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News Corp. Faces Report From U.K. Lawmakers on Cover-Up

News Corp. CEO Rupert Murdoch
News Corp. CEO Rupert Murdoch, right, Wendi Deng, his wife, center, and Lachlan Murdoch, a board member of News Corp., left, are driven by car from their apartment in London. Photographer: Simon Dawson/Bloomberg

Rupert Murdoch said last week he was the victim of a cover-up over phone-hacking at one of his U.K. tabloids. Lawmakers may say tomorrow how far up News Corp. they believe the lies went.

The Culture Committee, a panel of 11 lawmakers, has been working on their report since last July, when Murdoch and his son James were summoned to testify about their roles in the scandal. Both Murdochs in sworn testimony at a U.K. media-ethics inquiry last week blamed underlings for their failure to detect any wrongdoing at the now defunct News of the World newspaper.

With all its hearings and evidence already public, the committee is unlikely to publish any material surprises. The concern for News Corp. executives past and present is how critical the report is of each of them. The Murdochs succeeded last week in shifting scrutiny back to politicians, with an adviser to Culture Secretary Jeremy Hunt resigning for leaking information about a proposed News Corp. deal to executives.

“In political terms, the committee’s work has been somewhat overtaken by events, but the whole world is listening to its conclusions,” said Claire Enders, founder and chief executive officer of Enders Analysis, who advises clients including the U.K. government. “Shareholders, people in the business community and the U.S. Justice Department will all be reading this very closely.”

U.K. telecommunications regulator Ofcom has said it will draw upon the report for its decision as to whether News Corp. is fit to hold a broadcasting license. Ofcom last week asked News Corp. to provide documents from civil cases involving phone hacking as it decides whether the matter has compromised the company’s ability to run the U.K.’s biggest pay-TV broadcaster.

Blaming Underlings

The scandal, which peaked last July after the Guardian newspaper reported that tabloid staff had intercepted the voice mail of a dead schoolgirl, cost News Corp. its bid for the rest of British Sky Broadcasting Group Plc and James Murdoch his chairmanship of that company. He remains deputy chief operating officer of New York-based News Corp. while his father, 81, is chairman and CEO.

Both Murdochs pointed to the paper’s lawyer, Tom Crone, and its editor, Colin Myler, in their appearance last week at the Leveson Inquiry. Myler and Crone told the committee last year they’d informed James when they asked him to sign off on payments to keep victims silent. If the committee clears father and son of direct knowledge, it may still criticize them for “willful blindness” or in James’s case, incompetence.

‘Collective Amnesia’

The committee’s report, to be published tomorrow at 11:30 a.m. in London, will have more impact than its last investigation into phone hacking at the News of the World tabloid, published February 2010.

That document accused the paper’s executives of suffering “collective amnesia” in evidence sessions the previous year, and said it was “inconceivable” they hadn’t known what was happening. The company dismissed it. Rupert Murdoch told the committee last year this report had never drawn to his attention.

That response is one of the areas of “deep regret” James Murdoch admitted to in his two appearances before the committee last year. The “pushback,” he said, “had been too strong.”

The pushback began in July 2009, when the Guardian reported that phone-hacking had gone beyond that one reporter, Clive Goodman, who had been jailed for it in 2007, and the small number of victims named at his trial. It further reported that victims were being paid hundreds of thousands of pounds to settle cases quietly.

Defenses Disputed

The company denied more reporters had been involved. Myler and Crone, summoned before the Culture Committee last September, denied having misled it in 2009. Written evidence later sent to the committee and to the Leveson Inquiry showed that both had been told of exactly such claims. Two years later, when James Murdoch accused them of keeping evidence from him, they replied that they had both known about it and showed it to him.

Myler and Crone’s 2009 session denying widespread hacking is likely to be criticized in tomorrow’s report. Crone, as the lawyer who was working at the paper at the time hacking took place, may face particular censure, as may Les Hinton, the former CEO of Dow Jones & Co.

Some of the defenses offered by James Murdoch as to why he didn’t identify wrongdoing sooner have already been disputed. Parliament’s Home Affairs Committee said last year it was “almost impossible to escape the conclusion” News Corp. “were deliberately trying to thwart a criminal investigation.” That hurt his line that the company had relied upon the police’s probe stopping at a single reporter.

Brooks, Coulson

Likewise Harbottle & Lewis, a firm of lawyers employed by News Corp. to review a selection of e-mails urging an employment dispute, denied the company’s claim that they’d done a thorough investigation into possible wrongdoing at the News of the World.

The committee may feel constrained in what it can say about others who may face trial. Former News International chief executive Rebekah Brooks and Prime Minister David Cameron’s former communications chief Andy Coulson, both editors of the paper when illegality was widespread, have been arrested and may be charged. Both previously denied to the Culture Committee that wrongdoing had gone beyond a single reporter.

The opposition Labour Party’s culture spokeswoman, Harriet Harman, said yesterday that she believed Murdoch should lose his status as a “fit and proper person” to hold a broadcasting license in the U.K. and that News Corp. should thus be stripped of its 39 percent stake in BSkyB.

“I think he’s not a fit and proper person because of what went on in his organisation -- widespread criminality,” she told BBC television’s “Sunday Politics” show.

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

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