Yesterday I used the lyrics from Emerson, Lake and Palmer’s song Karn Evil No. 9, First Impression, Pt. 2 - “Welcome Back My Friends, To The Show That Never Ends” as an entrée into the topic of the investigation of JP Morgan’s hiring practices in China and possible Foreign Corrupt Practices Act (FCPA) violations. These lyrics seem doubly relevant with the news report from The Independent that “Scotland Yard is investigating News International as a “corporate suspect” over hacking and bribing offences.” But as a ‘corporate suspect’ News Corp might liken its position to be similar to the Greek sailors in the Odyssey; that being between Scylla and Charybdis.
In an exclusive report, entitled “Exclusive: Met investigating Rupert Murdoch firm News International as ‘corporate suspect’ over hacking and bribing offences”, Tom Harper reported that “The Independent has learnt the Metropolitan Police has opened an “active investigation” into the corporate liabilities of the UK newspaper group – recently rebranded News UK.” Harper wrote that “One of Rupert Murdoch’s most senior lawyers has been interviewed under caution on behalf of the company and two other very senior figures have been officially cautioned for corporate offences. John Turnbull, who works on News Corp’s Management and Standards Committee (MSC) which co-ordinates the company’s interactions with the Metropolitan Police, answered formal questions from detectives earlier this year.”
Apparently, News Corp was not “aware of its status as a potential “corporate defendant” until April 2012 when Met detectives asked the MSC for “minutes of board meetings”. The request triggered behind-the-scenes negotiations which eventually led to former Deputy Assistant Commissioner Sue Akers writing to the MSC a month later. In a letter to the chairman Lord Grabiner, she said there was “an active investigation into the corporate liability of News International”. The company immediately changed the terms of its co-operation with the police.”
News Corp Responses
News Corp’s responses were quite interesting. Lord Grabiner, responding to Ms. Akers “outlined the position of the company. He indicated it would be a “dereliction of duty” to continue co-operating with Scotland Yard if the police were planning a “corporate charge” against News International.” Harper reported that this communication also said, “Later he added: “A suspect which is being asked to provide material for use in the investigation into its own liability is entitled to be advised that it is under suspicion in order that it can be advised of its rights and make informed decisions.”” Harper apparently queried “A senior Scotland Yard source said that after Ms Akers’ letter there was a “suspension in co-operation” whilst the UK lawyers “took advice” from the board directors in New York.”
Roy Greenslade, writing in his Greenslade Blog, in an article entitled, “Rubert Murdoch’s company under investigation on ‘corporate charge‘ “ in the online edition of The Guardian said that “Police interest in bringing corporate charges was revealed when the former Met police deputy assistant commissioner, Sue Akers – then heading the investigation – appeared at the Leveson inquiry in July 2012. Greenslade quoted Akers as saying at the time, “We’ve sought legal advice… in respect of both individual and corporate offences.” Shortly after this appearance, Greenslade noted that “The Guardian’s Nick Davies and David Leigh reported that News Corp lawyers had protested to the police about the possibility of company directors being prosecuted “for neglect of their duties.””
News Corp also requested that the UK authorities consider the effects of any corporate indictments. Harper said that “Gerson Zweifach, the group general counsel of News Corp, flew in to London for emergency talks with the Met last year. According to Scotland Yard, he told police: “Crappy governance is not a crime. The downstream effects of a prosecution would be apocalyptic. The US authorities’ reaction would put the whole business at risk, as licences would be at risk.”” This avenue has continued as “Lawyers for News Corp then continued to plead with the police not to pursue the company.”
Unlike US prosecution guidelines, where the Department of Justice (DOJ) can consider the effect of wiping out a company through an indictment and conviction, apparently there is no similar provision in UK law. Harper explained that the “Crown Prosecution Service can treat a company as a “legal person” who is “capable of being prosecuted”. And any organisation at the centre of a criminal investigation “should not be treated differently from an individual because of its artificial personality”.” He cited the latest Crown Prosecution Service (CPS) guideline on the issue which states, “A thorough enforcement of the criminal law against corporate offenders, where appropriate, will have a deterrent effect, protect the public and support ethical business practices.
As noted the DOJ can take into account such collateral damage as the destruction of a company when bringing charges under laws such as the FCPA. This is based on Arthur Anderson going out of business after sustaining a guilty verdict in an Enron related trial. But what about the fear that News Corp could lose valuable licenses which allow it to operate various media such as Fox News in the US? Tom Watson, British MP and long-time critic of Murdoch, was quoted in The Independent article with the following response, “The doom-laden internal analysis that the thousands of people who actually add value to the company may lose their jobs is bogus. If News Corp wants to clean up its act, it can easily do so by replacing the Murdochs with people who understand corporate social responsibility.”
More critically for News Corp will be the decision on cooperation with the British authorities and the US DOJ in any ongoing Bribery Act or FCPA investigation. Corporate cooperation is viewed as one of the cornerstones of current FCPA enforcements. If a company truly fears that it may be indicted for its actions based upon it turning over such information to the authorities it may decide it is not in its best interest to do so. But not to cooperate could well be taken into account in any fine or penalty assessed by the DOJ and could considerably raise the cost of any monetary settlement.
However, I am reasonably certain that the US government can obtain such company information through standard investigative tools available to it under US criminal procedures. While it is not clear what the level of cooperation between the relevant US and UK authorities has been today, I would certainly opine that there has been a high level of cooperation. If I were advising News Corp, I would certainly suggest that such cooperation between governments is usually forthcoming. I would also advise them that cooperation is better than non-cooperation.