How Bad Is News Corp.?

Michael Wolff on the state of the Murdoch empire and its Mob-like structure

Rupert Murdoch

In my biography of Rupert Murdoch, I referred to News Corporation as Mafia-like, provoking the annoyance of my publisher’s libel lawyers. I explained to them that I did not mean to suggest this was an organized crime family, but instead was using “mafia” as a metaphor to imply that News Corp. saw itself as a state within a state, and that the company was built on a basic notion of extended family bonds and loyalty.

But just because it’s a metaphor doesn’t mean it isn’t the real thing, too.

Well-sourced information coming out of the Department of Justice and the FBI suggests a debate is going on that could result in the recently launched investigations of News Corp. falling under the RICO statutes.

RICO, the Racketeer Influenced and Corrupt Organizations Act, establishes a way to prosecute the leaders of organizations—and strike at the organizations themselves—for crimes company leaders may not have directly committed, but which were otherwise countenanced by the organization. Any two of a series of crimes that can be proven to have occurred within a 10-year period by members of the organization can establish a pattern of racketeering and result in draconian remedies. In 1990, following the indictment of Michael Milken for insider trading, Drexel Burnham Lambert, the firm that employed him, collapsed in the face of a RICO investigation.

Among the areas that the FBI is said to be looking at in its investigation of News Corp. are charges that one of its subsidiaries, News America Marketing, illegally hacked the computer system of a competitor, Floorgraphics, and then, using the information it had gleaned, tried to extort it into selling out to News Corp.; allegations that relationships the New York Post has maintained with New York City police officers may have involved exchanges of favors and possibly money for information; and accusations that Fox chief Roger Ailes sought to have an executive in the company, the book publisher Judith Regan, lie to investigators about details of her relationship with New York police commissioner Bernie Kerik in order to protect the political interests of Rudy Giuliani, then a presidential prospect.

The U.S. is in an awkward if not downright ridiculous position in terms of the maelstrom that has engulfed News Corp. in Britain.

While News Corp. does most of its business in the U.S., prosecutors here have no jurisdiction over the phone hacking crimes that were committed in the U.K. And it’s quite possible, because of differences in news gathering operations in the U.S., and in cell phone protocols, that no hacking was committed here. And while hacking may have taken place by British reporters against targets in the U.S.—as alleged in Jude Law’s suit—that remains to be proven.

And yet, what has happened in the U.K. is far from mere rogue behavior in a remote foreign division. Rather, News International is a division that has long been one of the core components of the company, both in terms of revenue and brand, and one that has reported to the highest echelons of the company: Rupert Murdoch himself, his closest confidants, and, more recently, his son, James.

Still, it could well be that even with its U.K. operation shuttered or sold, its executives put on trial, and with the opprobrium of the British government and public heaped on it, the company can continue with its same ethos and methods of operation in the U.S. (Indeed, given the declining growth of the newspaper business, the share price of the company might well go up without them. The shareholders would have benefited from News Corp.’s crimes.)

Here is where the RICO logic comes in. The usual path of a criminal investigation follows the crimes back to the source—that’s what happened to News Corp. in the U.K. when the royal family discovered that its voice mail messages were appearing in the press. But in a RICO investigation, you are really following the ethos and methods of operation of a group or organization to the crime. In other words, criminal activity is not seen as an isolated or particular event—as News Corp. has desperately and unsuccessfully tried to portray the crimes that occurred in the U.K.—but as an established pattern of conduct.

As it happens, much of this pattern of conduct at News Corp. has long been hiding in plain sight. How the company has gotten away with such behavior is, in fact, a subtext of the investigations that are now unfolding.

Partly, the company has escaped legal scrutiny because this is a boys-will-be-boys sort of story. News Corp.’s by-any-means aggressiveness has become so much a part of its identity that it seemed almost redundant to find fault with it. Everybody knew but nobody—for both reasons of fear and profit—did anything about it; hence its behavior has become, however unpleasant, accepted.

And partly, it’s because the fundamental currency of the company has always been reward and punishment. Both the New York Post and Fox News maintain enemy lists. Almost anyone who has directly crossed these organizations, or who has made trouble for their parent company, will have felt the sting here. That sting involves regular taunting and, often, lies—Obama is a Muslim. (Or, if not outright lies, radical remakes of reality.) Threats pervade the company’s basic view of the world. “We have stuff on him,” Murdoch would mutter about various individuals who I mentioned during my interviews with him. “We have pictures.”

Similarly, the Post and Fox News heap praise and favors on partisans, who in turn do them favors (the police, in New York as well as London, receive and return the favors).

This reward and punishment has translated into substantial political power, both in terms of regulatory advantages and, too, in the ability of the company to shield itself from the kind of scrutiny that it has taken a perfect storm of events to have it now receive.

Then, too, as one of the largest media organizations, it has insured a hands-off attitude (if not policy) from other media organizations—those which have business with it, or whose executives want to protect their prospects of working for it, or that extend courtesies in the hope they will be extended back.

There’s also the money. Ultimately, if you have the goods or the savvy with which to damage the company, you get paid off. In London, that’s how News Corp. thought it could contain the hacking scandal, with big cash payments to and confidentiality agreements with the hacking victims. In the U.S., Floorgraphics, the company that News America Marketing tried to extort, was bought for far more than its value when it persisted in its suit against News Corp. Judith Regan received an outsize settlement when she pushed her claim that Ailes had pressured her to lie about her relationship with Kerick.

A former News International executive of my acquaintance reminds me of a detail I have forgotten: There are rat traps throughout News International’s headquarters in Wapping, the old distillery and warehouses where Rupert Murdoch moved his British papers in the late 1980s as a way to break the print unions. There are rat traps even in Murdoch’s own office. And the rats there are very large.

Beyond the obvious metaphor that the freely running rats suggest, there’s another. News Corp. has never had anything more than a thin skin of an orderly, well-resourced, highly regulated corporation. Underneath the first layer is a kind of unreconstructed, even Dickensian, do-anything-to-survive world. Indeed, in some ways it is a culture in rebellion against the decorous and straightlaced world. News Corp. revels in its anti-establishment view. If it has a central philosophy, it’s against regulation and, in a sense, even modernity. When I was beginning my book, just after the company acquired Dow Jones, Murdoch was being encouraged to think about a new branding campaign for the company (“branding” is a modern concept Murdoch would otherwise sneer at)—the notion he fastened on and had to be talked out of involved making the symbol of the company a pirate ship.

Just as this conversation was going on so was a conversation about the editorial oversight board Murdoch had agreed to as a condition of buying the Wall Street Journal. He thought it was a joke. He thought the people who believed that he would take such a board seriously and honor its terms were a joke. Of course, he wouldn’t be bound by his agreement! (And, indeed, he promptly cast it aside, supplanting the paper’s editor, which he had expressly committed not to do.)

News Corp. protects, too, its reprobates, its pirates, seeing them as, somehow, the soul of the company.

There is the inexplicable story of Richard Johnson, the Post’s Page Six editor who admitted to taking payoffs from sources that wanted favorable coverage. He has continued to thrive in the company. There’s the executive at News America Marketing, Paul Carlucci, who despite the apparent and costly illegalities that occurred under his management, was promoted within News Corp. And there’s Bill O’Reilly: well-documented charges of sexual harassment have not in the least dimmed his career at Fox News.

It’s all about the organization. It’s an organization all about doing what Rupert wants you to do, or doing what you imagine Rupert wants you to do, or doing what you imagine your boss imagines Rupert wants done. There are few companies as large as News Corp. that are so devoted and in thrall to one man. There are few companies which, over so long, have so assiduously hired the kind of people who would be in thrall to one man. Indeed, News Corp. can be quite a disorganized and scattered company, and yet its driving premise, what unites and motivates this oft-times gang-that-couldn’t-shoot-straight enterprise, is to do as Rupert would have you do.

It’s a superior and blind kind of loyalty. “Can you…?” Murdoch says to several executives visiting with him on his boat (this is the old boat—much smaller than the grander one he has now) when he receives a phone call that he needs to take in private. The executives jump in the water and swim around the boat until the call is done (and this story is not apocryphal).

The most direct method of undoing this sort of enterprise is undoing this sort of loyalty.

In London, there have now been 10 arrests. While British law does not provide for the kind of U.S.-style plea bargaining that can easily flip a co-conspirator, there is, ever-more apparently, no where else to turn. There will be no News International safe haven in terms of cash or comfort. While the company continues to pay legal fees, and, in the case of Rebekah Brooks, apparently continues to keep her on the payroll (despite representations otherwise), this is a last gasp of the company’s ability to buy dedication. There are too many questions now. In other words, the value of loyalty is fast running out. In the end, it will be a human drama, as all scandals are, about lives and careers upended and the necessity to save yourself.

In the U.S., curiously, the company has, for the last few years, been undoing its own loyalty program. Arguably, the hacking scandal has unfolded not just because the organization is, at its heart, antipathetic to reasonable community standards, but because the organization itself is in turmoil. James Murdoch has been the manager of this scandal, and James is simply not as cunning, or perhaps even as cutthroat, a pirate as his father. The coterie that has long surrounded Murdoch, executives who have carefully managed and tempered him, which included Peter Chernin, the COO, Gary Ginsberg, his chief communications lieutenant, and Lon Jacobs, the general counsel, have been systematically parted from the company, not least of all because James Murdoch has been consolidating his influence over his father by dispatching the men who might have competing influence. Although each of these men has been paid bountiful amounts to maintain a minimum loyalty, the truth is they are embittered, too—and they know everything.

“You don’t get it,” Rupert’s son-in-law, Matthew Freud, the infamous London PR man, told me almost a year ago. “If there was a conspiracy in the company, the conspiracy was to keep Rupert from knowing.”

Freud’s convoluted formulation answered a question I hadn’t asked and suggests that 10 months before the Milly Dowler revelations and the bottom falling out of the scandal, Murdoch intimates were sensing how close this could come to the center and essence of their lives. Indeed, it’s not clear why you would have to conspire to keep someone from knowing what he did not know, nor why you would, unprompted, make admitting to a cover-up a main thesis of your defense.

You wouldn’t—except if you understood (and Freud is one of the people within the company to have a gimlet-eyed understanding of it) that everything that happens at News Corp. is systemic, that this is an organization predicated on a certain view of the world that fosters a certain behavior (that might turn weaker stomachs), that its nature runs from the top to bottom and bottom to top. And that the necessary and desperate and ultimate strategy has to be an effort to protect the man at the center of it all. Because there is nothing without him.