March 5, 2021

News Corp. Agrees to $139 Million Settlement With Shareholders

The group asserted News Corporation’s board of directors — led by Rupert Murdoch, the chairman and chief executive — breached its fiduciary responsibility in handling the crisis in Britain.

The lawsuit, filed by Amalgamated Bank, the largest union-owned bank in the United States, which handles large-scale labor and pension funds, also asserted that the company had unethically paid $670 million in 2011 to acquire the Shine Group, the television production company of Mr. Murdoch’s daughter, Elisabeth Murdoch.

News Corporation will not pay any $139 million settlement. Rather, the company will receive a payment from insurance that protects corporate boards from this type of litigation.

“We are proud of this historic settlement,” Edward Grebow, president and chief executive of Amalgamated Bank, said in a statement. The bank’s LongView Funds hold 455,343 Class A common shares of News Corporation.

News Corporation indicated that the settlement would move it one step closer toward distancing itself from the hacking imbroglio that erupted in 2011. “We are pleased to have resolved this matter,” News Corporation said in a statement.

“The agreement reflects the important steps News Corporation has taken over the last year to strengthen our corporate governance and compliance structure,” the statement added.

News Corporation has invested in building a compliance structure that will appease the United States Justice Department ahead of a meeting later this month to discuss phone hacking and bribery at its British papers.

In late June, the company is expected to split off its publishing assets — including its British newspaper arm — into a separate, publicly traded company. Entertainment and television assets like Fox Broadcasting and Fox News will form a separate company called 21st Century Fox.

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British Talks on Press Regulation Break Down

Mr. Cameron’s abrupt move placed new strains on his relationship with the Liberal Democrats, the junior coalition partner with his Conservative Party, and raised the possibility that they may end up voting with the Labour opposition against Mr. Cameron’s proposal for a royal charter to underpin a new self-regulatory body.

Last November, after months of hearings, a long-awaited report on the behavior of British newspapers embroiled in the phone hacking scandal, written by Lord Justice Sir Brian Leveson, recommended that press regulation should be backed by parliamentary statute, curbing Britain’s 300-year-old tradition of broad press freedom.

The Leveson inquiry was established after the hacking scandal came to a head in July 2011. At that time, Mr. Murdoch ordered the closure of The News of the World, a flagship Sunday tabloid, after disclosures of widespread hacking, including the cellphone of Milly Dowler, a kidnapped schoolgirl who was later found murdered.

The crisis led to civil suits, criminal investigations, a parliamentary inquiry and the Leveson hearings — scrutiny that coursed through British public life, exposing previously hidden relationships between the press, the police and politicians.

The affair has cost Mr. Murdoch’s newspapers hundreds of millions of dollars.

Six more journalists who previously worked for The News of the World were arrested in February on suspicion of hacking into cellphone messages, adding to a tally of more than 100 reporters, editors, investigators, executives and public officials implicated in wrongdoing by police units investigating accusations of criminal activity.

The scandal spread on Thursday to the rival Mirror Group, when the police said that four Mirror journalists had been arrested on suspicion of “conspiracy to intercept telephone communications.” The journalists were not identified by name. Scotland Yard said they included three men aged 40, 46 and 49 and a 47-year-old woman who were arrested in south London.

When the Leveson inquiry published its report calling for statutory underpinning to a new press watchdog, Mr. Cameron opposed the idea while Labour supported it.

Instead, Mr. Cameron proposed that a new self-regulatory agency with the power to fine newspapers and take other measures to support victims of press intrusion into their privacy should be supported by a Royal Charter, a device used to give authority to and define the rights of major institutions like the British Broadcasting Corporation and the Bank of England.

Mr. Cameron plans to call a vote on his proposal in Parliament on Monday, but Liberal Democrat officials said it was unclear how the junior coalition partner would vote. The Press Association news agency quoted Liberal Democrat officials as saying Mr. Cameron called off the talks with their leader, Nick Clegg, and the Labour opposition leader, Ed Miliband “unilaterally.”

“We were very surprised and disappointed,” an unidentified Liberal Democrat official was quoted as saying. “We thought we were making real progress and inching toward a deal, but the Prime Minister has unilaterally decided to pull the plug on cross-party talks.”

At a news conference on Thursday, Mr. Cameron said his proposal would create “the toughest regulation of the press that this country has ever seen.”

Newspapers, he said, would refuse to accept regulation by parliamentary statute — an idea supported by Labour, the Liberal Democrats and privacy campaigners.

“There’s no point in producing a system that the press won’t take part in,” Mr. Cameron said. “As prime minister, I wouldn’t be fulfilling my duty if I came up with something knowing that it wouldn’t work.”

Referring to Sir Brian, the author of last November’s report, Mr. Cameron said: “The route I have set out is the fastest possible way to deliver the strong self-regulation body that Leveson proposed that can put in place million-pound fines, prominent apologies and get justice for victims in this country.”

“The deal is there to be done, it is the fastest way to get proper justice for victims,” Mr. Cameron said.

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Media Decoder Blog: News Corp. Posts Gain on Strength of Cable Channels

8:54 p.m. | Updated Strong growth at News Corporation’s cable channels FX, Fox News and regional sports networks helped the company more than double its net income in the three-month period that ended Dec. 31, offsetting lingering costs related to a phone-hacking scandal and the cost of a planned split of the media conglomerate into two publicly traded companies.

On Wednesday, News Corporation reported net income of $2.38 billion, or $1.01 a share, compared to $1.06 billion, or $0.42 a share in the same three-month period a year earlier. The gains rested largely on an 18 percent increase in revenue at the company’s cable network segment. Over all, revenue rose 5 percent to $9.43 billion.

In a conference call with analysts, Chase Carey, News Corporation’s president and chief operating officer, said the company would complete its separation into two companies by the end of fiscal 2013. Fox Group will include the company’s cable channels, 20th Century Fox studio and Fox Broadcasting. The company’s newspapers, including The Wall Street Journal and The New York Post, its Harper Collins book publishing unit and a suite of Australian pay-TV assets will make up a new, slimmed-down company called News Corporation.

The company’s second-quarter results highlighted how disparate Rupert Murdoch’s media empire has become — with its cable channels making up more than 60 percent of the company’s overall profit. Its publishing business, while stronger than last year, continues to face industrywide headwinds.

News Corporation has faced struggles at its British tabloids, which have been the subject of a continuing investigation into phone-hacking and bribing of public officials. The costs associated with the scandal appeared to have temporarily waned. The company’s gains on Wednesday were partly offset by the $56 million spent on investigations related to the closure of News of the World, compared to $87 million spent in the same period of 2011.

Over all, the publishing division reported modest improvements from the same period last year, which Mr. Carey attributed in part to the transformation to digital storytelling The introduction of the Sunday edition of The Sun in Britain contributed to a $16 million increase in operating income to $234 million. Advertising revenue at the company’s Australian newspapers continued to drag on the division.

But the real driver of News Corporation’s growth came from its cable channels, which reported operating income of $945 million, a 7 percent increase from the previous year. The company continues to invest in sports rights, including a deal with the Ultimate Fighting Championship.

Mr. Carey called speculation about News Corporation introducing a cable sports channel that could compete nationwide with ESPN “the world’s worst-kept secret,” but declined to comment on when that channel might make its debut. “Almost everywhere we’ve invested in sports around the world it has been not just important, but a cornerstone,” he said.

Mr. Carey also emphasized the importance of investment in original programming like the anthology series “American Horror Story” and “The Americans,” a spy drama on FX that last week became the channel’s highest-rated drama premiere.

Affiliate revenue at the cable channels spiked 13 percent at domestic channels and 42 percent at the company’s international channels. Advertising revenue at the domestic cable channels grew 8 percent compared to a year earlier. “Our domestic cable business continued to hit every target we set and execute superbly,” Mr. Carey said.

Broadcast television didn’t fare as well. Sluggish ratings in the fall season at Fox Broadcasting contributed to lower national advertising revenue.

Fox reported a 19 percent increase in operating income, because of retransmission consent agreements with cable and satellite operators and an increase in local political advertising. Mr. Carey said he was “disappointed” in ratings for the singing competition series “The X Factor” and hoped the show would gain momentum. “At the Fox Network it has been no secret that we had a tough fall,” he said, emphasizing that he would stick with the network’s current management team.

The company’s movie division racked up critical and box office successes in “Lincoln” and “Life of Pi,” which has grossed over $500 million worldwide. “Taken 2″ also helped the division in the second quarter, bringing in $375 million in worldwide box office revenue. Still, the film division’s operating income fell slightly to $383 million, compared with $393 million in the same period a year ago.

In a statement, Mr. Murdoch, chief executive and chairman of News Corporation, said the company “seized opportunities to invest in our core businesses for long-term and sustainable growth.” He added: “As we make progress toward the proposed separation of our entertainment and publishing businesses later this year, I am confident in the future prospects for both businesses.”

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Media Decoder Blog: Murdoch Publishing Wing Shows Loss of $2.1 Billion

Potential investors got a glimpse of the financial challenges that Rupert Murdoch’s soon-to-be spun-off publishing company could face. In a regulatory filing, News Corporation said its publishing businesses lost $2.1 billion in the fiscal year that ended June 30.

The disclosure was filed to the Securities and Exchange Commission on Friday, as the media conglomerate prepares to split its publishing assets from its more lucrative entertainment segments. The new, stand-alone company will retain the name News Corporation and include newspapers like The Wall Street Journal, The New York Post and The Times of London; the HarperCollins book publisher; and a handful of fast-growing Australian pay-television assets.

The entertainment company, which will be called the Fox Group, will include 20th Century Fox studios, Fox Broadcasting and cable channels like Fox News and FX. That company has annual revenue of more than $23 billion.

The losses in the publishing business came largely from $2.8 billion in impairment and restructuring charges, mostly related to the closure of The News of the World tabloid in Britain, which was shut down in July 2011 after revelations of widespread phone hacking. Revenue at the publishing business fell to $8.65 billion in fiscal year 2012, from $9.1 billion a year earlier.

The S.E.C. Form 10 filing moves the company closer toward the split and gives shareholders a better idea of what the stand-alone publishing company, called “New News Corporation” in the report, will look like financially when the spinoff is completed in mid-2013.

The company warned investors that “newspaper and advertising circulation revenues have been declining, reflecting general trends in the newspaper industry.” In addition to industrywide headwinds, the company said illegal activity at its British newspapers “could damage New News Corporation’s reputation and might impair its ability to conduct its business.”

As additional civil lawsuits related to phone hacking are filed in Britain, News Corporation said it “is not able to predict the ultimate outcome or cost associated with these investigations.”

The fallout from the phone hacking scandal, and an investor base that increasingly expressed disapproval of the newspaper business, prompted Mr. Murdoch to announce the split of his $60 billion media conglomerate in June.

“The filing of the Form 10 is another important step forward in the evolution of our company and in the establishment of two independent global leaders in Fox Group and the new News Corporation,” said Mr. Murdoch, who serves as chairman and chief executive of the combined News Corporation.

Earlier this month Mr. Murdoch said Robert Thomson, a confidant and the former managing editor at The Wall Street Journal, would serve as chief executive of the new News Corporation. Mr. Murdoch will continue to serve as chairman of both companies and chief executive of the Fox Group.

In his new role Mr. Thomson, 51, will have a base salary of $2 million with a performance-based $2 million bonus, according to the filing.

In addition to hundreds of newspapers on several continents, the publishing company will also include Australia’s; Fox Sports in Australia; 50 percent of Foxtel, the No. 1 pay-TV provider in Australia; and 44 percent of Sky Network Television in New Zealand. Analysts expect those businesses to drive profits and support some of the weaker newspapers.

Fox Sports had revenue of $3.6 billion and Foxtel of $2.5 billion in 2012. Those results were not included in the publishing company’s 2012 earnings, but will contribute to the new company’s bottom line.

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Media Decoder Blog: Tom Mockridge Will Leave News Corp. Unit in Britain

Tom Mockridge, a longtime News Corporation official who served as chief executive of the company’s British newspapers in the aftermath of a phone hacking scandal, will step down.

Mr. Mockridge announced on Sunday that he would leave his post at the end of year. The day before, reports emerged that Robert Thomson, currently the top editor at The Wall Street Journal, was expected to be named chief executive of News Corporation’s planned spinoff publishing company. Mr. Mockridge and Mr. Thomson had long been considered the top candidates for the chief executive job. An announcement about Mr. Thomson’s appointment was widely expected by Monday or Tuesday.

Rupert Murdoch, chairman and chief executive of News Corporation, called Mr. Mockridge “a skilled executive and a trusted friend” and said his decision to step down was “absolutely and entirely his own.”

Mr. Mockridge stepped into the role of chief executive of News Corporation’s British publishing unit, News International, last July. He served as a steady hand at a time of corporate crisis. His predecessor as chief executive, Rebekah Brooks, and other top News International executives became the subject of an investigation into phone hacking at the News of the World tabloid.

More recently, Mr. Mockridge has been active in the recently completed Leveson Inquiry into media practices in Britain. Several top lieutenants within the company thought Mr. Mockridge’s time overseeing the company’s embattled British newspaper unit would pay off with his appointment as chief executive to the larger, spun-off publishing company, which will include The Journal, The New York Post and HarperCollins.

Born in New Zealand, Mr. Mockridge joined News Corporation in Australia in 1991. In a news release, News Corporation said he planned to “pursue outside opportunities.”

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DealBook: News Corp. Shareholders Slap Down Murdoch’s Sons

Rupert Murdoch and his son James appearing before a committee in the British Parliament in July that was investigating the News of the World phone-hacking scandal.Press Association, via European Pressphoto AgencyRupert Murdoch and his son James appearing before a committee in the British Parliament in July that was investigating the News of the World phone-hacking scandal.Lachlan MurdochPaul Hackett/ReutersLachlan Murdoch

The News Corporation’s independent shareholders voted largely against reinstating Rupert Murdoch’s sons James and Lachlan to the company’s board, according to a tally the company filed with the Securities and Exchange Commission on Monday.
Although the Murdoch family’s control of a large percentage of voting shares all but guaranteed that all 15 board members would be re-elected after a contentious shareholder meeting on Friday, the detailed tally showed widespread opposition to the roles of James and Lachlan Murdoch.

Investors also voted heavily against Natalie Bancroft, an aspiring opera singer and socialite, and Andrew S. B. Knight, a former News Corporation executive who serves as the head of the board’s compensation committee.

The results of Friday’s vote were not expected to have a significant impact on the company’s leadership since the Murdoch family controls 40 percent of voting shares. And Prince Walid bin Talal of Saudi Arabia controls about 7 percent of voting shares; he has publicly backed the Murdochs and their management.
Still, James, the company’s deputy chief operating officer, has come under increased scrutiny in recent months as the News Corporation’s British newspaper unit deals with a phone-hacking scandal at its now shuttered News of the World tabloid. He was re-elected with 433 million votes, or 65 percent of the total.

His brother Lachlan received 440.9 million votes, or approximately 66.3 percent.

Ms. Bancroft, who joined the board after the acquisition of her family’s company Dow Jones Company, was re-elected with 66.4 percent of the vote, while Mr. Knight received 67.7 percent.

And while Rupert Murdoch, the company’s chief executive, easily held onto his additional position as chairman, he was re-elected with 84.4 percent of the vote, one of his lowest approval rates in years. Chase Carey, the News Corporation’s chief operating officer and a likely successor to Mr. Murdoch, fared better by having garnered 90.5 percent of the vote.

The News Corporation scored some victories, to be sure. Its two newest directors, the former New York City schools chancellor Joel I. Klein and the venture capitalist James W. Breyer, were elected with more than 96 percent of the vote.

And a floor proposal to prevent Mr. Murdoch from serving as both chairman and chief executive failed spectacularly: Just 0.22 percent of votes cast were in favor of the initiative.

Still, such a significant vote against James and Lachlan Murdoch could eventually impact the future makeup of the company, analysts said. Until The News of the World scandal broke open this summer, James had been seen as a likely candidate to take over for his father.
“Shareholders can send a message that the company has to heed,” said Doug Creutz, a senior research analyst at the Cowen Group.

In an interview ahead of the shareholder vote, he pointed to a 2004 campaign by several thousand shareholders to oust Michael Eisner from his chief executive post at the Walt Disney Company. Not long afterward, he was replaced by Robert A. Iger.

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World Briefing | Europe: News International Knew of Broader Hacking in 2008, Lawmakers Are Told

Julian Pike, a partner at the law firm Farrer and Co., said he knew the company’s claim that the practice was limited to one “rogue reporter,” was untrue but admitted that he “had not done very much,” with the information, as he was not obliged to reveal it. He insisted that he was “not party to any cover-up.”

The company eventually admitted to wider wrongdoing early this year, and shuttered the newspaper this summer amid a cascade of revelations. But the company was told in 2008 that three other journalists at the tabloid had been involved, Mr. Pike told a committee of lawmakers gathering evidence on a scandal that continues to pervade a wide swath of British life. 

The committee will take evidence from Mr. Murdoch’s former chief lieutenant, Les Hinton, next Monday, and has said it will likely call Mr. Murdoch’s son James to give further evidence later this year. Both men face allegations, which they vehemently deny, that they were complicit in covering up phone hacking.

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News International Knew of Broader Hacking in 2008, Lawmakers Told

Julian Pike, a partner at the law firm Farrer and Co., said he knew the company’s claim that the practice was limited to one “rogue reporter,” was untrue but admitted that he “had not done very much,” with the information, as he was not obliged to reveal it. He insisted that he was “not party to any cover-up.”

The company eventually admitted to wider wrongdoing early this year, and shuttered the newspaper this summer amid a cascade of revelations. But the company was told in 2008 that three other journalists at the tabloid had been involved, Mr. Pike told a committee of lawmakers gathering evidence on a scandal that continues to pervade a wide swath of British life. 

The committee will take evidence from Mr. Murdoch’s former chief lieutenant, Les Hinton, next Monday, and has said it will likely call Mr. Murdoch’s son James to give further evidence later this year. Both men face allegations, which they vehemently deny, that they were complicit in covering up phone hacking.

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London Police Relent on Demand for Reporters’ Sources in Hacking Scandal

In a statement, police officials said they had consulted the Crown Prosecution Service, which would be responsible for pursuing the case in the courts if it were to go ahead, and that the agency had asked for more information. As a result, police officials had decided to delay a decision on how to proceed.

But this “does not mean that the investigation has concluded,” the statement said. “We have agreed with the C.P.S. that we will work jointly with them in considering the next steps.”

The prospect of reporters being forced to reveal their sources has led to outrage across the British news media, even from some of the Guardian’s bitterest rivals.

“We greatly welcome the Met’s decision to withdraw this ill-judged order,” the Guardian’s editor, Alan Rusbridger, said.

The apparent reversal is highly embarrassing for the police. Last week, they said they would seek a court order to force the Guardian to reveal, among other things, the sources for its articles about how The News of the World tabloid illegally intercepted the voice mail messages of a girl who was kidnapped and then murdered.

The Guardian’s initial article about the girl, Milly Dowler, generated widespread revulsion and started a chain of events leading to the closure of the newspaper, part of Rupert Murdoch’s media empire. News International, Mr. Murdoch’s British newspaper arm, reportedly has offered the Dowler family about $3.2 million, with an additional payment of about $1.6 million to go to charity, in compensation.

Angry that the Guardian had obtained information about the Dowler case, the police decided to find out who had provided it. In August, a senior officer from Operation Weeting, the police phone-hacking investigation, was arrested on suspicion of disclosing unauthorized information in violation of Britain’s Official Secrets Act. He has not yet been formally charged but has been suspended from his job.

A Guardian reporter, Amelia Hill, was also questioned by the police in connection with the possible leak.

In their statement explaining why they had apparently changed their mind about pursuing the Guardian, the police said that “there was no intention to target journalists or disregard journalists’ obligations to protect their sources.” They were instead “gathering any evidence” about how the material had been obtained by the paper, they explained.

“It is not acceptable for police officers to leak information about any investigation, let alone one as sensitive and high profile as Operation Weeting,” the police said.

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James Murdoch’s Testimony on Hacking Is Challenged by Ex-Officials

The two former executives said at a parliamentary hearing that they had informed James Murdoch, chief of News Corporation’s European and Asian operations, at a 15-minute meeting in London in 2008 that the hacking of voice mail as a reporting tool went beyond the work by a lone “rogue” reporter and a private investigator that the company had acknowledged at the time. The men said they had conveyed that message as part of a plan to win Mr. Murdoch’s backing for a record $1.4 million settlement that bound a hacking victim to silence about his case.

The former executives — Tom Crone, former legal manager for the Murdoch-owned newspapers in Britain, and Colin Myler, former editor of the now-defunct News of the World — said the settlement had been intended to avoid millions in legal costs, but several members of Parliament suggested that it was part of a cover-up intended to buy the hacking victim’s silence and prevent the scandal from spreading.

The committee on culture, media and sport, which had summoned Rupert and James Murdoch to a hearing in July, said it would meet again to decide whether to call James Murdoch back for additional questioning. Committee members have said that they will focus on determining whether he testified truthfully in July when he said that there was no indication at the 2008 meeting of a pattern of wrongdoing at The News of the World, which was closed as a result of the scandal.

James Murdoch, who has denied that he was told that the hacking involved more than a single case that resulted in two men’s going to jail in 2007, almost immediately disputed the former executives’ testimony to the committee on Tuesday. In a statement, he rejected the assertions by Mr. Crone and Mr. Myler that they had told him of an internal e-mail from the tabloid’s archive — one showing that the phone hacking had been more widespread and posed a far more serious threat financially and legally — that justified a payout that would serve to contain the damage.

The meeting in 2008 has emerged as a turning point in the saga that has embroiled Britain’s news media, politicians and the police. Months of disclosures have damaged Prime Minister David Cameron, who hired a former News of the World editor as his communications chief, only to see him resign and undergo questioning as one of 15 editors, reporters and private investigators arrested in the case. The scandal prompted the resignation of the Scotland Yard commander who was Britain’s top police officer, after disclosures about his ties to the Murdoch hierarchy; and forced Rupert Murdoch to shut down The News of the World after 168 years of publication.

For Rupert Murdoch, 81, who presides over one of the world’s most powerful news organizations, the scandal has posed a more personal threat. James Murdoch, 38, has been fighting for his corporate survival, in the face of deep unease among powerful News Corporation investors. Whether James Murdoch, long considered his father’s corporate heir, can survive may depend on what the parliamentary and police inquiries reveal in the months ahead about his stewardship of the British papers as the phone hacking scandal grew.

The dimensions of the affair were captured in a closing exchange at the parliamentary hearing, when one of the lawmakers quoted from an e-mail he said had been sent anonymously to committee members by somebody who had once worked at a senior level in News International in which the writer spoke of the possibility that “a global empire could be blown apart” by the scandal. As matters stand, whether James Murdoch can withstand the mounting pressures appears to hinge, more than anything, on the differing accounts of the 2008 meeting, and what it reveals of his willingness to confront the scope of the illegal practices.

John F. Burns reported from London, and Alan Cowell from Paris. Ravi Somaiya contributed reporting from London.

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