Michael Wolff: Murdoch still mired in scandal

Michael Wolff, USA TODAY | USATODAY

Is Murdoch safe?

After 18 months of unremitting scandal in Britain, and threats of government action in the U.S., has Rupert Murdoch gotten to the other side of his trouble and, as a recent story in The New York Times suggests, gotten his "mojo" back?

The Times story seems to be the kind promoted by an internal PR operation — and indeed follows the line, News Corp., Murdoch's company, has been trying to sell.

His British papers — where the hacking into the voice mail boxes of by some counts thousands of politicians, royals and celebrities, as well as ordinary people (including a murdered 12-year-old), and payoffs to the police for salacious information, occurred — have been investigated and the accused will now face trial.

What's more, Britain has moved on. There are other scandals, including a sex scandal at the BBC, Murdoch's arch nemesis, to monopolize the attention of politicians and the media. On top of that, News Corp. has taken steps to separate itself from its low-growth or money-losing and scandal-causing newspapers, so investors are happy.

In other words, pay no attention to crisis past, and let the 81-year-old Murdoch be Murdoch. Indeed, says the Times, he's on a buying spree. There's a stake in the YES network, with its New York Yankee's franchise, and rumors of interest in some big American newspapers.

Now, it is true that when all is said and done, how Murdoch and his company performed in a scandal that might well have destroyed more ordinary men will likely be one for the case-study books. But all is far from said and done.

More than 70 people have been arrested in the Murdoch-related hacking and police bribery scandals in Britain and now several key trials are coming up.

Among them is the prosecution of Rebekah Brooks, the top executive in his British operation who was personally close to him and to his family, and Andy Coulson, who, after leaving the Murdoch organization, became one of Prime Minister David Cameron's closest advisers.

Murdoch's future and legacy depend, in some considerable sense, on these two people — both with intimate knowledge of where the bodies are buried, and both whose lives and careers have been destroyed by their fealty to him.

But perhaps even more alarming for Murdoch, new charges were added last week against Brooks and Coulson, as well as several other Murdoch executives, accusing them of making payoffs to police for juicy information about celebrities and politicians.

If true, that becomes a smoking-gun violation of the U.S. Foreign Corrupt Practices Act, which prohibits American companies from bribing foreign officials. Perhaps not coincidentally, a few weeks ago the Justice Department issued new clarifications about what constitutes an FCPA breach — a brief that could put News Corp. directly in its sights.

Before the election, people close to the company have described, the feeling was that it would be seen as too directly a political vendetta to pursue News Corp., the parent of politically conservative Fox News. With the Democrat's re-election, however, the Justice Department might seamlessly "follow the evidence wherever it goes."

But the scandal is not only a legal matter, it's a family issue, too.

News Corp. is a family-controlled the company — and it's a complicated and, often, warring clan.

The scandal split Murdoch's daughter, Elisabeth — who runs one of the world's biggest independent television companies, one that she sold to News Corp. last year — from her brother, James. He is head of News Corp.'s international operation and was once the heir apparent. But now he's largely blamed by his sister and by almost all other executives in the company for the poor handling of the scandal fallout.

Meanwhile, Elisabeth's husband, Matthew Freud, one of the most important PR men in London, openly argues the case against his brother-in-law, and, as well, his father-in-law for installing his inexperienced son.

Lachlan Murdoch, Murdoch's oldest son, who now lives in Australia, and runs his own media interests — and who was, himself, once the heir apparent before being deposed in an internal struggle with his father's other executives — is said to side with his sister, Elisabeth.

Their sister Prudence, the only adult Murdoch child not in the media business, holds the fourth vote on the Murdoch family trust — an entity without a tie-breaking mechanism. (Murdoch has two young children from his current marriage, but they don't have a vote on the trust.)

One of the ways that the company has addressed the negative fallout surrounding its newspapers is to propose a new spinoff company to come into existence some time next year that would contain all of News Corp.'s papers — this includes all the British and Australian papers, the Wall Street Journal and the New York Post — as well as its book (HarperCollins) and education companies, and television interests in Australia.

In addition to off-loading the newspapers, this spinoff is a mechanism that the elder Murdoch thought might lure his son, Lachlan, back into the company. But so far Lachlan has resisted, already causing something of a leadership vacuum at the yet-to-be launched company.

What's more, instead of this new company being simply a way to sequester the newspapers, Murdoch has used it as a rationale to spur the discussion of buying new newspapers, including the Los Angeles Times and the Chicago Tribune. In other words, News Corp., eagerly looking for a way to distance itself from newspapers, Murdoch's money-losing first love, might in fact, at Murdoch's behest, have to pour more of its money into the spinoff company to buy new papers.

Then, too, in a further development that has unsettled the status quo, Murdoch's wife Wendi, the 43-year-old socialite and would-be international power broker, has — following the purging by his son James of many of his closest advisers — become her husband's closest counselor, to the consternation of his adult children and top executives.

So, no, "safe" is hardly the world for Murdoch or News Corp. Legal peril, family dysfunction and the wiles and unpredictability of Murdoch himself, make this, despite all the company's efforts to appear otherwise, among the most combustible stories in business.

Contact Wolff at:

Michael@burnrate.com

@MichaelWolffNYC