FBI Investigating Allegations News Corp. Hacked Into 9/11 Victims’ Phones

News Corp. (NWSA) Chief Executive Officer Rupert Murdoch defended his handling of the phone-hacking crisis as the FBI began a probe into whether employees tried to hack the phones of victims of the Sept. 11 terrorist attacks.

“We’re aware of certain allegations pertaining to a possible hacking by News Corp. personnel and we’re looking into those charges,” Jim Margolin, a spokesman for the Federal Bureau of Investigation’s New York office, said in a phone interview yesterday.

Murdoch, in an interview with the News Corp.-owned Wall Street Journal, said an independent committee led by a “distinguished non-employee” will investigate the phone- hacking allegations. The company has handled the crisis “extremely well,” while there were “minor mistakes,” he said.

The scandal led News Corp. to abandon its $12.6 billion (7.8 billion-pound) bid for full control of British Sky Broadcasting Group Plc. (BSY) Last week it closed the 168-year-old News of the World tabloid, whose employees are accused of hacking voice-mails, including those of murder victims, and bribing police for stories.

Former News of the World editor Rebekah Brooks resigned today from her post as chief executive officer of News International, which publishes News Corp. newspapers in the U.K. Murdoch has said he plans to start a Sunday tabloid.

Photographer: Paul Taggart/Bloomberg

The FBI is examining whether employees of Rupert Murdoch’s News Corp. tried to hack into the phones of Sept. 11 victims, according to a person familiar with the matter who wasn’t authorized to publicly discuss it. Close

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Photographer: Paul Taggart/Bloomberg

The FBI is examining whether employees of Rupert Murdoch’s News Corp. tried to hack into the phones of Sept. 11 victims, according to a person familiar with the matter who wasn’t authorized to publicly discuss it.

Murdoch, 80, and his son James Murdoch, the company’s deputy chief operating officer, are scheduled to testify about the phone-hacking scandal before the U.K. Parliament on July 19. Brooks also is scheduled to testify.

Shares Rise

News Corp. rose 21 cents, or 1.3 percent, to $15.64 in Nasdaq Stock Market trading in New York at 4 p.m.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

The Murdochs must “cooperate fully” with inquiries into the phone hacking scandal, Kingdom Holding Co.’s Prince Alwaleed bin Talal Al Saud said in a BBC interview late yesterday.

“We hope as this unfolds that the truth will come out,” said Alwaleed, who has a 7 percent voting stake in News Corp. and had called for Brooks’s removal. “The facts will come out imminently.” It is “very important to me,” he said.

News Corp. has hired criminal defense lawyer Brendan V. Sullivan Jr. of the Washington law firm Williams & Connolly LLP, the New York Times reported. Sullivan’s clients have included former Alaska Senator Ted Stevens, ex-New York Stock Exchange Chairman Richard Grasso and Reagan White House aide Oliver North. Sullivan didn’t’ immediately return a phone and e-mail messages from Bloomberg News seeking comment.

Sept. 11 Attacks

U.S. Representative Peter King, the Republican chairman of the House Committee on Homeland Security, asked FBI Director Robert Mueller in a July 13 letter to investigate whether News of the World employees tried to access voice mails belonging to victims of the 2001 terrorist attacks through bribery and illegal wiretapping.

Julie Henderson, a News Corp. spokeswoman, didn’t immediately return phone and e-mail messages seeking comment today.

King’s request to Mueller was one of several by elected officials and media watchdog groups to investigate News Corp. King, who represents part of New York’s Long Island, said in the letter that his district lost 150 people in the attacks.

Possible Violations

At least six U.S. lawmakers yesterday asked government agencies, including the Justice Department and the Securities and Exchange Commission, to investigate possible violations of the law.

Joining the congressman in seeking a U.S. government probe were New Jersey senators Frank Lautenberg and Robert Menendez, both Democrats.

“If there is a chance that the victims of 9/11 and their families were victimized again by tabloids seeking to profit off their grief, we must bring those responsible to justice,” Menendez said in a statement on his website.

Menendez, in a separate Internet posting, said he has written to British Prime Minister David Cameron, seeking U.K. cooperation in sharing information on that nation’s investigation.

“It is imperative that the U.S. Government have the opportunity to access this information, along with all other relevant evidence to safeguard the rights, privacy, and safety of American citizens,” the senator said.

‘Suffered Enough’

Lautenberg, in his own Web posting, said “the families of victims have suffered enough.”

In a July 13 letter, he asked U.S. Attorney General Eric Holder and SEC Chairwoman Mary L. Schapiro to investigate whether News Corp. or its subsidiaries breached the U.S. Foreign Corrupt Practices Act.

The act makes it a crime for a U.S.-based company, such as News Corp., to pay foreign officials to get or keep business.

Holder today confirmed the existence of a U.S. probe in public comments he made while in Sydney.

“There have been members of Congress in the United States who have asked us to investigate the same allegations, and we are progressing in that regard using the appropriate federal law enforcement agencies in the U.S.,” Holder told a group of Australian justice officials, according to Laura Sweeney, a spokeswoman for the U.S. Justice Department.

Won’t Defer to U.K.

The U.S. probes could result in the filing of federal charges against News Corp. agents, two American former prosecutors said.

“I think it’s serious,” Ronald S. Safer, a white-collar criminal defense lawyer who was a federal prosecutor in Chicago for 10 years, said of the FBI probe.

“I do not think that they will defer to U.K. authorities,” said Safer, a managing partner of Schiff Hardin LLP. “If they find that there was hacking into those accounts that amounts to an unlawful intercept, then they will prosecute.”

Depending on how such a crime was carried out, it could be prosecuted as an illegal wiretap or as wire fraud, Safer said. Any defenses to those crimes would be technical in nature, amounting to challenging whether the alleged acts fit the legal definitions of the charged offense.

“The conduct itself would be indefensible,” he said. Hacking into the voice mail of a dead person wouldn’t lessen the offense, Safer said in a phone interview.

Crime Against U.S.

“The crime is against the United States and not an individual,” he said.

While prosecutors could be time-barred from filing charges for those crimes if they were committed more than five years ago, those limits could be circumvented by charging multiple defendants with a continuing conspiracy, Safer said.

If prosecutors can show an organizational pattern or practice of violating wire fraud laws within the past five years, they could also potentially file racketeering charges, Safer said.

Jeffrey H. Cramer, a former federal prosecutor in Chicago and a former state prosecutor in New York, said in a phone interview that the FBI isn’t “going off on a lark.”

“9/11 victims are held dear,” said Cramer, now managing partner of the Chicago office of international risk consultant and investigations firm Kroll Inc. “If there’s even some allegation that they’ve been victimized again, absolutely they’re going to look into it.”

Cramer said he would be “hard pressed” to think of a defense against such an allegation.

“If the investigation leads to anything,” he said, “the query would be, ‘Who did it and who authorized it? How high up on the corporate ladder?’”

Behavior Protocol

In his interview with the Journal, Rupert Murdoch said the company isn’t separating its newspaper assets, which also include U.K. tabloid The Sun, the Times of London and the New York Post. The company will establish a “protocol for behavior” for reporters across the company, he said.

Murdoch said his son dealt with the crisis “as fast as he could” and his position at News Corp. is unchanged.

Rupert Murdoch met today with the parents of a murdered schoolgirl whose voice-mail messages were hacked and deleted by News of the World reporters in 2002 while police were still searching for her.

“I said I was appalled to find out what happened,” Murdoch said after meeting the parents of Milly Dowler. “I apologized and I have nothing else to say.”

To contact the reporters on this story: Andrew Harris in Chicago at aharris16@bloomberg.net; Justin Blum in Washington at jblum4@bloomberg.net; Bob Van Voris in Manhattan federal court at rvanvoris@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Mark Silva at msilva34@bloomberg.net

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