News Corp. Lobbying Endangered BSkyB Bid, Leveson Inquiry Finds

The “intimacy, charm, volume and persistence” of a News Corp. (NWSA) lobbyist’s contacts with the U.K. government could have put the company’s bid for British Sky Broadcasting Group Plc (BSY) into danger, a judge concluded.

In his four-volume report on media ethics published today, judge Brian Leveson said that had the extent of the communication between News Corp.’s Fred Michel and Adam Smith, an aide to then-Culture Secretary Jeremy Hunt, in the first half of 2011 become known, it would have left any government decision to allow the bid open to legal challenge. Smith resigned this year when text messages between himself and Michel were published.

Leveson, who made little criticism of individual politicians in his report, said Hunt had been unwise to ask Smith to liaise with Michel, a situation made worse by “a lack of supervision.” He said Scottish First Minister Alex Salmond had made “wholly inappropriate” arguments in support of the takeover. New York-based News Corp. abandoned its 7.8 billion- pound ($12.5 billion) bid for full control of BSkyB in July 2011 to help contain the phone-hacking scandal at its News of the World tabloid.

“All the effort and good work which was done on the bid was put in jeopardy by a serious hidden problem,” Leveson wrote of the Michel-Smith contacts. He said they would have created “a powerful argument that there was at least the appearance of bias.”

Cameron’s Contacts

The judge said Hunt should have told Cameron about the extent of private contacts he’d had with News Corp. when he was given responsibility for overseeing the takeover at the end of 2010. While Hunt then cut back his contacts, Leveson said he should have told Michel not to communicate with him at all. Hunt was also advised by an official in his department to cancel a meeting for a drink with Andy Coulson, Cameron’s director of communications and the former editor of the News of the World.

“He’s so closely linked to them that if you were seen it wouldn’t look great” while the decision on BSkyB was pending, Hunt’s special adviser Sue Beeby wrote in an e-mail submitted to the inquiry.

Leveson also criticized the culture and governance at News Corp.’s News Of The World, which was closed after the extent of phone-hacking there became clear. He said that far from assisting police during a 2006 investigation, “cooperation, if provided, was minimal.” On one occasion, “when police had sought to execute a warrant, they were confronted and driven off by the staff” at the paper.

“Very serious concerns arise about the governance at the News of the World, the attitude of management and staff to the right to privacy, the attitude of management and staff to the law and the attitude of management to public scrutiny,” Leveson wrote. “The persistent failure of the company properly to investigate allegations that methods of unlawful interception were both widely in use and approved by management within the organization was a significant failure of governance.”

To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net; Thomas Penny in London at tpenny@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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