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Let’s freeze-frame the moment. It’s 2.39pm on a July day in 2011 and the world’s most powerful media magnate is atoning. In front of British MPs, his wife, his PR advisers, and a global TV audience, Rupert Murdoch says: “This is the most humble day of my life.”
The billionaire is going before the Commons Media and Culture Committee because the “rogue reporter” excuse for phone hacking at his London newspapers has finally collapsed, like a tottering drunk.
People are bitching that the News of the World hacked into the phones of terrorists and murder victims, as well as actors and footballers. Murdoch’s UK newspaper group, News International, has closed the newspaper.
Detectives investigating hacking have arrested Rebekah Brooks, days after she quit as News International’s chief executive. They have also arrested Andy Coulson, another of the News of the World’s former editors.
David Cameron’s coalition government, who employed Coulson as director of communications, has called a public inquiry into the ethics of the press. A tougher system of newspaper regulation looks likely.
Worst of all, because of all the fuss Murdoch’s holding company, News Corporation, has dropped its take-over of Sky, Britain's biggest commercial broadcaster. An £8 billion deal down the drain.
Murdoch is in a hole.
Fast forward four years. Murdoch has not been prosecuted. He and his family are £3 billion richer. David Cameron is back in Number 10, leading a majority government… Fast forward four years. Murdoch has not been prosecuted. He and his family are £3 billion richer. David Cameron is back in Number 10, leading a majority government…
…and Rebekah Brooks is back in charge of his British newspapers.
Of all the big beasts in the tabloid jungle, only Coulson had to do time in chokey, at Belmarsh high security prison.
How did 'The Digger' dig himself out of trouble? Did the “phone hacking scandal,” which turned into an existential crisis in British public life, make any difference?
The great escape
In the dark days of 2011, Rupert Murdoch was fighting on three fronts: a general reputational onslaught, the threat of press regulation, and a sprawling police-criminal mess.
Even though hacking was bad, he could have coped with the reputational harm. You don’t move from newspaper proprietor in 1950s Australia to 21st century multi-media, trans-continental tycoon without developing a thick skin.
Despite the occasional silences, Murdoch deftly negotiated his way through the Commons Committee in July 2011, and in April 2012, in two days of questioning by Robert Jay, QC, at the Leveson Inquiry. Murdoch was sombre, mournful. If only he had known of the terrible things that had been going on at his newspapers.
By now, Murdoch had taken on “ethical” spinmeisters Edelman. He was playing the good corporate citizen, hauling up the white flag and paying up.
News International issued apologetic statements instead of the apocalyptically angry ones under Brooks. It paid compensation to 719 hacking victims, including a generous £2 million for the family of Milly Dowler.
The problem wasn’t reputational, though. It was legal and financial.
For a start, the Metropolitan Police, once so friendly, had turned. Its officers were carrying out three inquiries into his tabloids: Operation Weeting into phone hacking, Elveden into corruption of public officials and Tuleta into computer hacking and other miscellanies. They were making arrest after arrest.
It wasn’t necessarily worrying that detectives were pulling and charging the medium-ranking staffers – reporters and news editors were expendable. But the arrest of Brooks –shortly before the resignation of the commissioner of the Metropolitan Police, Sir Paul Stephenson – had made things unstable.
Brooks had faithfully served Murdoch for years, and was the keeper of some of the company’s secrets. Would she be put on trial, and if so, what would she say?
News International’s directors might face criminal charges for phone hacking. Worryingly, Scotland Yard’s inquiries might jump the Atlantic, where US law banned bribery of foreign officials.
And this was where the company had been too clever for its own good (or too honest, if you prefer). Brooks had faithfully served Murdoch for years, and was the keeper of some of the company’s secrets. Would she be put on trial, and if so, what would she say?
In an attempt to dump blame on Coulson (who had already resigned from Downing Street), in June 2011 News International under Brooks had passed Scotland Yard a series of News of the World emails discussing payments to royal protection officers. They suggested money was changing hands for the Queen’s phone numbers.
The United States Department of Justice began investigating News Corporation for bribery, under the US Foreign Corrupt Practices Act.
Now, if the company had been prosecuted under the US Foreign Corrupt Practices Act, it might have been fined hundreds of millions of dollars. That would be doable for a business with annual sales of $37 billion.
The real trouble was that News Corp’s Fox TV business relied upon TV licences granted by the U.S. Federal Communications Commission. You have to be good and honest to hold a TV licence. Murdoch moved quickly to isolate his business from the hacking cancer.
He did this by shape-shifting. One of the advantages of being a trans-global corporation served by Harvard-smart lawyers, PR consultants and accountants, is that you can reassign personnel and roles, revise codes of conduct, re-imagine brands, jurisdiction-shop, de-list, re-list, amalgamate, and split your corporate entities. You can conjure up feints from the corporate trick box to mask, dodge, diffuse, shrink and shift blame.
And this is where it actually got clever. Murdoch’s lawyers in New York decided, as an upright company, the kind of company that respected the rule of law, the kind of company that should be allowed to keep hold of lucrative TV licences, that they would hand over anything dodgy in the small British newspaper business to the authorities.
They would – as one insider put it, to the disgust of redtop journalists who had given their lives to the company – “drain the swamp”. The lawyers hoped that by mirroring what an honest company would do, the company would not be prosecuted in the UK or, more importantly, the US. So they called in the City of London lawyers Linklaters to start going through years of expenses claims and emails on all of News International’s titles looking for corruption and other criminal offences. The police were amazed. They’d never had so much help from a company before.
Soon, detectives started arresting journalists at the News of the World and the Sun for payments to public officials – including the Sun’s deputy editor, managing editor, news editor, picture editor, chief reporter: a whole tier of the paper’s management. Murdoch may not have cared much about them, but he moved to protect his son James, who had failed to halt the cover-up while chair of News International. He was airlifted out of London to a lower-profile job in the United States. Brooks, too, was taken care of. She was given a car, an office, a secretary, and a £16 million pay-off. She would not talk to the papers or the police (she gave a prepared statement).
Most cunningly of all, News Corporation threw some new shapes on the New York Stock Exchange. In June 2012, a plan was floated (later approved) to keep the newspapers and book publisher HarperCollins in News Corporation while hiving off the cash generative, future-facing TV and film businesses into a new group, 21st Century Fox. Owning newspapers had depressed News Corp’s stock price. Traders told the late David Carr, of the New York Times, that 21st Century was “Hitco” – and News Corp “ShitCo.”
It didn’t end there. In July 2012, Rupert Murdoch resigned as a director of News International. And in June 2013, News International itself shed its old skin, being re-branded News UK. Traders told the late David Carr, of the New York Times, that 21st Century was “Hitco” – and News Corp “ShitCo.”
In June 2014, Brooks, with a humongous legal team funded by Murdoch, was found not guilty of plotting to hack, bribe (the Sun had paid a Ministry of Defence official £100,000) and pervert the course of justice. Her husband Charlie was also acquitted of conspiracy to pervert the course of justice – as was News International’s head of security, Mark Hanna.
Coulson was jailed for 18 months.
That was as bad as it got. As the corruption cases streamed through the courts, 31 public officials and their partners – a secret network of bent coppers, prison officers and NHS workers – were convicted of misconduct in public office. But apart from a few cases, almost all the Sun’s journalists – whose Murdoch-funded lawyers argued they were acting in the public interest – were acquitted.
After investigating for four years, the Metropolitan Police’s Tuleta inquiry ran out of time to prosecute anyone for computer hacking. Operation Weeting started delving into the rival Mirror titles. No doubt Murdoch’s newspaper editors would have told him during their regular phone conversations.
In January 2015, the Department of Justice told News Corp it wouldn’t be prosecuted in the US for bribery or phone hacking in the UK. The FBI had sifted through News Corp’s emails.
With the criminal trials receding in 2015, there was still one pain: regulation. Murdoch didn’t like being told what his papers could and couldn’t do. They had always claimed that the Press Complaints Commission was doing a fine job. Still, Murdoch and Cameron knew what they had to do.
Fight for press freedom
Out of panic or a public-spirited desire to tackle decades of press misbehaviour, David Cameron had set up the Leveson Inquiry. It came back to bite him. Firstly Leveson exposed that while the Coalition was making a “quasi-judicial” decision on the Sky bid, the Culture Department had opened up a back channel with News Corp. Secondly there was the pain of what to do with Leveson’s recommendations. Under pressure from press victims, Cameron had promised to enact them. But they turned out to be an effective system of regulation – with state-funded independent oversight and financial incentives for members. Parliament forced a Cameron U-turn.
Nonetheless Murdoch, the Daily Mail and Telegraph hated the recommendations and backed the PCC’s successor, the non-Leveson compliant IPSO. ...while the Coalition was making a “quasi-judicial” decision on the Sky bid, the Culture Department had opened up a back channel with News Corp.
Delaying tactics meant the issue drifted until the 2015 general election campaign. The Labour leader Ed Miliband promised to implement Leveson in full. The Conservatives did not. Most Fleet Street newspapers campaigned whole-heartedly for a Cameron victory and some made up dodgy stories about Labour to that end. David Cameron walked into No 10 on 8th May 2015.
And then the lacuna was spotted. For Leveson’s financial incentives to come into force they had to be signed by a government minister. The new Culture Secretary, John Whittingdale, announced that he was not “minded” to sign. Hacked Off, the campaign group, claims some press abuses are still rife. Dominic Ponsford, editor in chief of industry cheerleader Press Gazette, says that, although tougher, IPSO is “failing as a regulator.”
By its very covert nature it’s difficult to know how much illegal activity there is on national papers, but it would be surprising if it was anything like its former levels. For a start, journalists know that if they break the law and get caught, they might be shopped by their employers.
Secondly, newspapers are shrinking. They are losing news-stand sales. They are losing advertising revenue to Google and digital upstarts like BuzzFeed. Papers seem to be spending more on internet search and less on real world search (ie, investigations).
Murdoch’s papers can’t avoid this drain. While News Corp puts the best gloss on its headline figures, ugly underlying financials skulk in the undergrowth of its last annual report. In the past five years (2011 to 2015) revenue has drifted downwards and profits have fallen, from $678 million to a loss of $147 million. By contrast, 21st Century Fox is booming. Although figures fluctuate, profits soared over the same period, from $2.2 billion to $8.3 billion.
Murdoch – who messed up MySpace – knows the future lies more in pixels than print. News Corp is firing up its online estate agency business and has taken a stake in VICE – whose hip content is funded by blue chip money. Two key personnel will be on hand to help.
In June 2015, James Murdoch became chief executive of 21st Century Fox and his brother Lachlan co-chairman. And in September 2015 Rebekah Brooks was back in charge at News UK. In a sign of changing times, she bought a whizzy business specialising in viral advertising (‘Hey cool kids, watch these cooler kids! By the way, they’re drinking Coke.’) With Cameron and Brooks back, it might even be time to re-launch that Sky bid. As James Murdoch pointed out recently, having 40% of Sky is “not a natural end state for us.”
Aged 84, Murdoch still sits atop the media world. The phone hacking scandal cost his business $512m (£332m). But because it forced him to split his businesses, he’s richer than ever. Forbes put his wealth at just $7.6 billion in 2011. Now it’s $12.7 billion. Long-time Murdoch watcher, Australian journalist Neil Chenoweth, thinks Murdoch’s morale was dented by the phone hacking scandal and his divorce from Wendi Deng. But he says Murdoch has had a spring in his step since the UK general election.
There’s just one cloud on the horizon. Scotland Yard detectives might yet bring a corporate charge for phone hacking against News International – including Murdoch, who was interviewed by police. Exaro’s secret recording suggested he knew about bribery of police. But it’s amazing how people can mis-understand the company’s good intentions. That’s the conclusion News International’s former security chief Mark Hanna reached after suddenly dropping his employment claim.
Corporate prosecution aside (and, obviously, that could be a big deal), did the hacking scandal make a difference? Well, British newspaper journalists are almost certainly better behaved, though there still isn’t any proper regulation. Through his jinxes and feints, Murdoch has survived. And is wealthier. But he seems to be a little less powerful. He’s not the master puppeteer (Cameron can and does run the economy, he has his finger on the nuclear button), but, along with Paul Dacre at the Mail, Murdoch still paints the scenery of our political theatre.
So have things improved? Overall, they have, for the better. But there may be a twist or two to come.
See openDemocracyUK's full series on the Sun trials here.
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