, Mr Rich and Mr Keeling were also entitled to gain. "I didn't waste my time thinking about it," he said.

The two men were given bonuses when One.Tel reached a market capitalisation value of A$1bn and then A$2.4bn. But the deal did not stipulate that the value had to be sustained for any period.

The inquiry heard that Australia's Securities and Investments Commission expressed concerns about the bonus agreement, which was not approved by shareholders.

Mr Murdoch said that in October 2000 Mr Packer personally apologised to both him and his father for One.Tel's falling share price.Mr Murdoch had invested in One.Tel on Mr Packer's suggestion.