June 1 (Bloomberg) -- U.K. Prime Minister David Cameron said he backed Culture Secretary Jeremy Hunt over his handling of News Corp.’s bid for British Sky Broadcasting Group Plc last year, rejecting accusations of bias.
During six hours of testimony under oath before a media ethics inquiry in London yesterday, Hunt denied that congratulatory text messages sent to James Murdoch, News Corp.’s deputy chief operating officer, showed he was biased. He then said that with hindsight, he would have avoided such private contacts.
Hunt also said he’d considered resigning over e-mails showing that a close aide was in constant contact with a News Corp. lobbyist during the bid, before deciding the adviser, Adam Smith, should quit instead.
“I had conducted the bid scrupulously fairly throughout every stage and I believed it was possible to demonstrate that, and I decided that it wouldn’t be appropriate for me to go,” Hunt told Judge Brian Leveson’s inquiry. “But it was with an incredibly heavy heart that I decided we didn’t have any choice but to accept Adam’s resignation.”
The prime minister judged Hunt had done enough to save his job in the face of demands from the opposition Labour Party for him to quit. In an e-mailed statement, Cameron’s office said Hunt had “acted properly” and “took independent advice at every turn.” It added that there were “lessons to be learned from this process.”
Hunt’s contacts with James Murdoch were the focus of much of the questioning. “Great and congrats on Brussels,” Hunt told Murdoch, at that stage the head of News Corp. in Europe and chairman of BSkyB, in a text message on Dec. 21, 2010, after the European Union approved the takeover.
It was an important day in the bid process for other reasons. In a phone call that afternoon, Murdoch told Hunt of his outrage at comments by Business Secretary Vince Cable, then conducting the U.K. review, to undercover reporters that he’d “declared war” on Murdoch’s father Rupert, the News Corp. chairman.
Hunt then texted Chancellor of the Exchequer George Osborne saying he was “seriously worried we are going to screw this up.” Osborne replied: “I hope you like the solution!” That turned out to be Cameron stripping Cable of responsibility for oversight of the bid and giving Hunt the job.
The Labour Party has questioned why, if Cable lost responsibility for the bid for being biased against Murdoch, it was passed to Hunt, who had expressed backing for it. Cable is a member of the Liberal Democrats, the junior partners in the ruling coalition with Cameron’s and Hunt’s Tories.
In November 2010, Hunt had tried to set up a meeting with James Murdoch to discuss the bid. When his officials told him this would be inappropriate while Cable was considering it, Hunt had a private phone call with Murdoch instead and then wrote to Cameron arguing for the company’s cause. He told the inquiry that with hindsight, he wouldn’t have done that.
Hunt went on to deny he’d been biased in favor of News Corp.’s 7.8 billion-pound ($12.1 billion) offer, even though he’d expressed sympathy for the bid. He said he relied on the advice of regulators such as Ofcom, which oversees the media.
“I had put aside my policy priorities in this area,” he said. “Media plurality is a much, much higher-order decision. It’s about the health of the democracy. That was my priority.”
He pointed to decisions he’d made in the review that he said had angered News Corp., including referring it to Ofcom. “As far as they were concerned, Ofcom was a bete noir,” Hunt said.
Even when he had “quasi-judicial” responsibility for the takeover, Hunt didn’t completely give up private contact with News Corp. He said he replied to occasional text messages from lobbyist Fred Michel out of politeness. And in March 2011 he texted James Murdoch his congratulations on a promotion to New York. “I am sure u will really miss Ofcom,” he wrote. Asked about that at the inquiry, he explained: “I was pulling his leg.”
News Corp.’s chief concern was to speed up the approval process. By April 2011, it had discovered that phone hacking at its News of the World newspaper, which it previously said was limited to a single reporter, was in fact more widespread. Hunt asked for legal advice on whether he should consider hacking in his review of the deal.
“The one way that phone hacking could impinge was that there was an issue in trust,” he said. “You had to be confident you could trust the people you were doing a deal with.”
Michel expressed a desire to get the deal approved rapidly in communications with Hunt’s aide, Smith. Michel asked Smith on May 29 if the company would be able to get a decision by June 24, which would be “in everyone’s interest,” according to e-mail messages that News Corp. provided to the inquiry. On June 15, he sent another asking, “How do we get things moving?” and complaining that Hunt’s department was moving too slowly.
“We didn’t know that this was a volcano that was about to erupt,” Hunt said. “We were just looking at evidence in the media.”
The eruption came in July, when the Guardian newspaper reported that the News of the World had hacked into the voice mail of a murdered schoolgirl. News Corp. was forced to close the Sunday tabloid, Britain’s biggest-selling newspaper, and withdrew the offer for BSkyB.
Hunt said had he known about the extent of hacking earlier, he would have blocked the bid. “I do not think we would have got so far down the track with the merger given what we now know about corporate malpractice at News International,” News Corp.’s U.K. publishing unit, he said in his written evidence.
The culture secretary said Smith had to quit because he’d acted improperly under pressure from Michel, who sent him hundreds of text messages requesting updates.
“I wish he’d told us about the pressure he was under,” Hunt said.
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