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Hacking Case Linked to News Corp Referred to FBI

Alan Rappeport, Financial Times
Thursday, 21 Jul 2011 | 2:28 AM ET

A legal battle over alleged computer hacking of a US marketing company by a News Corp subsidiary has been referred to US authorities by a senior lawmaker, exposing the company at the centre of the UK phone-hacking scandal to further questions about how it operated in the US.

Rupert Murdoch, chief executive officer of News Corp., sits in a car as he is driven along Whitehall, prior to a parliamentary committee hearing on the phone hacking scandal.
Simon Dawson | Bloomberg | Getty Images
Rupert Murdoch, chief executive officer of News Corp., sits in a car as he is driven along Whitehall, prior to a parliamentary committee hearing on the phone hacking scandal.

Frank Lautenberg, a Democratic senator, asked the justice department and Federal Bureau of Investigations to examine the details of a case settled between News America Marketing and Floorgraphics Inc, an in-store marketing company. Floorgraphics alleged that its rival hacked its computer system as many as 11 times in 2003 and 2004 to gain business.

“I wanted to make sure that you were fully aware of the case of Floorgraphics and News America, as it may be relevant to your current investigation,” Mr Lautenberg of New Jersey wrote to Eric Holder, US attorney general, and Robert Mueller, head of the FBI, in a letter sent on Wednesday.

The FBI is looking into an unsubstantiated claim that representatives of the tabloid News of the World sought access to voicemails of US 9/11 victims, and the DoJ is examining whether alleged payments to UK police may have contravened the Foreign Corrupt Practices Act.

Senator Lautenberg’s letter came as two other Democratic senators, Barbara Boxer and Jay Rockefeller, moved to turn up the US heat on News Corp by asking an editorial oversight committee at Dow Jones, the News Corp-owned publisher, to investigate whether any misconduct had occurred in the US.

The committee, set up when News Corp bought the publisher of the Wall Street Journal in 2007, has powers to access “all books, records, facilities and personnel” across News Corp, the senators noted. They requested particular information on Les Hinton, who ran News Corp’s UK newspapers for 12 years before becoming Dow Jones chief executive.

After it lost several marketing contracts from consumer goods companies, Floorgraphics filed a lawsuit in 2004 against rival News America, a News Corp unit that sells newspaper inserts, coupons and in-store advertising. The complaint alleged that News America “attacked FGI directly by breaking into FGI’s computer system to acquire past and future contract information; improperly acquiring confidential FGI documents.”

The case was settled in 2009 for $29m and News Corp bought Floorgraphics soon after for an undisclosed price. In the last two years, News Corp has spent more than $500m to settle claims of anti-competitive behaviour.

The payments show the lengths to which News Corp has gone to quash legal problems beyond those related to the News of the World, which Rupert Murdoch, its chairman, told a UK parliamentary hearing on Tuesday represented less than 1 per cent of his company.

“Around the world it is customary to reach out-of-court settlements in civil litigations and civil matters,” James Murdoch, News Corp’s deputy chief operating officer, told the same hearing.

An attorney who represented FGI had no comment. George Rebh, an FGI founder, did not respond to an interview request.

During the trial in New Jersey in 2009, Mr Rebh’s allegations were explicit. He told the court that there was unauthorised access to FGI’s computer system by people using computers registered with an IP address linked to News America Marketing. He alleged that over four months, News America accessed its computer system through a password protected website 11 times.

The site contained information on FGI’s past advertising prices and Mr Rebh alleged that with such information a competitor could undercut its prices.

Mr Rebh said that a member of his company’s board, Bill Berkley, had faxed a letter to David DeVoe, News Corp’s chief financial officer. According to Mr Rebh, there was no response from Mr Devoe.

News Corp did not respond to a request for comment but previously denied the charges. Body




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