The Fall Guy: How Everything Might Work Out Nicely for Rupert Murdoch
Given the glee greeting the phone hacking troubles at News Corp. (NWS), you could be forgiven for thinking that the company's decision to abandon its takeover of BSkyB (BSY) was the beginning of the end for Rupert Murdoch and his son, James. Think again. The events of the last 24 hours -- in particular the departure of Tom Crone, the top lawyer for the Sun and the News of the World -- may have insulated the Murdochs against their enemies as they prepare to face a grueling Q&A before a British parliament public committee inquiry.
Some sensible people regard the last week as Murdoch's Waterloo. Liberal Democrat MP Simon Hughes said, "At last the sun is setting on Rupert Murdoch's British empire." Guardian columnist George Monbiot tweeted, "This is our Berlin Wall moment" and, "Anyone not dancing a jig round their desk right now hasn't grasped the scale of what's just happened."
Set aside the Schadenfreude and look at the substance of events, however, and things seem to be breaking Murdoch's way, at least in the short term.
A fall guy has been found
While News may have dropped the BSkyB bid, its statement contains enough get-out clauses that it can relaunch its bid at almost any time. The majority of the statement, in fact, is devoted to clauses describing ways News may re-start the bid. With the bid now quiet, it takes one over-boiling pot off Murdoch's stove.
The departure of Crone -- the second senior lawyer to bail out of News in recent days -- appears to leave the Murdochs and their News International tabloid lieutenant Rebekah Brooks without an experienced adviser as they prepare for their grilling in parliament. The interrogation will be rough. The support of Murdoch's papers has won and lost elections for both Conservative and Labor parties. MPs' knives will be out.
But the Murdochs will be able to point to Crone's eviction as evidence that they did not know the phone hacking was widespread. It was Crone who told parliament in 2009 that he found no wrongdoing at NOTW beyond Clive Goodman, a royal reporter, and private detective Glenn Mulcaire, both of whom were jailed for their roles in the hacking. Those statements have turned out to be wrong. Further, in James Murdoch's statement upon closing the NOTW, he hinted that Crone's previous statements were wrong, and that he was misled into settling cases of hacking he thought were one-off occurrences:
... the News of the World and News International wrongly maintained that these issues were confined to one reporter.
... This was not the only fault. The paper made statements to Parliament without being in the full possession of the facts. This was wrong.
The company paid out-of-court settlements approved by me. I now know that I did not have a complete picture when I did so. This was wrong and is a matter of serious regret.Whether anyone believes that Crone or the Murdochs had no idea what was going on at the NOTW or the Sun is irrelevant. They have a story backed by some evidence, which they can repeat in their upcoming interrogation -- that the truth didn't make it higher up the chain than Crone.
That's important because the Murdochs must also insulate themselves against U.S. prosecutors and the SEC, who probably have enough grounds to open a Foreign Corrupt Practices Act investigation of the company. In such cases it tends to be the small fry that actually face charges, not the CEOs. Crone is not a CEO.
Keep your friends close...
The Murdochs have kept Brooks and Dow Jones chief Les Hinton in their circle, despite continued calls for the former's resignation and continued interest in the latter's knowledge of what occurred on his watch at News International until 2007. The Evening Standard reported:
Mr Crone worked closely with News of the World editors Rebekah Brooks, Andy Coulson, Piers Morgan and Colin Myler and also regularly met Les Hinton, head of News international until 2007, as well as his successor James Murdoch.(Notice that Morgan's name has cropped up again.) Both Hinton and Brooks likely know just how bad the scandal could become (the police have only contacted 170 of 3,870 potential victims). Hinton is on the same hook as Crone -- he also told parliament he knew of no wrongdoing at NOTW beyond Goodman. If Murdoch fires either of them, they could start cooperating with police inquiries in a way that might harm the Murdochs. The family needs to keep them close, and loyal, until they have served their purpose, perhaps as the Murdochs' reserve fall guys.
Meanwhile, with the NOTW abandoned and its employees scattered hither and yon, the more evidence that gets lost, the better.
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