FBI opens inquiry into Murdoch’s News Corp.

The phone hacking scandal that has ignited a political firestorm in Britain jumped the Atlantic on Thursday as the FBI opened an investigation into whether British reporters tried to access cellphone messages and records of victims of the Sept. 11, 2001, terrorist attacks in violation of U.S. law.

The preliminary probe further rattled the New York-based global media empire of Rupert Murdoch, who was forced this week to withdraw his $12-billion bid to take over Britain’s largest satellite broadcaster, and raises new questions about the future of News Corp.

U.S. officials said the FBI is trying to determine if a full investigation is warranted, and no evidence has yet emerged to confirm that News Corp. employees sought to hack phones in the United States. But the unfolding scandal sent the company’s battered stock down another 3% in trading.


The FBI’s New York field office launched the investigation after several members of Congress urged an inquiry into British media reports that journalists at News Corp.'s recently closed News of the World tabloid in London had tried to gain access to phones of Sept. 11 victims and the families of those who died, according to federal law enforcement officials.

“We are doing this based on their requests,” said one official, who requested anonymity because the investigation is underway. “But after reviewing the letters and their allegations, and after consultation with the U.S. Attorney’s office in New York, we are proceeding.”

Felony convictions in a U.S. court could imperil the 27 federal licenses that News Corp. uses to operate TV stations across the country. The stations are part of the Fox Broadcasting Co. network.

Overall, News Corp.'s U.S. holdings are larger and more profitable than those in Britain. They include the 20th Century Fox movie studio, the Wall Street Journal and New York Post newspapers, and HarperCollins Publishers.

Facing an angry backlash by lawmakers on both sides of the Atlantic, Murdoch told the Wall Street Journal on Thursday that corporate executives would create an independent, internal committee to “investigate every charge of improper conduct.”

Murdoch defended his company’s handling of the widening controversy, saying executives had made only “minor mistakes.”

Murdoch said he was “getting annoyed” with press coverage of the scandal, but said, “I’ll get over it.” He predicted that the financial and political damage to News Corp. was “nothing that will not be recovered.”

A News Corp. spokesman said the company had no public comment on the FBI investigation.

Separately in Britain, Murdoch and his son James, after initially refusing a summons, agreed to appear Tuesday before a committee in Parliament that is investigating the alleged phone hacking and police bribery there. Rebekah Brooks, who heads the company’s British newspaper division, also agreed to testify. She was editor of the News of the World when some of the hacking allegedly occurred, but has denied any knowledge of it.

News Corp. has faced a deepening crisis in Britain since reports in a rival publication that News of the World reporters hacked into the phone of a teenager kidnapped in 2002 who was later found slain, and may have impeded a police investigation into the girl’s disappearance. The pressure intensified Thursday with the arrest of former News of the World executive editor Neil Wallis, the 9th person who worked at the tabloid to be detained by police.

In a letter Wednesday to FBI Director Robert S. Mueller III, Rep. Peter T. King (R-N.Y.), who chairs the House Homeland Security Committee, had cited reports that News of the World journalists “attempted to obtain phone records of victims of the terrorist attacks of Sept. 11th through bribery and unauthorized wiretapping.”

King also cited reports that the reporters had solicited a New York police officer “to gain access to the content of private phone records” of the Sept. 11 victims.

“It is revolting to imagine that members of the media would seek to compromise the integrity of a public official for financial gain in the pursuit of yellow journalism,” King wrote. “The 9/11 families have suffered egregiously, but unfortunately they remain vulnerable against such unjustifiable parasitic strains.”

Paul Browne, deputy commissioner of public information for the New York Police Department, said the officer referred to in the reports was no longer a city employee and now works as a private investigator. It was in that capacity that the newspaper was reportedly soliciting help from the ex-officer, Browne said.

“He allegedly was approached by them,” Browne said.

Browne added that at this point, “we have no inquiry” underway at the NYPD, deferring instead to federal investigators.

Other members of the House and Senate from both parties called for congressional investigations, adding to the political cast of the scandal. No hearings have been scheduled, however.

Rep. Bruce Braley (D-Iowa) sent a letter to Rep. Darrell Issa (R-Vista), who chairs the House Oversight and Government Reform Committee, asking for an investigation into “whether victims of the September 11, 2001 attack and other U.S. citizens had their cell phones targeted by News Corporation.”

Rep. Anna G. Eshoo (D-Menlo Park) made the same request of Rep. Fred Upton (R-Mich.), chairman of the House Energy and Commerce Committee. News Corp. is “a very, very powerful journalism organization … and we should at least investigate to determine if this happened on this side of the pond as well,” she said.

Rep. Mary Bono Mack (R-Palm Springs), chairwoman of a House subcommittee that deals with telecommunications issues, contacted News Corp. to ask if the company’s reporters had used hacking techniques that may violate U.S. privacy laws.

“They have been cooperative and assured congresswoman Bono Mack that this is not a U.S. problem,” said Ken Johnson, senior advisor to Bono Mack.

Separately, lawmakers called for the FBI, Justice Department and the Securities and Exchange Commission also to investigate whether U.S.-based News Corp. violated the Foreign Corrupt Practices Act, which forbids bribery of foreign officials to obtain or retain business.

Legal experts said that if News Corp. journalists bribed London police, the company and its employees could be criminally prosecuted. But with British authorities already pursuing the case, it would be unusual for the U.S. to get involved.

“I don’t think the Justice Department would be in a rush to insert itself” in a British bribery case, said Richard Cassin, a Charlottesville, Va., lawyer who helps clients comply with the Foreign Corrupt Practices Act.

“But because of the disgusting allegations, the public revulsion and the political hornet’s nest that all of this created, the Justice Department may feel pressure to get involved,” he added.

The Securities and Exchange Commission could seek to enforce the part of the foreign bribery law that requires companies to keep accurate books, Cassin said. If News Corp. employees disguised bribe payments with accounting tricks, the SEC may have grounds to fine the company.

An SEC spokesman declined to comment on the case.

Violations of U.S. anti-bribery provisions carry penalties of up to $2 million. If convicted, employees could face up to $250,000 in fines and five years in jail.

Such convictions could jeopardize News Corp.'s TV licenses. Federal law contains character requirements for holders of licenses for television and radio stations. Felony convictions are grounds for revocation or could be cited to prevent renewals, although such moves are rare.

Asked about the controversy at a congressional hearing Thursday, Federal Communications Commission Chairman Julius Genachowski said the allegations should be investigated but he did not say that his agency would start such an inquiry.