Murdoch's World (36 page)

But as was subsequently becoming clear, the law firm had not been commissioned to conduct a wide-ranging review at all. Instead, it had
examined emails that Clive Goodman, the reporter convicted of involvement in hacking in 2006, had exchanged with five editors.

The company limited Harbottle & Lewis's involvement to an assessment of whether Goodman had a strong case for a wrongful termination suit.
The law firm's presence was triggered by Goodman's complaint: “This practice [phone-hacking] was widely discussed in the daily editorial conference, until explicit reference to it was banned by the Editor” (at that time, Andrew Coulson).

Hinton had authorized paying Goodman the equivalent of twelve months' salary in an agreement that precluded any employment suit.

The
Journal
reporters didn't have at hand all those details, many of which would be revealed at the inquiry convened weeks later by Lord Justice Brian Leveson. But they showed that News Corp had wrongly presented a human resources defense as a no-nonsense legal review.

Ultimately, the
Wall Street Journal
gave prominent play to both stories: the
News of the World
's telltale switch in language to mask the hacking done on its behalf, and the
sleight of hand in the corporation's public reliance on a narrow document review as a full-fledged internal investigation. MPs cited the voice mail story repeatedly in its final report on the affair. But the
Journal
's reporters and editors had to fight hard to get those stories in print. And that led them to the question that hovered over the entire process: Why was Thomson involved at all?

Over at the
New York Times
, the top business editor was a former
Journal
editor named Lawrence Ingrassia. He
recused himself from all coverage of the tabloid phone hacking scandal because his son had married the daughter of Colin Myler, the final
News of the World
editor. That's what respected news organizations tended to do in such circumstances. Why had Thomson not done the same? Why not assign a senior news executive not in the paper's top chain of command and without ties to the British papers to oversee the reporting?

Journal
staffers batted around two answers. Thomson, like Murdoch, had grown up in a completely different newspaper culture. Papers in the Anglo-Aussie tradition took sides, fought for their interests, and were expected to do so.

Additionally, it served the chairman's interests to have his best friend run the show during a crisis. Journalistic propriety be damned. When the cards were down, Mr. Murdoch could rely on his mate to mitigate the damage.

19

“THE ONLY PERSON IN LONDON”

IN SEPTEMBER 2011, DEVELOPMENTS IN London raced ahead of News Corp. Klein and his colleagues embarked on a ruthless cull within the tabloids. Arrests mounted. Bribery and corruption joined mobile phone hacking on the list of allegations. Police swept through reporters' homes in early morning raids. Past courtesies no longer applied. The questions posed the previous April by Murdoch's former
Sunday Times
editor took on added urgency: What did James Murdoch know about hacking, and when did he know it?

Especially dangerous to Murdoch was the resentment of Colin Myler and Tom Crone, who had lost their jobs in July when the Murdochs decided to kill
News of the World
. At the end of the first week of September, the two
prepared to take their case public, in front of the cameras at Parliament's Portcullis House, so that all of Britain and the world could hear them attack the man next in line to take over News Corp.

The family, too, had turned on James, in various ways. First Elisabeth and then Rupert told James to step aside. (Rupert changed his mind the next day.)
The younger generation's efforts to work in unison to manage the transition from Rupert to the next Murdoch had been shredded. Lachlan had come to London to lend support and counsel but not to reenter the corporate fray. Elisabeth thought James and the newspaper hacks beneath him had led News International to the brink of ruin.
James and Rebekah fucked the company
, Elisabeth was overheard raging at a book party staged by her husband, Matthew Freud, with
Times of London
editor James Harding. Elisabeth wanted James out, perhaps for good. The sale of Elisabeth's production company Shine to News Corp had been accompanied by the plan to appoint her to a seat on News Corp's board of directors. In early August, she announced she would not take it up. James Murdoch's wife, Kathryn Hufschmid, loathed Freud and saw his machinations to position his own wife as the clean Murdoch behind her husband's rift with his sister.

James remained hidden from view amid the company's first quarterly report since the scandal, in early August. The initial questions from investment analysts involved profit margins for News Corp's cable holdings, advertising rates on those channels, the company's appetite for buying back stock (a way to increase the value of each stockholder's shares), what News Corp would do with the $5 billion it set aside to acquire BSkyB, the local TV business, the struggles of Fox Business Network, the prospect of newspaper profits in Australia. One analyst asked Rupert Murdoch whether he might split publishing off from the rest of the company; the chairman again knocked it down in no uncertain terms.

A reporter from Reuters asked,
Would the board support Murdoch's wish for James to succeed him as CEO at some stage in the near future?

Murdoch hedged. “Well, I hope that the job won't be open in the near future,” he said. “Chase [Carey] is my partner. If anything happens to
me, I'm sure he will get it immediately, but—if I went under a bus, but Chase and I have full confidence in James. But I think that's all I need to say about it. In the end, the succession is a matter for the Board.”

Meanwhile, James Murdoch trod a delicate path. “I acted on the advice of executives and lawyers with incomplete information, and
that's a matter of real regret for me,” he said in the sole interview he granted. British police officials had exonerated the company: “We now know that was an inadequate investigation, and that is a matter of profound regret for me, as well.”

The subject of that investigation continued to haunt News International and its parent company.
(In one sign among many, New York State's controller killed News Corp's $27 million educational software contract late that month.) The problem was no longer that a prominent reporter had hired a private investigator to hack into the private voice mails of the royals but that the private investigator, Glenn Mulcaire, had done the job too well and too often for too many masters at
News of the World
.

THE PARLIAMENTARY committee on media reconvened in September 2011. HR executive Daniel Cloke claimed in his testimony that Crone, Hinton, and Myler—basically the paper's entire hierarchy and its corporate bosses—had known of Clive Goodman's 2007 accusations that reporters and editors routinely commissioned phone hacking. But the company had not pursued the larger allegation. The former general counsel for News International, Jonathan
Chapman, cited a “feeling of family compassion” at the company, which tempered the impulse to punish those who had committed crimes on the paper's behalf. He described a form of mateship.

As Crone and Myler addressed the committee, however, they felt bound by no such kinship. Instead, they told a relatively simple story:
things were going south. They had told James the risks. James Murdoch had received the email from Julian Pike and Tom Crone, who told him about the “for Neville” email. Crone and Myler met with Murdoch to make sure he understood the stakes, and he authorized them to settle the lawsuit swiftly and silently for anything up to about £500,000. The News International executives had minimized the importance of the meeting in earlier testimony. Now it was the hinge on which their testimony swung.

“If it all went public with Mr. Taylor, we were at risk of four other litigants coming straight in on top of us, with enormous cost,” Crone testified. “If we have to pay way over the odds for Mr. Taylor, especially if there is a confidentiality clause . . . that is a good course of action. If it is £415,000 or £425,000 to settle one case, thereby avoiding being sued by four other people who might have similarly high demands and huge legal costs, that is the right decision to take from my point of view.”

News International kept much of the British media legal establishment on retainer at one time or another but had agreed to waive lawyer-client privilege over past conduct of the cases, part of its effort to demonstrate to American and British authorities its willingness to cooperate. The waiver of legal privilege meant all those deliberations were now cascading into public view.

In their testimony, Crone and Myler often sidestepped questions to stick to their main and most damaging point: “There was no ambiguity about the significance of that document [the ‘for Neville' email] and what options there were for the company to take,” Myler said. Given their earlier, contradictory testimony, the two men had trouble convincing parliamentary committee members to rely on their account, especially of James Murdoch's state of mind. Conservative MP Louise Mensch turned to Crone: “I have to say, sir, that your evidence has really been as clear as mud.”

JAMES MURDOCH'S status remained clouded as the date of News Corp's annual shareholder conference neared. The event was scheduled for Los Angeles in mid-October on the Fox Studio lots at the 476-seat Darryl F. Zanuck Theater—a secluded spot on a site controlled by the company. Protesters would have a much tougher time disrupting the meeting than they would in New York's Upper West Side, where the meetings were usually held. Security was tight.

Along with James's leadership, Rupert's acumen had been called into question too. External analysts looked at a trail of misdeeds and misjudgments—from the acquisition of Elisabeth Murdoch's Shine for a very generous price, to the $2.8 billion write-down of the
Wall Street Journal
, to the purchase of MySpace and its fire-sale disposal a few short years later.

“We have consistently
given Mr. Murdoch's board an F since they first incorporated in the US, and that's only because there's no lower grade,” Nell Minow of GMI Ratings, a firm that assesses integrity in corporate governance, said ahead of the company's annual meeting. Amid the hacking revelations, Murdoch's leadership is “a big, big mess,” she said. “Rupert Murdoch went to testify before Parliament and he said, at the same time, ‘I didn't know this was going on' and ‘I'm the guy to fix it.' Those are two incompatible statements. Anybody who is swayed by that is not paying attention.”