Murdoch's World (37 page)

“If you had this happen in a normal company, in theory, the board would have required the CEO to resign,” said Laura Martin, senior media analyst for the investment bank Needham and Company. But she said investors believed News Corp's shares would rise more with Murdoch steering the ship than someone new.

At the shareholders' meeting at the theater tucked at the back of Fox Studios, Rupert Murdoch carried himself with a
confidence laced with bravado. He started his address by calling News Corp's history “the stuff of legend.”

“The company has been the subject of both understandable scrutiny and unfair attack,” Murdoch said. But his voice was not the only one that shareholders heard. Union critics who held News Corp shares gave Labour MP Tom Watson their proxy, and in the process gave him a soapbox from which to speak.
“I think I've got a duty to bring that to the shareholders' attention, because, after all, they are also responsible for what this company does,” Watson said. “And I think the board have let them down.” The board was stacked with Murdoch's children, former executives, political allies, and current or former business partners. The Murdoch family trust held about two-fifths of all voting shares, which gave it near control of all stockholder decisions. Like almost everyone else who came into Rupert Murdoch's orbit, the
board members found it difficult to distinguish between the interests of the family and the company.

At the session, Watson informed Murdoch and shareholders there would be a new front on the parliamentary inquiry he was helping to direct: email and computer hacking. The company paid more than $5 million that day to the Dowlers, much of it earmarked for a charity of their choice, to settle their claim against the company.

The day proved arduous for Rupert Murdoch. Officials from institutional investors such as the California state pension fund demanded that he separate the roles of chairman and CEO. Murdoch became testy, cutting off his former Australian editor turned corporate activist Stephen Mayne: “Stephen, I'd hate to call you a liar, but you're wrong.” To a representative from the Church of England, Murdoch snapped, “Your investments haven't been that great, but go ahead.” Why the Church of England invested in a company that had topless girls on the third page of its most profitable publication every day was a separate question. Perhaps it showed the modernity, or the erosion of standards, of British institutions. Perhaps it merely underscored the ubiquity of Murdoch's presence in British commerce.

Rupert Murdoch easily enough won reelection to his corporate board. Saudi prince Al Waleed bin Talal had promised to cast the 7 percent of voting shares he held following the Murdoch line. (Murdoch had invested News Corp money in Waleed's Saudi media enterprises.) Yet the day proved an embarrassment. James Murdoch lost nearly 35 percent of the vote for reappointment to the board—a majority of all non-Murdoch votes cast. Lachlan, who had never run the British enterprises, lost a third of the vote.

AT THE outset of November, just days before appearing yet again before the parliamentary committee, James stepped down from the boards within News International that ran the two tabloids (News Group Newspapers) and the
Times of London
and the
Sunday Times
(Times Newspapers Ltd). He was disengaging from the UK.

Lawmakers on the parliamentary committee investigating
News of the World
experienced something out of the movie
Groundhog Day
. In 2010 the committee unsatisfyingly concluded that News International had suffered from “collective amnesia.” On November 11, 2011, one question dominated the conversation:
was James Murdoch a fool or a knave?

He did learn of the “for Neville” email, the younger Murdoch admitted to the MPs, before authorizing Crone to pay enough money to make Gordon Taylor's complaint disappear. But he had only understood half the email's import. Crone and Myler told him it contained transcripts. They never called it the “for Neville” note, nor did they mention Thurlbeck at all, he said. By Murdoch's account, he knew only that the transcripts proved the existence of a second specific instance of hacking, not that it was commonplace at his paper. Myler should have told him more. The lawyers failed him. The police gave him false assurance. He never received the outside lawyer's doomsday assessment of the culture of criminality alive in the newsroom.

“If there was a mistake or a shift that we need to focus on, it was the tendency for a period of time to react to criticism or allegations as being hostile or motivated commercially or politically,” Murdoch testified. “What we did not necessarily do was reflect as dispassionately as we might have, among all the din and clamor that surrounds a large business such as this.”

Watson baited Murdoch amid the exchange. “Are you familiar with the word mafia?”

M
URDOCH
: “Yes, Mr. Watson.”

“Have you ever heard the term
omertà
? It is the mafia term for the code of silence.”

“I am not an aficionado of such things,” Murdoch replied.

“Would you agree that it means a group of people who are bound together by secrecy, who together pursue their group's business objectives with no regard for the law, using intimidation, corruption, and general criminality?”

“Absolutely not,” Murdoch said. “Frankly, I think that that is offensive and it is not true.”

Watson then reminded him of the bill of particulars in the hands of police and prosecutors: “There are allegations of phone-hacking, computer-hacking, conspiring to pervert the course of justice and perjury facing this company and all this happened without your knowledge. Mr. Murdoch, you must be the first mafia boss in history who didn't know he was running a criminal enterprise.”

Watson had gone a step too far. But other MPs, including Conservatives, also took tough shots. Watson's Labour colleague Paul Farrelly challenged James Murdoch's competence.
Why hadn't he asked to read the lawyer's reports? Why would he authorize such big payments? Why did he fail to realize that the hacking of Gordon Taylor's phone meant the illegal practice stretched beyond coverage of the royals? Why did he not take the
Guardian
's 2009 report on the Taylor settlement seriously?

“So even at that stage in the middle of 2009 as the executive chairman of News International,” Farrelly asked, “you are possibly the only person in London who still thinks that there is [only] one rogue reporter and one private detective?”

More odious developments surfaced before the cameras.
The public learned of the private eyes following the lawyers and MPs. Every MP on the House of Commons committee conducting the investigations in 2009 and 2010 had also been followed by private investigators seeking dirt. Murdoch apologized profusely.

The committee could not land the knockout punch. Then again, James Murdoch could not make the bleeding stop.

The MPs were not the only ones investigating News International's behavior. Prime Minister Cameron had created an inquiry to be run by Lord Justice Brian Leveson. The judge and his lead interrogator, attorney Robert Jay, were taking a hard look at the press's relationship with police, politicians, and power. As they did so, additional disclosures came to light.

At the outset of 2012, the
Times of London
admitted that in order to disclose in print
the identity of an anonymous police blogger known as “Nightjack,” it had hacked his email. In court, lawyers for the newspaper had deceived the judge, maintaining that the reporter deduced his identity from publicly available information. Meanwhile, the
Sunday Times
acknowledged subjecting Gordon Brown to “blagging,” a broad term encompassing deception by journalists to obtain information illegally. The
Guardian
had earlier posted audio of a con man posing as a lawyer to persuade Brown's attorneys to hand over private terms about the sale price of Brown's flat. The paper's editor, John Witherow, confirmed that incident, but also said one of his employees had impersonated Brown in a call to Abbey National Bank in order to get confidential financial figures.
In the middle of February, police arrested a handful of employees at the
Sun
on suspicion of bribing police officers and military personnel for information.

Later that month,
Rupert Murdoch returned to London to oversee the printing of the first edition of the
Sun on Sunday
, the new tabloid to replace
News of the World
. The paper felt distinct from the one it replaced. The first
Sun on Sunday
was light on scandal, heavy on sports, inspiration, celebrity gossip (but not
too
mean), and a scattering of politics and world affairs.

Murdoch beamed for the cameras. The new publication was a welcome distraction that would restore some of the advertising and circulation revenue lost when he shut down the
News of the World
. James was nowhere to be seen.

Only twenty-four hours later, one of the most senior police officials at Scotland Yard testified that
Sun
journalists had made illegal payments to a broad swath of public officials in a half-dozen or more government agencies. “It reveals
a network of corrupted officials,” deputy assistant police commissioner Sue Akers testified before Judge Leveson. “There also appears to have been a culture at the
Sun
of illegal payments, and systems have been created to facilitate those payments whilst hiding the identity of the officials receiving the money.”

The cancer at News Corp's British holdings had metastasized.

20

AILES SEEKS A LEGACY

LIKE RUPERT MURDOCH, ROGER AILES insisted he had no time for people who obsessed on status such as college pedigrees, big journalism awards, or invitations to
fancy, high-powered dinners on Manhattan's Upper East Side. Periodically he would register his disdain for such attributes while attending fancy, high-powered dinners on Manhattan's Upper East Side.

By 2011 Roger knew what kind of mark he had made at Fox News, an organization shaped in his own image, a concoction of show business, populist conservative politics, pugilism, and reporting. But there was the question of legacy—what would endure.

Ailes's channel had helped conservatives push news coverage to the right. Fox made the news business, especially television news, brasher, more opinionated, and splashier. It brought local television news judgments and Hollywood sensibilities into the national and
political arenas. MSNBC had found profit for the first time by banking hard left, but that was no rebuke of Fox; it was an homage.

Ailes had subtly steered his channel to shift with the times. To harness anti-Obama sentiment, he had dropped the outmatched liberal Alan Colmes from
Hannity & Colmes
, added Glenn Beck, and created Fox Nation, a red-meat, red-state online offshoot for those who found the Fox News website too evenhanded. Yet in the summer of 2010, Ailes decided to create another brand on the web that might prove more welcoming to the nation's quickest growing demographic: Hispanics.

He turned to Francisco Cortes for help. A Bronx native of Puerto Rican descent, Cortes started at Fox after a stint in the US Army as one of the first enrollees in the Ailes Apprenticeship. Ailes wanted to create a new Fox-friendly pipeline of young African American, Asian, and Latino journalists to help stock the newsroom with a diverse crew trained in the Fox way. He decided to create a new website called Fox News Latino, aimed largely at English-speaking Hispanics. The site incorporated pieces from freelancers and a dozen staffers with the aggregation of news coverage from other sources, particularly in Latin America.