With the phone-hacking scandal that took down News Corp.'s News of the World tabloid showing no signs of slowing down, media watchdogs and industry observers are starting to wonder whether the flames engulfing media mogul Rupert Murdoch's ambitions in Britain could eventually bring heat to his U.S. operations.
The black eye that News Corp. is taking for accusations that News of the World hacked into the voice mail accounts not only of celebrities and members of the royal family but also of victims of crime and terrorism has thrown into disarray the company's plans to take control of British Sky Broadcasting. News Corp. took the unusual step Monday of setting in motion a more rigorous regulatory review of its plans to acquire the 60% of the powerful satellite broadcaster it doesn't already own, a move seen by News Corp. watchers as a gesture of goodwill.
So far, the fallout from the News of the World debacle has been mostly limited to Britain. However, as the coverage continues to intensify around the globe, it is giving new ammunition to critics of Murdoch and News Corp. in the United States.
"It is becoming increasingly clear this scandal was not perpetrated by a few rogue reporters, but was systematically orchestrated at the highest levels of News Corp.," said Melanie Sloan, executive director of the progressive advocacy group Citizens for Responsibility and Ethics in Washington, which has called for a congressional investigation of News Corp. "If Mr. Murdoch's employees can be so brazen as to target the British prime minister, then it is not unreasonable to believe they also might hack into the voice mails of American politicians and citizens."
Concerns about the shenanigans at News of the World are not limited to groups that position themselves as counterweights to News Corp.'s Fox News and other media outlets that are deemed to have a conservative agenda. Some investors are outraged as well.
On Monday, a group of News Corp. investors, led by Amalgamated Bank in New York, accused the company of "improper conduct" in a lawsuit filed in Delaware Chancery Court. The suit, a revision of a previous filing over the terms of News Corp.'s purchase of a production company owned by Murdoch's daughter Elisabeth, said the revelations in Britain show a "culture run amuck within News Corp. and a board that provides no effective review or oversight."
One of News Corp.'s top U.S. executives has found himself under a cloud as a result of the debacle in Britain. Les Hinton, chief executive of News Corp.'s Dow Jones & Co., parent of the Wall Street Journal, is the former head of News International, the publishing group that included News of the World. Hinton's tenure there extended from 1995 to 2007, when much of the alleged hacking took place. Like Rebekah Brooks, the current chief of News International, Hinton has close ties to Murdoch and is considered one of his top executives.
"It should be a wake-up call," said Ilyse Hogue, a senior advisor at Media Matters for America, a nonprofit group that monitors print, broadcast and Internet news outlets for "conservative misinformation." She said questions about how News Corp. operates in the United States "need to be raised now."
News Corp. shares plunged for a fourth day Monday, losing $1.23, or 7.1%, to a six-month low of $16.10 on the New York Stock Exchange. The stock has tumbled 13% over the last week.
The bulk of News Corp.'s U.S. operations, such as movie studio 20th Century Fox, its influential Fox News Channel and its newspapers, including the Wall Street Journal and New York Post, are run without any direct government oversight.
However, the backbone of its Fox broadcast operations — its 27 television stations that reach almost 40% of the country — are licensed by the Federal Communications Commission. These licenses can be challenged when they come up for renewal.
The FCC has a policy regarding character requirements for licensees of broadcast television and radio stations. Misconduct that could result in the revocation of a broadcast license includes criminal convictions and misrepresentations to the FCC or any other governmental unit. The FCC declined to comment about News Corp. and whether the continuing investigation of its British operations would have any repercussions in the United States.
News Corp. also declined to comment.
"At this point, there is no evidence News Corp. did anything in the U.S. as it allegedly did in the U.K. Something would have to happen within the FCC's jurisdiction to trigger any investigation here," said Art Brodsky, communications director of advocacy group Public Knowledge.
People familiar with the inner workings of the FCC note that there have been only a handful of license revocations, the most recent being almost 25 years ago when RKO lost its broadcast license on issues of character.
"It is very rare," said Blair Levin, a fellow at the Aspen Institute and a former high-ranking FCC official. He added that with regard to News Corp. he could "easily see battles arising on these issues."
Even if News Corp. is found to have behaved badly abroad, short of a conviction of Rupert Murdoch himself, the FCC may find its hands tied.
"If News Corp. or one of the Murdochs or other senior officers or directors got a criminal conviction, maybe, on a really good day, with wind at your back, calm seas, and a nuclear turbine you might get something going," said attorney John Hane of Pillsbury Winthrop Shaw Pittman. "But I really doubt it."
That sentiment was echoed by Rebecca Arbogast, a media analyst at Stifel, Nicolaus & Co.
"A lot of people might argue what was going on there indicated something less than high character, but I do not see the government stepping in and doing anything here," Arbogast said.
Media Matters' Hogue argues that the government should be proactive on News Corp. rather than watching events unfold from afar.
"Waiting for proof beyond a shadow of a doubt where lines were crossed gets us to where the U.K. was," she said, adding, "criminal investigations absolutely need to happen right away."