News Corp. May Be at Risk for US Probe Over Bribery

Tuesday, 12 Jul 2011 09:05 AM

 

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WASHINGTON/NEW YORK — Rupert Murdoch's News Corp. could face probes by U.S. authorities for possibly violating bribery laws, compounding the media mogul's problems after a phone-hacking scandal in Britain.

The Obama administration has stepped up enforcement of anti-bribery laws significantly in the past two years, winning big settlements from the likes of Daimler AG and BAE Systems Plc by focusing on bribes they paid to foreign officials to win lucrative contracts.

Bribes for business have represented the bulk of these anti-bribery cases brought by the Justice Department and the Securities and Exchange Commission. It is unclear whether U.S. authorities would use scarce resources to probe News Corp over bribes allegedly paid to British police and other officials for information that became news scoops.

Employees of Murdoch's now-shuttered News of the World tabloid have been accused of hacking into personal voicemail and paying bribes. British authorities are investigating.

Legal experts in the United States said News Corp. could face scrutiny on this side of the Atlantic Ocean as U.S. officials probe whether any of the allegations, if proven true, violate the U.S. Foreign Corrupt Practices Act.

That law makes it a crime for any company with U.S. ties to bribe foreign officials to obtain or retain business.

British media outlets reported that News of the World reporters bought phone details for the royal family from a security officer. The Daily Mirror newspaper reported, citing an unidentified source, that News of the World reporters also had offered to pay a New York police officer to retrieve the private phone records of victims of the Sept. 11 attacks.

At a minimum, News Corp. would be at risk for violating laws on accurate accounting reporting if the bribes were paid, according to legal experts. News Corp. shares trade on Nasdaq and the company files its financial reports with the SEC.

"Would the Department of Justice go after them on a criminal basis? Hard to say. But the SEC definitely has a stake in this," said Alexandra Wrage, a legal expert on bribery who is the president of the firm TRACE, which helps companies comply with anti-bribery and anti-corruption laws.

 

"How did they account for these payments? If you falsify, misrepresent on your books what this money was spent on, straight out of the box you have a FCPA violation," Wrage said.

A Justice Department spokeswoman declined to comment, as did a spokesman for the SEC. News Corp. representatives were not immediately available for comment.

The United States has been pushing other countries to step up their enforcement of anti-bribery laws and a stiff new law in that vein took effect July 1 in Britain. However, it would not apply to the News of the World case because the alleged activity took place before the measure came into force.

One lawyer said U.S. prosecutors probably would defer to their British counterparts and raised questions of whether a criminal case here could be made since prosecutors would have to show bribes were paid to obtain or retain business.

"It's a million-to-one shot," said the attorney, who declined to be identified because he did not want to jeopardize any business with News Corp.

Ed Rubinoff, a Washington-based attorney with Akin Gump Strauss Hauer and Feld, said any investigation would likely be led by the SEC and focus on how the company reported and accounted for any alleged bribes it paid as well as what controls it had for such payments.

If a probe is initiated, that could signal a broadening of the U.S. government's interpretation of the law, Rubinoff said. However, the difficulty could be in proving that any bribes gave News Corp. a business advantage, Rubinoff said.

"This would be pushing the boundary a good bit more," he said, adding that "you don't have to prove all those elements for a record-keeping violation."

Another possible headache for Murdoch's empire is that a bribery inquiry that started in one country could go global and such investigations can drag on for years and cost tens of millions of dollars.

"Another potential issue here that should be of concern to the company is it is very common for FCPA inquiries to focus on a discrete set of facts, but then for a company to do a world-wide internal review," said Michael Koehler, a professor of business law at Butler University.

"It's very common for enforcement agencies to ask the 'where else?' questions," he said.

© 2014 Thomson/Reuters. All rights reserved.

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