Pressure mounting in US for a full-scale inquiry into News Corporation under the Foreign Corrupt Practices Act.

Piers Fawkes, PSFK
  • 18 july 2011

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This article titled “News Corp faces global investigation into bribery” was written by Ed Pilkington and Dominic Rushe in New York, for The Guardian on Monday 18th July 2011 18.18 UTC

News Corporation faces a global investigation of all its businesses to ascertain whether they engaged in the same acts of bribery revealed to have taken place in the UK between News of the World reporters and police.

With pressure mounting in the US for the launch of a full-blooded inquiry into News Corporation under the Foreign Corrupt Practices Act (FCPA), the daunting consequences of such a move are becoming evident. Mike Koehler, a law professor at Butler University who is an expert in the act, said a costly and expensive worldwide investigation into possible bribery activities on the part of the company’s subsidiaries in America, Australia, Europe, India and China was now almost inevitable.

“Once the US authorities have started investigating the UK phone scandal, their next question is where else?” he said.

A full-scale FCPA investigation could also see News Corporation forced to hand over to US authorities its most sensitive legal documents, even those covered by lawyer-client privilege. US investigators have the right to call for a waiver to the privilege in order to obtain key documents including witness statements and all legal advice given to the company.

The US attorney general, Eric Holder, has confirmed that a preliminary investigation is under way into News Corporation’s activities.

Several members of Congress have called on the justice department to launch investigations under the FCPA and anti-phone-hacking legislation, and Holder said he was “progressing in that regard using the appropriate federal agencies in the United States”.

It is too early in the proceedings to know precisely in which direction the justice department will take its investigation, or possibly multiple investigations. A justice department spokesman said: “Any time we see evidence of wrongdoing, we take appropriate action. The department has received letters from several members of Congress regarding allegations related to News Corp and we are reviewing those.”

Experts in US company law believe it is increasingly likely that an FCPA inquiry will now follow. The law was introduced in the 1970s to penalise US-based companies from profiting from the spoils of bribery and corruption in other countries.

Brad Simon, a white-collar defence lawyer with Simon and Partners who has represented several FCPA defendants, said the spate of resignations in the UK, including those of two of the most senior police officers in the country, would boost the case for an full-blown investigation.

“The US justice department traditionally responds to fast-breaking news developments and the fact that there have been resignations and arrests in the UK make it more likely than not that the US authorities will pursue this matter,” he said.

In anticipation of any legal action, Rupert Murdoch has begun assembling a crack legal team to represent him before the US authorities, suggesting he is readying himself for a bitter legal battle in America as a result of the phone-hacking scandal.

At the centre of the team is Brendan Sullivan, one of America’s most experienced lawyers, who during 40 years in litigation has acquired a reputation for taking on difficult and sensitive cases. He represented Oliver North, the US marine corps officer, in congressional hearings over the Iran-Contra affair.

At the time of the hearings in 1987, Sullivan was described by the Washington Post as “the legal equivalent of nuclear war”. A fellow lawyer said: “He asks no quarter and gives no quarter.”

Koehler said a full investigation would be likely to last for up to four years and cost News Corporation tens of millions of dollars. “The Department of Justice has a very sharp stick at its disposal,” he said.

The US authorities can bring criminal charges against a firm they believe is not co-operating. Criminal charges were brought against accountant Arthur Andersen after the collapse of the energy firm Enron. The case in effect killed the accountancy firm.

Speculation has also focused on whether News Corporation employees have engaged in any phone hacking within the US. A US liberal campaigning group,, has put up a sum of 0,000 as a reward for any information leading to the arrest and conviction of “News Corp employees who hacked the phones of American citizens in the US, or bribed officials or others for information about Americans.” The group promised to pass any hard evidence it received to the FBI. © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.


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