News Corp. Evidence of Obstruction Mounts Amid James Murdoch’s Resignation

Before Rebekah Brooks was arrested last year over her role in the News Corp. (NWSA) phone-hacking scandal, she staved off a police threat of obstruction charges related to the company unit she headed, according to two people familiar with the matter.

Based on a perceived lack of cooperation last April, Scotland Yard officials warned they would arrest Ian Burton, the lawyer Brooks retained to handle all police interactions with her unit, News International. Brooks, then the unit’s chief executive, defused the threat by sending two emissaries to Sue Akers, the director in charge of the police probe. They assured Akers the company would cooperate fully, the people said.

Court records and interviews with people briefed on the hacking investigation indicate the showdown between Brooks and Scotland Yard is just one episode in a persistent, five-year effort to contain the scandal in a manner the police and a U.K. judge have called obstructive.

“They are to be treated as deliberate destroyers of evidence,” said High Court Judge Geoffrey Vos at a Jan. 19 hearing in London at which the company announced it had settled 36 cases involving hacking victims.

Three months after the April police threat, Brooks was arrested on suspicion of corruption and conspiring to intercept communications. At that point, the company mounted an aggressive campaign to help the police identify any examples of illegal behavior.

Photographer: Chris Ratcliffe/Bloomberg

James Murdoch, News Corp.'s chairman for Europe and Asia, at the Digital Life Design (DLD) conference in Munich. Close

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Photographer: Chris Ratcliffe/Bloomberg

James Murdoch, News Corp.'s chairman for Europe and Asia, at the Digital Life Design (DLD) conference in Munich.

Latest Disclosure

The latest disclosure in a series, made last week, involved a 2006 e-mail that detailed hacking at News of the World, the Sunday tabloid the company shut in response to the scandal. It showed Brooks, while editor of another News Corp. tabloid, The Sun, had been told by police that hacking victims were more widespread than the New York-based media company had admitted -- and included Brooks herself.

The e-mail, sent between two News of the World managers, suggests that from the beginning of the phone-hacking scandal, there was a conspiracy among senior executives to deceive the police and a separate, parliamentary probe into phone hacking.

The most significant of the revelations involves James Murdoch, the former News International executive chairman who, until last August, was widely considered to be the heir apparent to his father, Rupert Murdoch, as chief executive of News Corp.

E-Mail Deleted

In January of last year, eight days after police asked a News International tabloid to turn over any new evidence related to alleged voice-mail hacking, the company deleted a potentially incriminating e-mail from James Murdoch’s mailbox.

The younger Murdoch, currently deputy chief operating officer of News Corp., gave up his title as executive chairman of News International last week.

According to Linklaters LLP, the London law firm coordinating the company’s inquiry into alleged criminal behavior at News International, the deletion of James Murdoch’s e-mail files was part of a “stablisation and modernisation programme” put in motion by the company’s information technology department in January of last year.

The Murdoch e-mail was deleted 11 days before London police opened a new investigation into phone hacking at News International, a coincidence reported by The New York Times.

News International had asked HCL Technologies, a database management firm, about the possibility of “truncating a database” during the same month. HCL said in a letter to Parliament that it wasn’t able to fulfill the request.

The Plan

News International proceeded with its e-mail “stabilisation” plan until late January, when the police opened Operation Weeting, its current probe into phone hacking. At that point, the company halted its purge, according to a person briefed on the matter.

Earlier this year, a U.K. newspaper, the Guardian, reported that News International had sent out a directive on Jan. 12, 2011 -- three days before the deletion -- asking that employees retain their e-mails. News International spokeswoman Daisy Dunlop declined to comment on the Guardian report.

A hard copy of the deleted e-mail was subsequently discovered in the files of former News of the World editor Colin Myler. The note, from 2008, relayed to James Murdoch a lawyer’s warning that a union official suing the company was eager for the opportunity to demonstrate that phone-hacking was “rife” at News of the World, and not limited to a single “rogue” reporter, which had been the company’s official position.

Not Aware

Murdoch told Parliament on two occasions last year that he had never been made aware that phone-hacking was widespread at News of the World while he was chief executive of News International from 2007 to 2009.

After the note was discovered in December, Murdoch wrote to Parliament, saying he was confident he didn’t review the full e- mail at the time, given his quick response to it and the likelihood that he had received the message on his BlackBerry.

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

Parliament may issue a report as early as this month on its probe into phone-hacking at Rupert Murdoch’s U.K. tabloids. Its last report on the topic, from 2010, expressed exasperation at what lawmakers described as “collective amnesia” on the part of News International’s top management.

Based on disclosures since the last report, the forthcoming one will probably be even more critical of James Murdoch, Brooks and other senior News International executives who testified last year before the House of Commons’ select committee on culture, media and sport.

Other Probes

In addition to the parliamentary inquiry, News International is the subject of three separate criminal probes involving phone hacking, bribery of police officers and computer hacking. News International is also in the process of settling civil cases brought by celebrities and other public figures who claim their voice-mail accounts were regularly hacked.

Judge Vos admonished the company in open court in January over what he described as an intentional effort to delete e- mails pertaining to phone hacking.

In addition to his accusations about destruction of evidence, he ordered several laptops that had escaped scrutiny to be examined. The judge said they might contain clues as to why so many of the company’s e-mails were deleted as victim lawsuits against News International piled up.

The company is also center stage in the Leveson Inquiry, a London tribunal led by Judge Brian Leveson. He is charged with looking into the ethics of the media in the U.K.

Read Aloud

It was at this inquiry on Feb. 27 that the e-mail about Brooks’ knowledge of phone hacking in 2006 was read aloud. It was sent in September of that year by Tom Crone, an in-house lawyer, to Andy Coulson, who was at that time editor of News of the World.

Crone wrote the note a month after the arrest of Clive Goodman, the Royal Family reporter whose arrest for hacking kicked off the scandal. At the time, the police were trying, unsuccessfully, to get News International to give them access to Goodman’s files.

The reporter and Glenn Mulcaire, a private investigator who did contract work for News of the World, were charged with the illegal interception of voice mails belonging to members of the Royal Family and their staff.

The e-mail begins: “Here’s [what] Rebekah told me about info relayed to her by cops.”

Police Plan

According to the e-mail, a police representative had informed Brooks that phone-hacking victims extended beyond members of the Royal Family, which was the cause of the original investigation. The police were intent on bringing the case to trial, “to demonstrate the scale” of the phone-hacking effort.

Prosecutors never got the opportunity to present “the full case” because the two men charged, Goodman and Mulcaire, pleaded guilty.

In December, an outside lawyer who reviewed a cache of e- mails in 2007 between Goodman and five editors, including Coulson, expressed surprise at the “active involvement” displayed by News of the World editors in Goodman’s case.

The lawyer, Lawrence Abramson, who reviewed the e-mails when he was at the Harbottle & Lewis LLP law firm, testified at the Leveson inquiry that Goodman’s editors were “trying to influence the way the prosecution was being conducted -- or the way the defense was being conducted.”

“And there is one e-mail that’s been redacted that I thought would not reflect well on…” Abramson continued, before being stopped because his testimony was straying into areas under criminal investigation.

Coulson Blamed

The emergence of evidence suggesting Brooks’ awareness of the scope of phone-hacking comes at a time when she is under increased scrutiny.

Until last summer, blame for phone hacking had attached to Coulson, her successor at News of the World. In 2003, Brooks became editor of The Sun, which kept her clear of suspicion in phone hacking issues that arose in 2005 and 2006.

Her position has changed in recent months, as the police have arrested 10 current and former journalists from The Sun in connection with the widespread payment of police officers and other public officials for information.

Cheryl Carter, Brooks’ longtime personal assistant, was arrested on Jan. 6, on suspicion of attempting to pervert the course of justice.

At the Leveson inquiry last week, Deputy Assistant Commissioner Akers testified that Scotland Yard had uncovered a “network of corrupt officials” who had received payments from journalists at The Sun.

Culture of Bribes

“There also appears to have been a culture at the Sun of illegal payments, and systems have been created to facilitate those payments, whilst hiding the identity of the officials receiving the money,” Akers added.

David Wilson, Brooks’s spokesman, declined to comment on the police investigation.

A year ago, Brooks was in charge of the relationship between News International and Scotland Yard. Beginning in January 2011, when Operation Weeting was started, she wouldn’t let Akers or her detectives deal directly with executives at News International, according to Akers’ testimony before Parliament last summer. Scotland Yard had to put in requests for information with BCL Burton Copeland, the outside law firm.

From the start, Akers asked the company to turn over all internal reports and inquiries related to phone hacking, according to an executive familiar with the matter. That request covered some 2,500 e-mails reviewed in 2007 and sent to the law firm of Harbottle & Lewis.

Missing E-Mails

On March 24, Burton Copeland requested the documents from Harbottle. A week later, the file was delivered to News International’s office in Wapping. Brooks’s newly hired deputy, William Lewis, saw that it contained only about 100 e-mails. He and another new hire, Simon Greenberg, asked the IT department to reconstruct the rest of the package.

Meanwhile, it was clear that the 100 or so e-mails that News International had in hand were damaging. One was a note from Coulson, former editor of News of the World, to Goodman, complaining about the amount of money it would take to bribe a police official to get a copy of the phone numbers of Royal Family staff members.

After leaving News International in 2007 because of the Goodman case, Coulson was hired as a communications adviser to David Cameron, who became the U.K.’s prime minister in 2010.

The Threat

On April 14, the police arrested James Weatherup, an editor from News of the World. Burton Copeland removed some of Weatherup’s work-related possessions from News International before the police arrived, transferring them to its own offices.

Akers threatened to arrest Ian Burton, a principal at the law firm, and bring obstruction of justice charges, according to two people briefed on the matter, unless News International began to cooperate.

Brooks dispatched her two deputies, Lewis and Greenberg, to meet face-to-face with Akers and bear the brunt of her anger, said three people with knowledge of the matter.

Akers lectured the men about the importance of dealing directly with News International executives instead of a law firm. Lewis and Greenberg assured her that going forward, the company would cooperate completely.

A few days later, Brooks hosted a videoconference to update two colleagues at News Corp. headquarters in New York: Lon Jacobs, then the general counsel, and Joel Klein, chief executive of News Corp.’s education division, who was advising News Corp. chief executive Rupert Murdoch on the matter.

James Murdoch attended in London, along with Burton, Dan Tench, a lawyer from the firm Olswang, Lewis and Greenberg.

Scotland Yard

Klein and Jacobs had already heard about Akers’s anger over the removal of Weatherup’s possessions, according to two attendees who asked not to be identified. Brooks assured the men that Lewis and Greenberg had put things right with Scotland Yard and that Akers was no longer “mad” at News International.

After learning about the Harbottle file and the e-mail involving Coulson and payments to police officers, Jacobs asked whether Coulson would be arrested, according to two attendees. Brooks said that was likely.

Wouldn’t Coulson’s arrest be a problem for the company? Jacobs asked. Brooks dismissed his concern, saying Coulson’s arrest was much more likely to be a problem for David Cameron.

Coulson was arrested three months later.

Brooks herself came under fire in early July after the Guardian revealed that journalists working for her in 2002, when she was editor of News of the World, had sanctioned the hacking of a cell phone belonging to a 13-year-old schoolgirl who had been abducted and murdered.

New Cooperation

Brooks resigned from News International on July 15, a week after Coulson’s arrest. Two days later, she was arrested, questioned and released, pending charges.

Following the July 4 revelations about the murdered schoolgirl, News Corp. committed itself to full cooperation with the police. Murdoch named Klein, a former Justice Department prosecutor, to head up a management and standards committee (MSC), comprised of Lewis, Greenberg and Jeff Palker, general counsel for the company’s operations in Europe and Asia.

The committee is answerable to News Corp. headquarters in New York, and has no formal ties to the U.K. subsidiary. In her testimony last week, Scotland Yard’s Akers endorsed the committee’s efforts, as well as its independence.

“The fact that we are dealing with the MSC directly and not News International I think should make any contention that it isn’t independent without foundation,” Akers said.

News Corp.’s cooperation with Scotland Yard has come at a price. Journalists at The Sun have criticized the committee and complained that its willingness to turn over internal communications has jeopardized confidential sources.

The level of animosity towards the committee reached such a point last month that Rupert Murdoch came to London to express his commitment to the tabloid and its reporters. He spent much of February in London directing the launch of a new Sunday edition of The Sun, filling the News of the World void.

To contact the reporter on this story: Greg Farrell in New York at gregfarrell@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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