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Murdoch's legal, financial woes escalate

The legal and financial troubles for Rupert Murdoch’s News Corp. are escalating on the eve of the media tycoon’s showdown appearance before a House of Commons committee Tuesday morning. NBC News' investigative correspondent Michael Isikoff reports.
/ Source: NBC News

The legal and financial troubles for Rupert Murdoch’s News Corp. are escalating on the eve of the media tycoon’s showdown appearance before a House of Commons committee Tuesday morning.

Law enforcement sources tell NBC News that U.S. Justice Department officials in recent days have reached out to British law enforcement officials to review allegations relating to $160,000 reportedly paid by Murdoch’s News of the World to Scotland Yard police officers. The consultations with officials at Britain’s Serious Fraud Office are the first tangible step by Justice to determine whether the payments may have violated the U.S. Foreign Corrupt Practices Act — a law that makes it illegal for an American company to pay bribes to foreign government officials.

Murdoch’s News Corp., which is based in Delaware, is also facing a new legal challenge from shareholders. In recently filed court papers, a group of shareholders — including investment funds and labor and municipal pension funds — allege that Murdoch has misused News Corp. assets, treating the company “like a family candy jar, which he raids whenever his appetite strikes.”

“If you’re a major shareholder of the company, you have a good reason to be worried,” Andrew Schwartzman, senior vice president and policy director of the Media Access Project, a Washington public interest group that monitors the media industry, said about the new legal developments threatening the company.  “This could pose a long term threat to the company.”

The lawsuit was filed in Delaware Chancery Court months ago to focus on a $650 million News Corp. purchase of a British TV production company owned by Murdoch’s daughter, Elizabeth — a deal that the lawsuit alleges resulted in a $250 million windfall for the younger Murdoch. It also focused on what it alleges is excessive compensation paid by the company — including $74 million paid to Murdoch in the past three years — as well as News Corp.’s $1,250,000 contribution to the Republican Governor’s Association last year.

The donation shows Murdoch’s willingness to use corporate assets — as opposed to political action committee contributions voluntarily donated by employees — to advance his “conservative political agenda,” the lawsuit charges. 

In recent days, the lawsuit has been amended to include the phone hacking scandal, alleging that the recent disclosures show “a culture run amok within News Corp.”

Read more reporting by Michael Isikoff in 'The Isikoff Files'

News Corp. has not yet responded to the lawsuit. In a statement provided to NBC News Monday night, a company spokesman said that the allegations relating to the conduct of News of the World, the now shuttered newspaper owned by News International, the company’s British subsidiary, “are “serious,” adding, “We are fully cooperating with the relevant authorities as appropriate.”

“However,” the statement continued, “we reject the notion that the issues at News International  are somehow indicative of our culture. Regarding opportunistic litigation, we will defend against it in court as necessary.”

In another sign that at least some in the company are pushing back, the News Corp.’s Wall Street Journal — whose publisher, Les Hinton, abruptly resigned last Friday — ran a hard-hitting editorial attacking the company’s critics as a “political mob.”

The recent developments raise the stakes considerably for Tuesday’s testimony by Murdoch and his son, James, News Corp. deputy chief operating officer who, as previous chief of British operations, approved out-of-court legal settlements to some of those whose phones were tapped.

In the two weeks since the scandal has erupted, News Corp’s stock has dropped 21 percent, an $8 billion plunge in market value that has personally cost Murdoch and his family more than $1 billion, according to an analysis by the Financial Times.