FBI Inquiry of Murdoch's Empire Hinges on British Probe

Monday, 25 Jul 2011 01:13 AM

 

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The FBI is just cranking up a preliminary review of whether alleged phone hacking and bribery by Rupert Murdoch's media empire violated U.S. laws, but any resolution may well have to await the outcome of British investigations.

The FBI's early fact-gathering could turn into a long saga that tests or reinforces the long-standing cooperation between U.S. and British law enforcement. Most of the records and witnesses to prove or disprove the allegations are in the hands of British investigators.

The problem for Murdoch is that his business, not just his now-shuttered British tabloid News of the World, faces investigations on two continents. That includes a nascent FBI probe. Depending upon what turns up, it could head in unexpected directions, perhaps threatening other Murdoch properties, which include the Fox television network.

News Corp., Murdoch's New York-headquartered parent company, is assembling a gold-plated roster of lawyers to deal with any U.S. legal action. According to published reports, the company has signed up Brendan Sullivan, the high-priced Washington criminal defense attorney, and Mark Mendelsohn, an acknowledged expert on the Foreign Corrupt Practices Act

Sullivan is famous for defending Oliver North against Iran-Contra scandal charges and Sen. Ted Stevens, R-Alaska, against corruption counts. Mendelsohn ran the Justice Department unit that enforced the anti-foreign-bribery statute from 2005 to 2010.

News Corp., Sullivan and Mendelsohn would not confirm the hirings.

For now, U.S. investigators are not only looking at the phone hacking and bribery allegations but also kicking the tires on any other allegations against Murdoch entities that appear in print or even old court records. That includes reviewing old allegations from a civil lawsuit that a unit of News Corp. hacked into computers of a small advertising competitor in New Jersey and obtained confidential information it used lure away clients.

Separately, the FBI plans to question actor Jude Law about allegations his phone was hacked while he was in the U.S., according to the BBC. Law has sued the Murdoch-owned Sun tabloid for allegedly hacking into Law's voicemail for stories about his private life.

The allegation about phone hacking in the United States rests on a single news story in the Daily Mirror, a London tabloid rival to Murdoch's The Sun.

A former New York police officer-turned-private investigator, not identified by name, said he'd been contacted by News of the World journalists who offered to him to retrieve private phone records of victims in the Sept. 11 attacks in the United States.

According to the story, the ex-officer claimed reporters wanted the victim's phone numbers and details of calls they had made and received in the days before the 2001 attacks, particularly those of British victims.

The story quoted an unidentified source as saying: "This investigator is used by a lot of journalists in America and he recently told me that he was asked to hack into the 9/11 victims' private phone data. He said that the journalists asked him to access records showing the calls that had been made to and from the mobile phones belonging to the victims and their relatives."

"His presumption was that they wanted the information so they could hack into the relevant voicemails, just like it has been shown they have done in the U.K. The PI said he had to turn the job down. He knew how insensitive such research would be, and how bad it would look."

In the United States, the Mirror's story jolted some Sept. 11 families into sorting through memories of what the news media said about them and their loved ones.

Attorney General Eric Holder has agreed to meet Sept. 11 family members who want to discuss the phone hacking allegation. Arrangements could be set up as early as this week.

If there are any U.S. victims of phone hacking, they are very unlikely to be aware of it. If there is evidence that any Sept. 11 families' phones were hacked, most of it is likely in Britain, not in the U.S.

British authorities are reviewing seized documents that suggest perhaps thousands of British phones were hacked over the years on behalf of Murdoch journalists.

"We hope that the cell phones of the 9/11 victims and their relatives have not been hacked," Norman Siegel, an attorney who has represented some families for eight years, said Saturday. "However, we strongly believe the FBI and the Justice Department are acting responsibly in continuing their investigations of this matter and the 9/11 families are offering their assistance."

The U.S.-based parent company of Murdoch's operations, News Corp., said that "we have not seen any evidence to suggest there was any hacking of 9/11 victim's phones, nor has anybody corroborated what are clearly very serious allegations. The story arose when an unidentified person speculated to the Daily Mirror about whether it happened. That paper printed the anonymous speculation, which has since mushroomed in the broader media with no substantiation."

Washington lawyer and former federal prosecutor Jay Darden is skeptical of the allegation.

"I think the Justice Department always has to be careful when opening up criminal investigations just based on sensational reports in a newspaper in another country. That's why you want career officials making decisions, so that decisions not only to open an investigation but pursue it aren't made for the wrong reasons," said Darden, who has represented companies and executives in Foreign Corrupt Practices Act cases.

Darden, who is not representing News Corp. or other Murdoch holdings, was assistant chief of the Justice Department's fraud section from 2006-2010.

Though reports of British journalists paying police for tips and information go back years, the practice is a crime in that country and British police are promising a crackdown.

That investigation would be an exclusively British matter, except for the long reach of the Foreign Corrupt Practices Act. That post-Watergate U.S. law has been used to prosecute U.S. companies that pay bribes to foreign officials to win business, usually foreign government contracts. News Corp. has its headquarters in New York.

In a statement Friday, News Corp. said that it had not seen any indication "of a connection or similarity between the events, allegations and practices being investigated in the U.K. and News Corp's U.S. properties."

U.S. legal authorities are divided over whether the corruption law even covers the bribes that journalists paid police. Federal officials have noted that the law has never been used to prosecute bribing an official for information that might increase newspaper circulation. Furthermore, U.S. officials would be reluctant to expend resources prosecuting bribes the British are already going after.

But other lawyers don't see a problem if the facts warrant.

"It wasn't a payment to obtain business, but it was done to get a business advantage," said Alexandra Wrage, president of TRACE, an association that advises multinational companies on anti-bribery compliance. She cited a 1999 case in which company executives paid half a million dollars in bribes to Haitian customs officials to reduce import taxes on rice.

But if the law's bribery provision is an iffy prospect for U.S. enforcement in this case, another part might not be.

If the U.S. financial records of News Corp. concealed payoffs by News of the World to police and someone at the U.S. parent company condoned it, that could well be a crime under the law, and one the British aren't pursuing. That part of the law is designed to protect U.S. stockholders and investors, but any U.S. prosecution would have to wait until the British had first proved there were bribes.

The law is most often applied in Third World countries without a robust legal system. U.S. and British officials have long-standing agreements on handling overlapping criminal cases; those arrangements favor U.S. deference to Britain's police payoffs probe.

Recently, the U.S. stepped aside as Britain's Serious Fraud Office began investigating BAE Systems PLC, England's largest arms company, for allegedly paying bribes to Saudi Arabia for contracts.

But when a British decision halted the investigation in 2007, the U.S. stepped in. The result: BAE was sentenced last year in federal court in Washington to pay a $400 million criminal fine in an FCPA-related case.

One notable dissenter to demands for U.S. investigation of the Murdoch scandal is Washington lawyer Peter Clark, a former Justice Department official regarded by legal colleagues as the father of the Foreign Corrupt Practices Act.

Clark said that "whether or not the FCPA — or any U.S. criminal law — may reach some aspect of conduct outside this country, it is clear that these allegations of payments to British police by a British newspaper are best dealt with by U.K. authorities, not the Securities and Exchange Commission or the Department of Justice. No one questions the ability and integrity of U.K. investigators, prosecutors and courts; they are second to none in the world."

Clark does not represent any Murdoch properties.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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