It’s a case with all the hallmarks of a classic tabloid scandal. It features corrupt government officials, big bribes for disclosure of secret information, the hint that it may lap over to the United States, and even bit parts for members of the British royal family. It is a case that Rupert Murdoch and his $50 billion global media empire that operates under the News Corporation umbrella would normally be dying to cover.
Now, however, News Corp is the principal subject. Murdoch’s journalists and executives aren’t ferreting out and reporting corruption. Rather, they are accused of fostering it.
On November 20, UK prosecutors announced that two former Murdoch executives, Rebekah Brooks and Andrew Coulson, would be charged with violating UK Bribery Act and other laws for allegedly paying about $256,000 in bribes to British government law enforcement and other employees. Brooks and Coulson were executives at News International, the British branch of US-based, News Corporation, and publisher of the Sun and News of the World, two of the UK’s highest-circulation papers.
The charges are the most serious allegations yet leveled against News Corp. executives in the long-running phone-hacking scandal, which erupted into public view in early 2011. After documents turned over by News Corp. revealed evidence of widespread corruption, the company and its executives have been under investigation by UK prosecutors, the London police and the UK Serious Fraud Office.
To date, 52 News Corp. journalists, British police officers and other public officials have been arrested on charges related to paying, authorizing or accepting bribes for news tips, photos and other government information.
UK charges may be harbinger of FCPA case in US
The investigation widened to the other side of the pond in 2011, when the US Justice Department and Securities and Exchange Commission began inquiries of possible improper payments and possible violations of the US Foreign Corrupt Practices Act. News Corp. is headquartered in New York. The charges against Brooks and Coulson may tip the scales in favor of an FCPA prosecution by the US Department of Justice or charges by the SEC, say experts following the case.
“This greatly increases the likelihood that News Corp. will face an FCPA enforcement action in the US,” says Thomas Fox, an attorney who specializes in FCPA matters in Houston.
“There’s been a lot of speculation around FCPA violations [in this case], but these are the first substantive allegations of corruption at very high levels,” says Michael Koehler, professor at Southern Illinois School of Law and editor of the FCPA Professor blog.
“Here you have a situation in which executives of a subsidiary of News Corp., a US-based company, are charged with bribing public officials,” he continues. “That’s very much something, for obvious reasons, that the Justice Department and SEC are going to be interested in.”
Coulson, Brooks charged with violating precursor of UK Bribery Act
The charges against Brooks and Coulson by the UK’s Crown Prosecution Service are the result of “Operation Elveden,” a wide-ranging London Metropolitan Police probe into corrupt payments by News International journalists. Brooks and John Kay, the former chief reporter at the Sun, are accused of paying about $160,000 in bribes to an employee of the UK Ministry of Defense in exchange for sensitive government information from 2004 to 2007.
Coulson and the paper’s former top Royal Correspondent, Clive Goodman, allegedly made “payments to public officials in exchange for information, including a… phone directory known as the ‘Green Book’ containing contact details for the Royal Family,” according to the charging statement. The charges are a serious fall from grace for Coulson, who served as director of communications to Prime Minister David Cameron until last year, when the phone hacking and corruption allegations surfaced.
All five are charged with violating the Criminal Act of 1977, the law that criminalized conspiracy to bribe public officials in the UK. The law is one of three UK anti-corruption statutes that were codified and expanded by the UK Bribery Act in 2010, which is called by many experts as the world’s toughest, most comprehensive corruption law. In contrast to the US FCPA, which is limited to foreign corruption by US enterprises, the Bribery Act criminalizes corrupt payments made on UK soil and in other nations. It also covers commercial bribery.
If convicted, Brooks, Coulson and their co-defendants will face the much stiffer penalties under the Bribery Act. Bribing a public official carries a maximum sentence of 10 years in prison and an unlimited fine.
With Bribery Act untested, UK relies on older anti-corruption laws
The Bribery Act took effect in July 2011. To date, only one person, a London court clerk who took payments to reduce sentences in traffic violations, has been convicted of violating it. The charges against Brooks and Coulson make clear that the Bribery Act is not the only anti-corruption tool in UK prosecutor’s arsenal.
“There’s a perception that prior to the Bribery Act, Britain did not have anti-corruption statutes. That’s simply not true,” says Koehler, who says the UK will likely continue to prosecute cases under older anti-bribery laws in the near future.
“In the US, it’s not uncommon to have a two to four year turnaround in FCPA cases [between the start of an investigation and the filing of charges],” he says. “It’s not surprising that we haven’t seen the UK Bribery Act used yet.”
Murdoch, News Corp. unscathed to date
Murdoch has not been implicated in the corruption probe, although he has faced criticism for his management of the company. In May, a Parliamentary committee censured him for unethical business practices and said he “exhibited willful blindness” to widespread corruption at the News Corp. newspaper.
“We conclude… that Rupert Murdoch is not a fit person to exercise the stewardship of a major international company,” the committee said.
News Corp. has also avoided criminal or civil charges in connection with the ongoing investigations.