Tuesday, May 1, 2012

Rupert Murdoch not 'a fit person' to run major firm, UK lawmakers say

Rupert Murdoch not 'a fit person' to run major firm, UK lawmakers say

Rupert and James Murdoch are severely criticized after investigations into phone-hacking allegations - and three of their senior executives are accused of misleading parliament. ITN's Juliet Bremner reports.  

Updated at 11:24 a.m. ET: LONDON -- Rupert Murdoch is  unfit to run a major international company, British lawmakers said on Tuesday, finding him responsible for a culture of illegal phone hacking that has convulsed his News Corporation media empire.

Pulling few punches, members of the House of Common listed failings of the 81-year-old News Corp chief, his son James and a company they said had showed "willful blindness" about the scale of hacking that existed at the company's News of the World tabloid.

The cross-party parliamentary committee, which approved the report by a majority of six to four, also scolded News Corp's British newspaper arm for misleading the British parliament during its five year investigation into the hacking of the phones of celebrities, murder victims, politicians and soldiers.

But it split along party lines, with members from Prime Minister David Cameron's Conservative Party voting against the final conclusions of the report, saying they did not agree with its view on Murdoch's fitness to run a company.

Carl Court / AFP - Getty Images
Cameron, who has acknowledged that Britain's political elite had been in thrall to the Murdochs for years, is facing criticism ahead of local elections this week that he was too close to the media tycoon.
The report, published only a week after Rupert Murdoch gave evidence at a separate public inquiry into UK media ethics, said there had been huge failures in corporate governance which raised questions about the competence of Rupert's 39-year-old son, James.

"News International and its parent News Corporation exhibited willful blindness, for which the companies' directors -including Rupert Murdoch and James Murdoch - should ultimately take responsibility," it said.

Olivia Harris / Reuters

The report says News Corp's British subsidiary misled Parliament about the scale of phone hacking at its News of the World tabloid.
It provides a devastating account of how employees of News Corp's UK arm became involved in illegal activity and how its executives then attempted to cover up the wrongdoing. Corporately, the firm's "instinct throughout, until it was too late, was to cover up rather than seek out wrongdoing," it said.

"We conclude, therefore, that Rupert Murdoch is not a fit person to exercise the stewardship of a major international company," it wrote.

As so often in scandals, the attempted cover-up attracted the most criticism. The committee noted that, by June 2008, the chief executive of England's Professional Footballers Association, Gordon Taylor, had received a payment from News Corp's UK arm worth more than $1 million. The report says, this cash "was paid over a story which was never actually published and was clearly done to buy silence".

The committee said it could not "come to a definitive conclusion" as to what James Murdoch knew when he agreed this payment. But it said it was "astonished" that James Murdoch did not seek more information before authorising this "not inconsequential" sum of money.  It concludes that, for James Murdoch, "this clearly raises questions of competence".

Murdoch: Hacking scandal cost 'hundreds of millions'
The hacking scandal has not affected most of Murdoch's global media empire, which includes the Wall Street Journal, 20th Century Fox and pay-TV operations around the world.

But it could persuade shareholders of News Corp that Australian-born Rupert Murdoch should step back from the helm of his $50 billion media empire.

It has already forced James Murdoch to sever almost all his ties with Britain, although he still holds a directorship of Britain's biggest satellite TV firm BSkyB, which News Corp had sought to take over before the scandal.

British media regulator Ofcom is investigating whether BSkyB, which is 39 percent owned by News Corp, is a "fit and proper" owner of a broadcast license, which entails an examination of the company's officers and shareholders.

James Murdoch recently stepped down as chairman of BSkyB in response to the scrutiny the broadcaster is facing as a result of the hacking scandal. The regulator said on Tuesday it was reading the parliamentary report with interest.

The impact of the report may also be diminished by the fact it was split largely along party political lines.

"None of us were able to support the report and we all voted against it," Conservative lawmaker Louise Mensch said, referring to her party members. "It will be correctly seen as a partisan report and we've lost a very great deal of its credibility, which is an enormous shame."

Mensch said she would have supported the report if the reference to Rupert Murdoch being unfit to run a major international company had been removed. She said she supported the report's findings that three senior executives at News Corp's UK arm had misled parliament.

James Murdoch was back at the Leveson inquiry, where he claimed he didn't know about phone-hacking at News Corp's U.K. unit,  and didn't remember being told about it. ITV's Juliet Bremner reports.
Murdoch, who took London by storm in the 1960s before moving to New York on his quest to become the world's most powerful media tycoon, has apologized for the scandal.

He told a judicial inquiry into press ethics last week that senior staff at his British newspaper publisher had hidden the hacking scandal, saying he had been betrayed by minions.

News Corp said in a statement it was carefully reviewing the report, adding that it "fully acknowledges significant wrongdoing at News of the World and apologizes to everyone whose privacy was invaded".

Rupert Murdoch tells UK phone-hack inquiry: 'I'm not good at holding my tongue'

Media regulator Ofcom will take the report's findings into consideration in its continuing assessment of whether BSkyB's owners and directors are "fit and proper" persons to hold a broadcast license.

Reuters and The Associated Press contributed to this report.