NPR Story
3:47 am
Fri April 20, 2012

Murdoch's News Corp. Faces New Legal Threats

Originally published on Fri April 20, 2012 5:46 am

Transcript

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Rupert Murdoch's News Corporation is facing a series of new threats. The company's British newspaper division stands accused of phone hacking and bribing police officers. That scandal has already cost the company hundreds of millions of dollars. Now News Corp is fending off media reports that one of its companies worked with hackers to harm its competitors' global satellite and cable TV operations. NPR's media correspondent David Folkenflik reports.

DAVID FOLKENFLIK, BYLINE: News Corp announced last month that it would sell its large stake in a company called NDS. NDS is a little-known, but pivotal unit for News Corp. It focuses on smartcards and encryption to protect satellite TV programming from people who want to watch it without paying.

Within days of that announcement, two influential news organizations - the Australian Financial Review and the BBC - alleged that NDS has helped News Corp's pay TV outlets gain an unfair advantage. Those reports are based on 14,000 newly obtained emails and on interviews with hackers, telling of a shady website with a cinematic name.

(SOUNDBITE OF TV SHOW, "PANORAMA")

VIVIAN WHITE: Whose was the House of Ill compute?

LEE GIBLING: It was NDS. It was their baby. And it started to become more their baby as they fashioned it to their own design.

FOLKENFLIK: This is from the BBC investigative program "Panorama," which made the case that NDS had cultivated a network of hackers. Hacker Lee Gibling told the BBC that NDS was seeking to spread the secret computer codes for News Corp's pay TV rivals.

(SOUNDBITE OF TV SHOW, "PANORAMA")

GIBLING: They delivered the actual software to be able to do this with private instructions it should go to the widest possible community.

FOLKENFLIK: Emails also referred to a fund for payments to police informants in England, a reference with powerful echoes, given the separate and earlier allegations that News Corp's British newspapers had bribed police officers.

News Corp and NDS executives would not speak for this story, but they flatly deny the charges. Officials claim the BBC and the Australian Financial Review have taken emails about intense anti-piracy initiatives and portrayed them as part of an untrue scheme involving pay TV hacking. NDS dismisses the credibility of the computer hackers interviewed and contends there was just a single payment to police: a charitable donation for laptops.

Related allegations surfaced in several lawsuits filed against News Corp in the U.S. over recent years. All were dismissed or resolved without any significant finding of wrongdoing by the company. Mark Lewis is the most prominent of the British attorneys suing News Corps in the UK for victims of phone hacking. He says the company sought to discredit those claims when they first arose, as well.

MARK LEWIS: Look, with phone-hacking allegations, people dismissed them as being old allegations and know that they'd already been investigated. And what we have to do is to look at them.

FOLKENFLIK: Lewis says he's now exploring a suit against NDS and News Corp over the pay TV piracy allegations.

Satellite and pay TV represent a primary financial engine for the company. News Corp has a controlling minority stake in the British broadcasting giant BSkyB, for example, which generates well over a billion dollars a year in profits for the company.

But British regulators are now weighing whether News Corp is a fit and proper controlling owner of BSkyB, given the criminal investigations of phone hacking and bribery and the concerns of whether executive James Murdoch misled a parliamentary inquiry. So the stakes are high.

Rupert Murdoch tweeted, quote, "seems every competitor and enemy piling on with lies and libels. So bad, easy to hit back hard, which preparing."

ANDREW NEIL: The Murdoch culture is to take-no-prisoners.

FOLKENFLIK: Andrew Neil was the chief executive who launched BSkyB. He left Murdoch's orbit in the mid-1990s, and has no personal knowledge of the NDS allegations. But Neil says he finds them compelling.

NEIL: The Murdoch culture is to destroy the competition. It is the end will justify the means. Now, that doesn't mean that you're encouraged to break the law, but it does create a culture where you push things as far as they go.

FOLKENFLIK: That culture will again come under scrutiny next week when Rupert Murdoch and his son James are to face several days of questioning at a wide-ranging judicial inquiry in London.

David Folkenflik, NPR NEWS. Transcript provided by NPR, Copyright NPR.