News Corp. shares down sharply as BSkyB deal in doubt and America begins to listen
As the allegations of phone hacking and illegal police payments by News International newspapers – including News of the World, Sunday Times and the Sun – grow exponentially in the UK, there are now indications that the US media is catching up fast.
In the vanguard is the New York-headquarted media website paidContent:UK which reports that ...”News Corp.‘s bid to assume complete control of the BSkyB is facing growing doubts as investors dumped shares of the media conglomerate as well as BSkyB.
The website, which styles itself as ..."covering UK's digital media economy and is published by New York- based ContentNext Media, Inc. reported shares of News Corp were down more than 6% in early trading on the NASDAQ, while shares of BSkyB fell as much as 7% on the London Stock Exchange.
The website reports: “The stock sell-off came after UK Culture Secretary Jeremy Hunt asked government regulators whether News Corps’ bid for the satellite broadcaster was still ‘credible’ in the wake of the phone-hacking and police payoffs scandal that has already claimed Rupert Murdoch’s News of the World tabloid.
“They may be exacerbated by the latest turn of events: rather than withdraw completely, Murdoch is pulling back on the planned spin-off Sky News - agreed to as part of the effort to gain consent for the deal, and has promised to cooperate with the Competition Commission on a review.”
The site quotes the News Corporation as saying: “Should the Secretary of State for Culture, Olympics, Media and Sport decide on this basis to refer the proposed transaction to the Competition Commission for a detailed review, News Corporation is ready to engage with the Competition Commission on substance.
“News Corporation continues to believe that, taking into account the only relevant legal test; its proposed acquisition will not lead to there being insufficient plurality in news provision in the UK.”
The Telegraph also points out that Hunt later said he would refer the merger to the Competition Commission and also said that a group of News Corp. shareholders updated a complaint filed against the company to include the phone-hacking scandal.
“News Corp.‘s management and board have overseen a ‘piling on of questionable deals, a waste of corporate resources, a starring role in a blockbuster scandal, and a gigantic public relations disaster’, said Jay Eisenhofer, of Grant & Eisenhofer, the law firm that filed the suit in Delaware, according to The Telegraph.”
According to paidContent:UK, the original lawsuit, which was filed by Amalgamated Bank and several public sector pension funds, accused News Corp. of nepotism over the company’s $615 million purchase of Shine Group - the production firm run by Murdoch’s daughter Elisabeth. The lawsuit charged that Murdoch ‘habitually uses News Corp to enrich himself and his family members at the company’s and its public shareholders’ expense’.
“In the amended complaint, the plaintiffs pointed to the phone-hacking and police payoffs scandal as evidence ‘a culture run amuck within News Corp and a Board that provides no effective review or oversight’.”
Meanwhile, industry sources in the US report that a Washington, D.C.-based watchdog group will ask Congress to investigate whether any journalists working for the company’s UK division, News International, hacked into the phones of US citizens.
Citizens for Responsibility and Ethics, a non-profit group, evidently pointed to new allegations that journalists working for other Murdoch papers may have employed the same tactics that led to the downfall of the News of the World.
CREW’s call for a congressional investigation came amid revelations that former UK Prime Minister Gordon Brown had been hacked, and that even Queen, the Duke of Edinburgh and Prince Charles may have been targeted.
This could be the first of many legal or regulatory challenges to face News Corp. points out paidContent:UK.
“Speculation includes legal exposure for James Murdoch, chairman of News Int. and deputy COO of News Corp, which is incorporated in the US, and Les Hinton, the previous head of News Int. who now runs Dow Jones and is publisher of the Wall Street Journal. Another possible battleground: the FCC and Fox’s broadcast licenses.
“In a development that could stoke US anger toward the Murdoch Empire, a New York City police officer says the News of the World personnel offered to pay him to help gain access to voicemail accounts belonging to victims of the September 11, 2001 terrorist attacks, according to The Daily Mirror.
“Given the ever-increasing number of Murdoch publications involved, combined with the allegation that News Corp. journalists sought access to the voicemails of 9/11 victims and their families, America cannot leave this investigation entirely to the British,” CREW Executive Director Melanie Sloan said in a statement, adding: ‘Congress should immediately initiate its own inquiry’.
“News Int. officials, including James Murdoch and Hinton, had insisted for years that the hacking was limited to isolated individuals who operated without the knowledge of their superiors. Hinton testified to that effect. The veracity of those claims is eroding by the day.
“CREW, which a spokesman told us does not disclose its donors, has been described as a liberal watchdog group, although it has targeted politicians of both parties in its various campaigns against public corruption.”