Rupert Murdoch would have liked to believe the UK phone-hacking scandal was a tempest in a teapot. But as the crisis for News Corp escalated in London, it has also spread across the Atlantic Ocean to Mr Murdoch’s adopted home, the US.
Now, with multiple government agencies looking into News Corp practices, Mr Murdoch is facing the prospect of months of government inquiries in his company’s two largest markets, and the threat of a tarnished brand.
Spurned on by complaints from more than a half dozen members of Congress, the Federal Bureau of Investigation is now probing News Corp and the US justice department is looking into claims the company may have violated the Foreign Corrupt Practices Act.
The phone-hacking at News of the World “may be indicative of a pattern of corruption at News Corporation”, said Earl Blumenauer, a representative from Oregon who called for an FBI inquiry. “The pace at which this wide-ranging scandal is unfolding suggests that we may have only scratched the surface of potential illegal practices at the company.”
Such rhetoric has made the mushrooming scandal for News Corp a feature on US front pages and prime time newscasts for the past two weeks. Mr Murdoch’s face is now splashed on the cover of magazines including Time and Bloomberg Businessweek.
Yet a key source of the growing political outrage in the US remains unsubstantiated. In calling for investigations, several congressmen cited a report that the News of the World sought access to messages on phones belonging to victims of the September 11 terrorist attacks. Those claims, however, are based on a story in UK newspaper the Daily Mirror that relied on a single unnamed source and have not been confirmed.
Given the uncertainty of those allegations, legal experts say the US government may have more success pursuing its inquiry into possible violations of the FCPA, a wide-ranging law designed to prevent US companies from misbehaving abroad.
For example if News Corp executives were aware of phone-hacking or authorised bribes to police officers, they could be held liable under US law. “The justice department could very well charge under a conspiracy theory, and if they do so they can sweep up a number of people,” said Brad Simon, a defence lawyer and former federal prosecutor with experience of FCPA cases. “It allows them to cast a very wide net.”
However, the justice department has not yet said it will pursue a formal investigation, and the FBI’s probe is preliminary at this point.
So far, it seems, News Corp has escaped any major damage to its brand in the US. This is largely due to the fact that News Corp’s US interests, which include a movie studio, television networks, a book publisher and newspapers, are operated independently.
“News Corp is a very different company in the US than it is in Britain,” said Tom Rosenstiel, director of the Pew Research Center’s Project for Excellence in Journalism. “It’s historically been a television company, and is better known in the US as Fox, which really has three identities.”
News Corp owns the 20th Century Fox movie studio, the Fox broadcast network and the Fox News cable channels. “Each of those has very different personalities from the other,” said Mr Rosenstiel. “There’s really nothing political about Fox studios or Fox broadcasting.”
Moreover, the general public in the US is not very familiar with News Corp as a company. “There’s not a lot of connection between their brands including Fox News, The Wall Street Journal and Rupert Murdoch,” said David Rogers, director of the Center on Global Brand Leadership at Columbia Business School. “The parent company is not known as a general brand.”
But, as Mr Blumenauer said in his letter to the FBI, the pace at which this story is unfolding suggests it may not yet have run its course.
Alan Mutter, a news industry analyst and author of the Newsosaur blog, said: “We don’t really know what may or may not have happened in the US. If it turns out that News Corp reporters were running around hacking phones over here, it could turn out to be a big issue.”