News Corp.’s James Murdoch to Explain Story Holes to Lawmakers in U.K.

James Murdoch’s testimony last month to U.K. lawmakers about phone hacking by News Corp. (NWSA) journalists produced responses that he’d been mistaken, misled or just lied. This week he’s supposed to explain which of those it was, if any.

Murdoch, News Corp. (NWS)’s deputy chief operating officer, has until tomorrow to submit written replies to Parliament in London to respond to former executives of News of the World, a defunct News Corp. tabloid. They said some of his statements were “mistaken.” A former News Corp. law firm may undermine other Murdoch testimony in its responses.

When Murdoch appeared July 19 with his father Rupert before lawmakers, he said he hadn’t realized until late 2010 that more than one reporter had engaged in phone-hacking. Afterwards, Tom Crone, the tabloid’s legal manager, and Colin Myler, its onetime editor, said they told Murdoch in 2008 about an e-mail that suggested more reporters had been involved. They said they told him about it when they asked him to approve a 700,000-pound ($1.1 million) settlement with a phone-hacking victim.

Murdoch’s response to his former employees’ statements will determine whether he will be tarred as a poor manager or worse. Lawmakers’ reaction to it will also probably put the spotlight back on the hacking scandal after News Corp. reports projected positive earnings results after U.S. markets close today.

‘Difficult Position’

“He’s in a very difficult position,” Niri Shan, a media lawyer at Taylor Wessing LLP said of James Murdoch. The new testimony “is just going to draw more attention” to the phone- hacking scandal.

Police today said they arrested a 12th person in their investigation of phone hacking and other activities at the tabloid. Sky News said the 61-year-old man arrested was Greg Miskiw, a former editor at News of the World.

The circumstances surrounding the 2008 payment to victim Gordon Taylor, chief executive of the Professional Footballers’ Association, were the focus of many lawmakers’ questions to Murdoch last month. John Whittingdale, who chairs the committee investigating the scandal, said he’s likely to recall witnesses to resolve current contradictions and that Murdoch, Crone and Myler face further questions.

Murdoch was assisted at the hearing by Executive Vice President Joel Klein, a former assistant U.S. attorney general, and by the interim general counsel, Janet Nova.

‘For Neville’

Murdoch said he agreed to the payment -- more than 10 times the record court award in a privacy case at the time -- on advice of outside counsel. Crone told the committee in 2009 that the company decided to settle after Taylor’s lawyer found an e- mail from a junior reporter to Glenn Mulcaire, the private investigator at the center of the phone-hacking allegations. It was labeled “for Neville.”

The transcript was of 35 voicemail messages left by Taylor and his legal adviser. The text of the transcript was redacted by the committee. At the time of the message, the only Neville working at the tabloid was chief reporter Neville Thurlbeck.

“The bit I still don’t understand is why anybody would pay 700,000 pounds,” said Chris Bryant, a Labour Party lawmaker who is suing the company over phone hacking. “They must have had terrible legal advice or they’re lying. It was money to go away and be quiet.”

Miranda Higham, a spokeswoman for News Corp., declined to comment on any inconsistent statements by Murdoch, who stood by his testimony to Parliament last month after Crone and Myler said he was “mistaken.” Myler declined to comment on the same matter. Lawmakers have asked Crone and Myler to submit statements regarding the settlement.

Culture Committee Meeting

The Culture Committee may meet early next week to decide whether to release the evidence, according to a person familiar with the situation.

News Corp. shut the News of the World last month after a report that its journalists deleted messages from a murdered schoolgirl’s mobile phone. The scandal led to the arrest of former News of the World editors Rebekah Brooks and Andy Coulson. The company also dropped its 7.8 billion pound takeover bid for British Sky Broadcasting Group Plc. (BSY)

Three Opportunities

James Murdoch took over News Corp.’s European newspaper operations in late 2007, after the conviction of the News of the World royal reporter, Clive Goodman, and Mulcaire, of hacking voicemail messages.

The Taylor settlement was the first of at least three opportunities the Murdoch may have had to question whether wrongdoing had been confined to Goodman and Mulcaire. The second was in July 2009, when the Guardian newspaper reported on the Taylor settlement and revealed the “for Neville” e-mail.

At the time, News Corp. denied that the Guardian had revealed any new information or that there was any need for further inquiry.

In February 2010, Whittingdale’s committee released a report on press standards, concluding it was “inconceivable” that only Goodman had known about phone-hacking, that the newspaper’s inquiries had been “far from ‘full’ or ‘rigorous,’” It accused News Corp. witnesses of suffering “collective amnesia.”

‘Not Even Incompetence’

“There was never any real belief at the higher echelons of the company that this merited any kind of looking into,” said Claire Enders, founder and chief executive of media researcher Enders Analysis in London, whose clients include the U.K. government. “That’s not even incompetence; that’s just one event after another being underpursued and people not paying attention.”

Murdoch’s testimony may also be challenged by the law firm he said he relied on to review phone-hacking at News of the World. Harbottle & Lewis LLP, bound to silence by attorney- client privilege, received a waiver from News Corp. to discuss the matter. Murdoch had told the committee a review of e-mails the firm conducted had led to “a clear legal opinion that there was no additional illegality other than the two individuals.”

Ken Macdonald, the former Director of Public Prosecutions, told Parliament’s Home Affairs Committee last month that it took him less than 10 minutes to conclude that the e-mails showed evidence of corrupt payments to police officers, a crime Goodman was never accused of.

No Evidence

Harbottle & Lewis wasn’t asked to do a full audit of News of the World e-mails, instead looking only at those between Goodman and five executives. The law firm said that it could find no “reasonable evidence” that Goodman’s phone hacking was known about or that others were carrying out similar acts.

In an interview last month with his flagship newspaper, the Wall Street Journal, Rupert Murdoch, News Corp.’s chief executive, said the firm had made a “major mistake” in underestimating the scope of the problem.

After his testimony, the younger Murdoch was supported by the board of BSkyB, which last month unanimously backed him to remain as chairman of the satellite television broadcaster.

He was appointed CEO of BSkyB in 2003 and promoted in 2007 to run News Corp.’s television, newspaper and digital operations in Europe, Asia and the Middle East, while becoming non- executive chairman of BSkyB. In March, he took on the role of deputy chief operating officer at News Corp.

Stock Performance

New York-based News Corp. fell 67 cents to $13.88 at 10:23 a.m. in Nasdaq Stock Market trading today. Shares have fallen about 23 percent since news of the phone-hacking scandal broke July 4.

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

Before making his formal explanations to Parliament, James Murdoch’s strongest defense to claims he failed to investigate phone hacking was his reliance on early police investigations. The police in 2009 said they saw no reason to reopen the News of the World probe.

The officer in charge of the 2007 case, Peter Clarke, had a different view of the police reports’ value. He told the Home Affairs Committee last month that News Corp. obstructed his officers.

“This is a global organization with access to the best legal advice -- in my view deliberately trying to thwart a criminal investigation,” Clarke said. “I was as certain as could be that they had something to hide.”

To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net; Ben Moshinsky in London at bmoshinsky@bloomberg.net; Amy Thomson in London at athomson6@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.