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US Senators Raise Heat on Murdoch

Two Democratic senators have turned up the political pressure on News Corp, reviving questions about whether a scandal at Rupert Murdoch’s UK newspapers could jump across the Atlantic.

News Corp
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News Corp

A day after a damning parliamentary report into Mr Murdoch’s handling of the affair, News Corp’s directors gave him their unanimous backing, quelling speculation that he might split his chairman and chief executive roles.

But their statement was followed by news that Senator Jay Rockefeller of West Virginia had written to Lord Justice Leveson, who is leading an inquiry into the conduct of the British press, asking for any evidence that “troubling and sometimes criminal conduct” had occurred in the US or involved US citizens.

Mr Rockefeller, who first raised concerns about phone hacking last summer, chairs the Senate commerce committee, which has the power to hold hearings, and has oversight of the Federal Communications Committee.

The Federal Bureau of Investigations opened a probe into News Corp after Mr Rockefeller’s intervention.

He widened his concerns to include allegations of payments to police officers and other public officials, saying US-traded companies such as News Corp had “a duty to exercise adequate financial controls over their subsidiaries”.

Frank Lautenberg, the New Jersey senator who called last summer for investigations into possible breaches of the US Foreign Corrupt Practices Act, said allegations in Tuesday’s report by a House of Commons committee on media made it “critical” that US authorities ensured that US laws had not been broken.

News Corp had no comment.

In an unscheduled conference call on Wednesday morning, its board discussed Tuesday’s majority verdict by the Commons committee that Mr Murdoch was “not a fit person” to run a large international company.

The board – briefed by lawyers including Gerson Zweifach, general counsel, and Joel Klein, one of Mr Murdoch’s closest executives – voiced “full confidence in Rupert Murdoch’s fitness” and said they wanted him to remain chairman and CEO.

Mr Murdoch also received support from Moody’s, the credit rating agency, which said it saw no cause to cut News Corp’s Baa1 rating. Despite “the highly politicised hyperbole”, it said the company had ample liquidity to mitigate the scandal’s costs.

However, Moody’s said the MPs’ report could influence Ofcom as the UK media regulator considers whether British Sky Broadcasting , the pay-television group News Corp controls, is a “fit and proper” holder of a broadcast licence.

BSkyB moved to distance itself from its biggest shareholder on Wednesday. “It is important to emphasise that Sky and News Corp are separate companies,” said Jeremy Darroch, BSkyB chief executive. “We believe that Sky’s record as a broadcaster is the most important factor in determining our fitness to hold a licence.”

“The likelihood of Ofcom removing BSkyB’s broadcasting licences is zero. BSkyB itself has no case to answer,” said Claire Enders, a media analyst. However, she said Ofcom could require James Murdoch to stand down as a BSkyB director.

A day after a damning parliamentary report into Mr Murdoch’s handling of the affair, News Corp’s directors gave him their unanimous backing, quelling speculation that he might split his chairman and chief executive roles.

But their statement was followed by news that Senator Jay Rockefeller of West Virginia had written to Lord Justice Leveson, who is leading an inquiry into the conduct of the British press, asking for any evidence that “troubling and sometimes criminal conduct” had occurred in the US or involved U.S citizens.

Mr Rockefeller, who first raised concerns about phone hacking last summer, chairs the Senate commerce committee, which has the power to hold hearings, and has oversight of the Federal Communications Committee.

The Federal Bureau of Investigations opened a probe into News Corp after Mr Rockefeller’s intervention.

He widened his concerns to include allegations of payments to police officers and other public officials, saying U.S-traded companies such as News Corp had “a duty to exercise adequate financial controls over their subsidiaries”.

Frank Lautenberg, the New Jersey senator who called last summer for investigations into possible breaches of the US Foreign Corrupt Practices Act, said allegations in Tuesday’s report by a House of Commons committee on media made it “critical” that US authorities ensured that US laws had not been broken.

News Corp had no comment.

In an unscheduled conference call on Wednesday morning, its board discussed Tuesday’s majority verdict by the Commons committee that Mr Murdoch was “not a fit person” to run a large international company.

The board – briefed by lawyers including Gerson Zweifach, general counsel, and Joel Klein, one of Mr Murdoch’s closest executives – voiced “full confidence in Rupert Murdoch’s fitness” and said they wanted him to remain chairman and CEO.

Mr Murdoch also received support from Moody’s, the credit rating agency, which said it saw no cause to cut News Corp’s Baa1 rating. Despite “the highly politicised hyperbole”, it said the company had ample liquidity to mitigate the scandal’s costs.

However, Moody’s said the MPs’ report could influence Ofcom as the UK media regulator considers whether British Sky Broadcasting, the pay-television group News Corp controls, is a “fit and proper” holder of a broadcast licence.

BSkyB moved to distance itself from its biggest shareholder on Wednesday. “It is important to emphasise that Sky and News Corp are separate companies,” said Jeremy Darroch, BSkyB chief executive. “We believe that Sky’s record as a broadcaster is the most important factor in determining our fitness to hold a licence.”

“The likelihood of Ofcom removing BSkyB’s broadcasting licences is zero. BSkyB itself has no case to answer,” said Claire Enders, a media analyst. However, she said Ofcom could require James Murdoch to stand down as a BSkyB director.

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