News Corp shareholders bring case against board


Click to follow

Independent shareholders in News Corp are stepping up their legal campaign against Rupert Murdoch, his son James and the rest of the board, saying a pattern of illegal activity revealed by the hacking scandal in the UK extended into its subsidiaries in the US.

The investors are asking a US court to break the boardroom stranglehold of the Murdoch family and to compensate shareholders for scandals that they say have hurt the business reputation and the share price of the company. Yesterday, their lawyers revealed a new, broader complaint that includes allegations of wrongdoing at News America Marketing (NAM), an advertising firm specialising in marketing inside shops, and at NDS, a firm until recently controlled by News Corp that produces smart cards for use in satellite decoders.

NAM has paid almost $1bn in fines and settlements related to the allegation that employees hacked into the computer system of a rival firm and spread misinformation about the rival. And NDS was accused of illegally extracting software code from competitors' cards and posting the information online, allowing hackers to create counterfeit cards that could be used to intercept television programming. James Murdoch was on the board of NDS when the allegations first came to light in 2002.

"For more than a decade, News Corp subsidiaries have engaged in improper practices that have subjected the company to financial and reputational damage," the lawsuit alleges. "This misconduct was so pervasive that the board must have either been aware of the wrongdoing or was deliberately indifferent to the corporate culture that encouraged this type of behaviour."

Dissident shareholders have taken to the courts because they see little chance of unseating the Murdochs through other channels, since most of the shares in News Corp carry no voting rights. The lawsuit was launched last year by a trio of activist investors. The original object of their fury was News Corp's $615m acquisition of Shine, a television production company created by Elisabeth Murdoch, done to bring Rupert Murdoch's daughter back to the company. News Corp is yet to file a response to the suit.

Jay Eisenhofer, a lawyer for the trio, said that News Corp would have cleaned house years ago if it were not run as a "personal fiefdom" of Rupert Murdoch. "The illicit phone hacking and subsequent cover-ups at the News of the World were part of a much broader, historic pattern of corruption at News Corp, under the acquiescence of a board that was fully aware of the wrongdoing, if not directly complicit in the actions."

Australia launches inquiry

The Australian government promised an inquiry into the country's media, following complaints that Rupert Murdoch's News Corporation is biased and owns too many of the nation's newspapers.

The Communications Minister, Stephen Conroy, told colleagues in his ruling centre-left Labor Party the inquiry's terms of reference were under discussion but would not be "an attack on News Ltd" – the Australian subsidiary of News Corp.

He said the inquiry could cover areas including protections for privacy and the role of the print media's self-regulatory watchdog, the Australian Press Council. News Corp owns 70 per cent of Australia's newspapers. AP