Phone Hacking: US Authorities Preparing to Subpoena News Corp
Investigation launced into whether News Corp broke anti-bribery and hacking laws in US
The judicial screws are tightening on Rupert Murdoch's empire in America as the US justice department prepares to subpoena News Corporation in its investigation into whether the company broke anti-bribery and hacking laws on both sides of the Atlantic.
The news that subpoenas are being drawn up, reported by News Corp's flagship newspaper the Wall Street Journal, comes a week after attorney general Eric Holder said he was launching a preliminary investigation into the media group as a result of the UK phone-hacking scandal.
According to the Journal, the subpoenas will be broadly cast to draw information from the company relevant to the investigation, though final approval has yet to be granted by top justice department officials. In addition, it has emerged that federal prosecutors have begun probing allegations that News Corp's advertising arm in the US hacked into a computer of a competitor as part of a campaign to crush its rival.
A lawyer for the smaller company, Floorgraphics, told NBC he was visited by two federal prosecutors and an FBI agent. News Corp declined to comment on the legal moves.
Mary Mulligan, a former federal prosecutor in the southern district of New York that handles many of the big corporate cases of this sort, said there were numerous directions in which the probe of News Corp could go. "This is a complicated investigation, and a very important matter that's being looked into." She said the FBI and other federal agents would be guided by what they found.
"The facts are going to drive any charges that arise – what was accessed, how it was accessed and where."
One specific allegation that the FBI is investigating is whether News of the World journalists tried to access the phone records of 9/11 victims. The claim was raised in the UK's Daily Mirror, though, so far, no solid evidence has emerged to support it. If the accusations are confirmed, News Corp could be susceptible to prosecution under Title 18 USC 2701, involving unlawful access to stored communications, or 2703 and 2704 if the mobile phone messages are found to have been stored on a separate server.
News Corp also faces a possibly lengthy and costly federal probe into whether it broke anti-bribery laws as part of the illegal News of the World phone hacking in the UK.
The company is potentially liable under the Foreign Corrupt Practices Act (FCPA), which bans US-based companies from profiting from bribery and corruption in other countries.
News Corp is a US-based firm, its headquarters on Sixth Avenue in Manhattan.
FCPA experts have suggested that it could be brought under the auspices of the act because News of the World journalists bribed police officers in the UK in search of exclusive stories that in turn increased sales and generated profits.
It is not a defence for News Corp executives to argue that they were unaware of the bribery. Under the FCPA, a company can still be penalised if it should have known – what is called "willful blindness".
News Corp could also come under the scrutiny of the US Securities and Exchange Commission (SEC), which is jointly responsible with the justice department for policing the FCPA.
The SEC will want to know whether News Corp properly declared all its activities in its accounts or whether it tried to hide any bribes made within the UK under false accounting returns.
It is not known precisely what information investigators are seeking from News Corp under the subpoenas, but it could include News of the World accounts which would then be examined by forensic accountants.
News Corp itself seems to be most anxious about the FCPA side of the federal investigations, judging from the legal team it has assembled – some of the heaviest hitters in American legal affairs.
They include Brendan Sullivan, a formidable trial lawyer once described as "the legal equivalent of nuclear war", and Mark Mendelsohn, who used to head the justice department section that decides which FCPA cases to prosecute. He is joined by Michael Mukasey, a former US attorney general, and his legal partner Mary Jo White, who represented Siemens in one of the largest FCPA cases ever.
The Siemens case underlined how serious an FCPA prosecution could be for News Corp. In 2008, the engineering company admitted bribing foreign officials around the world and paid a record $800m (£490m) in settlement. That included $350m in disgorgement – a repayment for the profits it was estimated to have made as a result of the bribery.
No figure exists for how much money News of the World made out of its phone hacking activities. Under the FCPA, a rough calculation would be made which News Corp could be forced to disgorge.