Tuesday, July 12, 2011

Murdoch's News Corp. grief might equal Fox problems in the US ...

From CNN.com:

The scandal embroiling the empire of media mogul Rupert Murdoch's News International might extend from London to Washington, legal experts not personally involved in the unfolding matter said Monday.

The potential liability flows from journalists at individual newspapers, such as the recently defunct News of the World, to its parent, News International, to its parent, News Corp., which is a publicly held company in the United States.

"The allegation so far with this phone hacking scandal includes a component where someone within News Corp.'s organization perhaps made payments to London police officers to perhaps obtain information that would thus allow News of the World to write newspapers and sell newspapers," said Mike Koehler, a professor of business law at Butler University in Indianapolis, Indiana.

If true, that might violate the Foreign Corrupt Practices Act (FCPA), which Koehler described as "a U.S. law that generally prohibits the payment of money or anything of value to a foreign official for a business purpose.

"So, there does seem to be a basis for a U.S. investigation at this point."

From Mike:

This could wind up as an issue, albeit a smaller one than some factions might wish, for Murdoch, whose news empire covers much of the world in broadcast and in print.  The situation is similar to the RKO Radio censure by the FCC in the 1970's, when the parent company, General Tire & Rubber, was stripped of its US broadcast licenses because of bribes paid to agents of foreign nations to encourage sale of General's products overseas.

If, as a result of a US investigation based on the law cited above by the SEC and the DOJ, News International is found to be guilty of these charges, they could be forced to divest themselves of all of their broadcast licenses in the US.  It would be tantamount to finding the company to be a felon and, under US law, a convicted felon may not hold an ownership position in a broadcast license.  Criminal penalties could also be assessed.  In the US, the loss of the Fox TV licenses alone could be a crushing financial blow.

It must be noted, however, that cable networks of all the sorts run by Murdoch's company, including news and entertainment, would not be affected by this decision, nor would their movie production enterprises, since they are not licensed by the FCC for their operation. And these networks and production studios make a lot of money.

On the other hand, extra-constitutional penalties imposed by Executive or Judicial fiat might come into play and would result in long and tangled court battles that might not survive the Obama administration(s). Even though Rupert Murdoch is 80 it is expected that his heirs would sustain the fight.

It'll be very interesting to watch this play out on the US side of the pond.  It'll be very distressing if the US Government is able to take down the Loyal Opposition.

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