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.