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A Donation Clouds Fox News Report

The Fox Business Network focused on what it called “The War on Business” all last week, but on Tuesday its coverage was decidedly more focused — with a series of reports about a California ballot initiative that its parent company, the News Corporation, had spent $1.3 million to defeat.

Call it the War on Proposition 24.

The News Corporation is one of the many major media companies that have spent more than $1 million each seeking to defeat the proposition, which supporters say would repeal $1.7 billion in corporate tax breaks to help close the state’s budget gap.

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News Corp

Executives at media companies, which employ tens of thousands in the entertainment industry, say defeating the proposition is one of their biggest priorities in the midterm elections, and they question how they would continue to operate in the state if taxes go up.

In five consecutive hours of live reports on Tuesday, a Fox Business correspondent, Adam Shapiro, was stationed at Cambridge of California, a small furniture manufacturing facility in Gardena. Mr. Shapiro repeatedly said the proposition could drive businesses — specifically small businesses, not media titans — out of California, and he said “332,000 jobs” were “on the line.”

Tracy Byrnes, the anchor for one of the reports, expressed the opinion that “the proposition was setting up businesses to be destroyed, quite frankly.”

Yet in its expanded coverage of the issue, Fox did not disclose the News Corporation’s donation to a group working to defeat Proposition 24. Nor did Fox report that the small-business man it featured in the news reports was asked to do the interview by the same group, No on 24 — Stop the Jobs Tax.

A Fox Business executive said he had not known about the parent company’s donation. Industry observers, however, said the News Corporation’s contribution to the group, and the organization’s role in arranging the interview, raised a potential conflict of interest that warranted disclosure.

“There’s a trust between you and your audience, no matter what the medium is,” said Kevin Z. Smith, who holds the ethics chair for the Society of Professional Journalists and is a past president of that organization. “Not disclosing conflicts, to me, severely undermines your credibility.”

The News Corporation, the Walt Disney Company, Time Warner, Viacom, CBS and General Electric, the owner of NBC, make up six of the nine biggest donors to No on 24. The companies declined to comment about the proposition. The three other contributors of more than $1 million are Cisco, Genentech and Qualcomm.

Asked why media companies had been so opposed to the proposition, Scott Macdonald, a spokesman for No on 24, said it “would return California to an outdated way of taxing multistate companies that would be especially harmful for those with a large number of facilities and employees here,” like Hollywood studios.

Mr. Macdonald said the proposition “would mean these companies’ income taxes would increase when they added a new facility or hired a new employee.”

The ballot initiative is chiefly supported by the state’s teachers unions.

Local stations in California, including those owned by CBS and NBC, have covered the proposition without disclosing their corporate contributions. But no news outlet has covered the issue as aggressively as Fox Business, the three-year-old sibling of Fox News.

Kevin Magee, an executive vice president at Fox Business, said in an interview on Friday, “We didn’t know that News Corporation had made a contribution to No for 24.” He said such disclosures were normal “if you know it and if it’s germane to the story.” He said that had he known in this case, he thought the network would have disclosed the donation.

Mr. Magee said “The War on Business” was one of the channel’s weekly themes to focus attention on business issues. Other themes have included “They’re Burning Your Money” and “Is the World Broke?”

"Not disclosing conflicts, to me, severely undermines your credibility." -Society for Professional Journalists, Kevin Z. SMith

He said the network’s tone was not “pro-business” per se, but that it was “making sure that businesses get heard.”

The owner of Cambridge of California, Ben Nielsen, who was featured in the reports, said the people who brought him in for the interview “were the people that are handling the campaign,” No on 24.

Mr. Nielsen reiterated in an interview on Friday that Proposition 24 would have devastating consequences for his business. Closing his facility is one option he is considering if the proposition passes, he said, and in that case “20 people are going on unemployment.”

The reports on Fox Business did not include any interviews with teachers or other people supporting the proposition.

The disclosure of the News Corporation’s contributions has already come up in this election cycle.

When the company donated $1 million to the Republican Governors Association this summer, there were calls by the Democratic Governors Association for Fox News to disclose that donation in news coverage about governors’ races.

The network at first rebuffed the Democratic group, claiming it was just trying to gain publicity. But in October a Fox News correspondent, James Rosen, disclosed the donation, “by way of full disclosure,” he said.

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