The ballooning phone hacking scandal that brought down Rupert Murdoch’s News of the World tabloid in the U.K. last week has begun to infect his U.S. business dealings. Earlier today, plaintiffs in an ongoing shareholder lawsuit against Murdoch and News Corp. amended their complaint to reflect the events last week, arguing that Murdoch must have had first-hand knowledge of the misconduct in the News of the World newsroom, and that the recent revelations are indicative of a much broader, systemic problem with how he runs his empire.
“Rupert Murdoch, News Corp.’s founder, chairman, chief executive officer, and controlling shareholder, habitually uses News Corp. to enrich himself and his family members at the company’s and its public shareholders' expense,” the lawsuit alleges. The recent revelations concerning widespread phone hacking by News of the World employees “should not have taken years to uncover and stop” and “show a culture run amuck within News Corp. and a board that provides no effective review or oversight.” The suit goes on to say that “it is inconceivable that Murdoch and his fellow board members would not have been aware of the illicit news gathering practices.”
The shareholder suit, initially filed last March in Delaware Chancery Court on behalf of company shareholders, names nearly every top News Corp. executive as a defendant, including Rupert Murdoch, his sons James and Lachlan, COO Chase Carey, CFO David F. DeVoe, former New York Schools Chancellor and current News Corp. director Joel Klein, company lawyer (and Murdoch confidant) Arthur Suskind, and News Corp. board members Rod Eddington, Andrew S.B. Knight, and Natalie Bancroft.
The suit alleges that Murdoch’s recent $673 million purchase of his daughter’s TV and film production company Shine Group in February was nepotistic. “Murdoch did not even pretend that there was a valid strategic purpose for News Corp. to buy Shine,” the suit argues. “Rather, Murdoch publicly proclaimed that his purpose in causing News Corp. to enter into the transaction was to bring [daughter] Elisabeth back into the family business and put her on News Corp.’s already conflicted and dominated board of directors.” The suit argues that shareholder interests have been consistently ignored in the course of his decision making over the years, and that the Shine takeover illustrated a pattern in which “throughout his tenure, Murdoch has treated News Corp. like a family candy jar, which he raids whenever his appetite strikes.”
A spokesperson for News Corp. declined to comment on the amended complaint or the suit's allegations.