guardian.co.uk,
Ed Pilkington in New York, Friday 22 July 2011
News Corp's New York headquarters. The Foreign Corrupt Practices Act forbids US-based companies from profiting from bribery in other countries. Photograph: Mary Altaffer/AP |
The judicial screws are tightening on Rupert Murdoch's empire in America as the US justice department prepares to subpoena News Corporation in its investigation into whether the company broke anti-bribery and hacking laws on both sides of the Atlantic.
The news
that subpoenas are being drawn up, reported by News Corp's flagship newspaper
the Wall Street Journal, comes a week after attorney general Eric Holder said
he was launching a preliminary investigation into the media group as a result
of the UK phone-hacking scandal.
According
to the Journal, the subpoenas will be broadly cast to draw information from the
company relevant to the investigation, though final approval has yet to be
granted by top justice department officials. In addition, it has emerged that
federal prosecutors have begun probing allegations that News Corp's advertising
arm in the US hacked into a computer of a competitor as part of a campaign to
crush its rival.
A lawyer
for the smaller company, Floorgraphics, told NBC he was visited by two federal
prosecutors and an FBI agent. News Corp declined to comment on the legal moves.
Mary
Mulligan, a former federal prosecutor in the southern district of New York that
handles many of the big corporate cases of this sort, said there were numerous
directions in which the probe of News Corp could go. "This is a
complicated investigation, and a very important matter that's being looked
into." She said the FBI and other federal agents would be guided by what
they found.
"The
facts are going to drive any charges that arise – what was accessed, how it was
accessed and where."
One specific
allegation that the FBI is investigating is whether News of the World
journalists tried to access the phone records of 9/11 victims. The claim was
raised in the UK's Daily Mirror, though, so far, no solid evidence has emerged
to support it. If the accusations are confirmed, News Corp could be susceptible
to prosecution under Title 18 USC 2701, involving unlawful access to stored
communications, or 2703 and 2704 if the mobile phone messages are found to have
been stored on a separate server.
News Corp
also faces a possibly lengthy and costly federal probe into whether it broke
anti-bribery laws as part of the illegal News of the World phone hacking in the
UK.
The company
is potentially liable under the Foreign Corrupt Practices Act (FCPA), which bans
US-based companies from profiting from bribery and corruption in other
countries.
News Corp
is a US-based firm, its headquarters on Sixth Avenue in Manhattan.
FCPA
experts have suggested that it could be brought under the auspices of the act
because News of the World journalists bribed police officers in the UK in
search of exclusive stories that in turn increased sales and generated profits.
It is not a
defence for News Corp executives to argue that they were unaware of the
bribery. Under the FCPA, a company can still be penalised if it should have
known – what is called "willful blindness".
News Corp
could also come under the scrutiny of the US Securities and Exchange Commission
(SEC), which is jointly responsible with the justice department for policing
the FCPA.
The SEC
will want to know whether News Corp properly declared all its activities in its
accounts or whether it tried to hide any bribes made within the UK under false
accounting returns.
It is not
known precisely what information investigators are seeking from News Corp under
the subpoenas, but it could include News of the World accounts which would then
be examined by forensic accountants.
News Corp
itself seems to be most anxious about the FCPA side of the federal
investigations, judging from the legal team it has assembled – some of the
heaviest hitters in American legal affairs.
They
include Brendan Sullivan, a formidable trial lawyer once described as "the
legal equivalent of nuclear war", and Mark Mendelsohn, who used to head
the justice department section that decides which FCPA cases to prosecute. He
is joined by Michael Mukasey, a former US attorney general, and his legal
partner Mary Jo White, who represented Siemens in one of the largest FCPA cases
ever.
The Siemens
case underlined how serious an FCPA prosecution could be for News Corp. In
2008, the engineering company admitted bribing foreign officials around the
world and paid a record $800m (£490m) in settlement. That included $350m in
disgorgement – a repayment for the profits it was estimated to have made as a
result of the bribery.
No figure
exists for how much money News of the World made out of its phone hacking
activities. Under the FCPA, a rough calculation would be made which News Corp
could be forced to disgorge.
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