Media  
comments_image Comments

How Murdoch Reporters’ Bribes Violate U.S. Law

If Murdoch's reporters bribed British police, they may be liable under U.S. law.
 
 
Share
 
 
 
 

Imagine you're a Fleet Street reporter at a British tabloid with a pocketful of cash. You meet a trusted source at a pub, a police officer who tells you about the royal family's confidential schedule in exchange for a small gratuity. You hand over a few quid and rush off with a photographer to stake out a health club where Camilla Parker-Bowles is toning her abs.

Guess what: If you work for Rupert Murdoch, you may have violated U.S. law. What the government nails you for could depend on how you and your bosses account for the sketchy deal with the cop.

If you're entirely honest in the company's internal books and enter the payment as a "bribe," you've just created an irrefutable piece of evidence that can be used against you and your company in a prosecution by the Justice Department for violating U.S. statutes against overseas bribery. If, as is more likely, you file an expense account which refers to the cash payment as "taxis” or "office supplies," you stand a chance of being pursued by the Securities and Exchange Commission for keeping fake records.

News International Limited, the British arm of the Murdoch empire, is a subsidiary of News Corp., a publicly traded American company which also owns The Wall Street Journal and Fox News (not to mention the Sunday Times of London, The Times of London, and the British tabloid The Sun.) Because of this, experts say, News Corp. and all of its subsidiaries come under the Foreign Corrupt Practices Act, a Watergate-era law which makes it a crime for U.S. companies to participate in bribery abroad.

The scope and number of payments remains unclear. British press reports say more than $160,000 was paid by News of the World reporters to police officers. The issue came to light last week after News International turned over a trove of internal emails to authorities.

"A small number of officers may have taken illegal payments. That is fundamentally corrupt," Met Commissioner Sir Paul Stephenson told the BBC. "If true, I will be determined to root them out, find them and put them in front of the criminal court."

After years of relative quiet, the United States has substantially stepped up the resources to prosecute companies for violating the bribery law. There are 150 open investigations of American companies, according to the law firm Gibson Dunn & Crutcher. In 2005, the Securities and Exchange Commission and the Department of Justice combined for a total of just 12 FCPA enforcement actions. By 2010 that number had jumped to 54, the law firm reports. We've written previously on this subject when it involved payments by Albert Jack Stanley[1] , a former executive at KBR.

Unless information emerges that News Corp. executives in the United States were aware and condoned illegal behavior, it is doubtful whether the company or individual executives would face criminal prosecution in the United States, several defense lawyers said.

A prominent academic, Michael Koehler, who tracks prosecutions on his blog the FCPA Professor[2] , is not as sure the global news giant will escape criminal prosecution.

"Look at the 2011 enforcement actions on my blog," he says. "None of these involved high level officers or board members."

But lack of evidence of executive complicity in bribery doesn't protect the parent company from civil actions. Where News Corp. may be most vulnerable is under the "Books and Records" and "Internal Controls" provisions of the FCPA, according to lawyers who practice in this field.

Even if News Corp. subsidiaries recorded the bribes accurately in their books, it could land the company in difficulty with the SEC. Since the bribery was permitted in the first place, the charges would also open up the company to questions about its internal controls.