Coverage or Crime? When Journalism Crosses the Line

By Anna Stolley Persky

When 13–year–old Milly Dowler disappeared in 2002, the British media descended upon her family and her plight. Years after her remains were discovered, Milly and her family were once again thrown in the spotlight—this time over revelations that their privacy had been violated.

On July 4, a British newspaper disclosed that journalists from rival tabloid News of the World intercepted and deleted Milly’s voicemail messages in the days after she was reported missing. Although phone hacking by News of the World had long been public knowledge, this particular revelation sparked intense public outrage. Companies pulled their advertisement from what was once the biggest tabloid in the United Kingdom. The newspaper folded. Its publisher, Rupert Murdoch’s media conglomerate News Corporation, scrambled to contain the damage.

And then came the deluge of questions, lawsuits, and probes not just in Britain but also in the United States. Lawmakers, law enforcement investigators, and the public are attempting to discern the prevalence of phone hacking and, perhaps, other illegal conduct at News of the World, which operated through News Corp.’s News International unit. From there, the questions will center on with whom the responsibility should ultimately rest.

As when any big investigation kicks into gear, News Corp. is picking out a legal defense team to fight back. At the same time, the company is attempting to minimize its collateral damage and save both its reputation and financial viability.

“There could be a legal, political, and media extravaganza with the different players and forces involved,” says Jamin Raskin, a law professor specializing in constitutional law at American University Washington College of Law. “The moral subtext of it all is whether the media is just one more power player out for itself, or whether it still has some unique role as guardian of the public’s interest in the truth.”

Public Outrage
For those on the outside, the story is irresistible. There’s a dramatic cast of characters, from the private investigator and alleged rogue reporter to murder victims and war heroes, to an enormously rich media mogul. Fast–paced, the story is rich with drama and legal tussles, including potential criminal charges and a tangle of civil litigation. And the conduct by journalists, according to legal experts, is beyond outrageous, even to the most adamant defenders of media rights.

“The shocking aspect of this story is that you have reporters and prominent companies allegedly engaging in what amounts to trespass and theft,” says Orin S. Kerr, a law professor specializing in criminal law and computer crime law at The George Washington University (GWU) Law School. “I think there’s a realization that this should not be occurring, and that accessing somebody else’s files is an egregious privacy violation.”

The reverberations from the scandal may go far beyond News Corp.’s legal snarl or even its sullied reputation. The news media, already faltering in both financial and social status in the post–Internet era, faces another hit to its overall reputation. Some observers are concerned that while public distaste rages on, media outlets have been a little more reticent to take a stand against the conduct.

“The alleged illegal conduct by News Corp., if true, is shocking at many levels,” says Mark J. MacDougall, a white collar defense specialist at Akin Gump Strauss Hauer & Feld LLP and a former federal prosecutor. “What has been most surprising, though, is the relatively subdued treatment these charges have received from much of the mainstream media. Many journalists who are the most shrill in calling for prosecution and public hearings when serious corruption is exposed in government or business seem to have given this story a pass.”

Before the scandal hit, News of the World was a long–established British tabloid owned by Murdoch’s News Corp. Murdoch, an Australian American who vastly expanded his father’s media business, has fascinated the public for years. By 2000, Murdoch’s News Corp. owned  more than 800 companies in more than 50 countries. Murdoch is easily considered one of the most influential people in the world.

In the late 1960s, Murdoch bought two U.K. newspapers—News of the World and The Sun. Once the biggest–selling English language newspaper in the world, News of the World was transformed into a tabloid in 1984.

In the last few years, News of the World had been accused of allowing and encouraging illegal conduct, specifically phone hacking. In 2006 Clive Goodman, a reporter for the newspaper, pleaded guilty to illegally intercepting voice messages involving the royal family. In 2007 Glenn Mulcaire, a private investigator employed by the newspaper, followed suit with a guilty plea. Goodman and Mulcaire received short prison terms.

In the fallout, News of the World editor Andy Coulson resigned from his post. However, he claimed no knowledge of the conduct and described Goodman as a “rogue reporter.” The affair received some, but not exactly worldwide, media attention.

Fast forward to 2009 and 2010 when it became public knowledge that there were more victims, potentially many more victims, of the phone hacking. And then there emerged allegations not just of additional phone hacking—police and News Corp.’s News International were accused of bribery and a cover–up scheme. The question then became, how widespread was this conduct? And yet there was still little public concern.

But public indifference or minimal curiosity turned to outrage when details emerged on the manner by which News of the World investigated Milly’s disappearance and murder.

“The grotesque events around the hacking into of Milly’s phone pushed the public over the edge,” Raskin says.

‘Major Black Eye’
Attempting to confine the fallout, Murdoch closed News of the World after 168 years in circulation. News Corp. also abandoned its bid to buy satellite broadcaster British Sky Broadcasting.

Murdoch, who has called the phone-hacking scandal a “major black eye” for his company, met with and apologized to the Dowler family. In October, News Corp. agreed to pay 2 million pounds to the Dowler family, while Murdoch will personally give 1 million pounds to charities the family chooses—approximately $4.7 million total for both transactions—according to press accounts.

News Corp. also took out full-page advertisements in several British newspapers to say, “We are sorry.” The media giant announced an internal probe, and Murdoch blamed an outside law firm for failing to uncover the scandal back in 2007.

In July the Wall Street Journal, also owned by News Corp., ran an editorial defending its parent company and striking against the “liberal press” and “our media colleagues” for their coverage of the story.

But these efforts do not appear to have been effective. With criminal investigations looming, News Corp. appears to be struggling to prevent a self–implosion. Shareholders have been calling for the resignations of several of News Corp.’s directors, including Murdoch’s sons James and Lachlan. James is the deputy chief operating officer of News Corp., where Lachlan also serves as director. Two former News International executives said James was informed in 2008 that there might be phone hacking beyond one “rogue reporter,” disputing the latter’s testimony before a parliamentary committee that he had no knowledge of it.

In October British fund manager Hermes Equity Ownership Services, which manages more than $140 billion of assets, called for Murdoch and his sons to resign.

Richard Keil, who provides strategic communications to foreign governments, corporations, and trade associations for communications firm Purple Strategies in Alexandria, Virginia, says News Corp. should have taken immediate action to turn the story around. For example, News Corp. should already have established “new and clear–cut rules governing journalistic code of conduct” to turn the issue into a “‘lesson learned’ opportunity,” Keil says.

“The fastest way to quiet public outrage is to take steps to demonstrate you understand the nature of the problem and are working to solve it,” says Keil, a former White House reporter for Bloomberg News. “Apologies are a first step, but measures like this are what can help change the narrative into one more favorable to you.”

Murdochs in Sight
Whenever a company is engulfed in a scandal, a series of resignations usually follow. News Corp.’s “black eye” has been no different. News International chief executive and News of the World editor Rebekah Brooks resigned on July 15. Les Hinton, former head of News International who recently had taken charge of the Murdoch-owned Dow Jones & Company, stepped down on the same day.

Meanwhile, the scandal has triggered a number of resignations within the British police. And as the bad news accumulated in July, former News of the World reporter Sean Hoare, who had spoken publicly about phone hacking at the tabloid, was found dead in his north London home.

Murdoch and his sons have not yet been removed as of press time, although they are under some pressure to resign. Murdoch and James testified before the British parliament and, at that time, claimed they knew nothing about the phone hacking.

In London, a number of arrests have been made as part of the Metropolitan Police’s investigation. Police also continue to notify individuals who may have been victimized by the phone–hacking scheme. The list now includes bereaved families of soldiers killed in Iraq and Afghanistan, actor Jude Law, and Jade Goody, the reality TV star who died of cervical cancer in 2009.

Accusations have gone further. News of the World reporters are alleged to have paid police for information, and there are revelations that the paper may have used access to private information to intimidate politicians. News Corp.’s marketing unit, the Connecticut-based News America Marketing Group, is also facing investigation in the United States on allegations of flouting antitrust laws and computer hacking, according to Bloomberg News.

One of the leading questions emerging now is how much did either Murdoch or James know about the illegal conduct of News of the World reporters. The answer not only will have public image consequences, but also serious legal ramifications for News Corp.

“If Mr. Murdoch had awareness of what was happening and he took steps to further the conspiracy, then he’s in big trouble,” Kerr says.

It may take some time before the government probes make any headway into the issue, and it remains unclear whether any charges will follow.

Murdoch Empire Under Fire
Perhaps the entire scandal will end up in a snarl of civil litigation. In April, News Corp.’s News International unit admitted liability in some of the civil suits facing the company and agreed to pay compensation. Two of the suits involved actress Sienna Miller and British politician Tessa Jowell.

Mark Lewis, a London attorney representing some of the hacking victims, including the Dowler family, has retained New York lawyer Norman Siegel to explore filing a class action lawsuit against News Corp. in U.S. courts. Siegel has represented the families of many of those killed in the September 11 attacks.

Siegel previously had met with U.S. Attorney General Eric H. Holder Jr. over the question of whether News of the World had hacked into voice recordings of the September 11 victims or their families. That same day, Holder announced that the U.S. Department of Justice will be looking into the allegations.

Speaking on Sky News and BBC television in September, Lewis, a solicitor advocate at Taylor Hampton Solicitors Limited, announced that legal action could begin with taking depositions from various News Corp. officials. He also said the U.S. legal system provided the possibility of damage awards far beyond those possible in Britain. Lewis appears focused on issues of corporate control and the responsibility of News Corp. for the actions of its subsidiaries.

Lewis points out that Brooks acknowledged payments to police officers when she appeared before a select parliamentary committee in 2003. Yet in 2011, Brooks was still in a high–level position at the company.

Rupert and James can “bear responsibility for corporate governance failures and a company culture of corrupt practices,” wrote Lewis in answer to interview questions. News Corp. representatives did not return phone calls to their press office.

In the meantime, News Corp. faces an increasing number of civil lawsuits. On September 13, Neville Thurlbeck, a former senior reporter for News of the World, filed an unfair dismissal suit saying he was fired because he was a whistleblower in the hacking scandal. On October 25, Coulson, who became Prime Minister David Cameron’s communications chief after leaving the tabloid, also has filed a lawsuit over News Corp.’s decision to stop paying his legal fees.

Also this past September, News Corp. shareholders recently amended a lawsuit against the company’s directors to include allegations related to the scandal. The original complaint, filed in March in the Delaware Chancery Court, accused Murdoch of nepotism for buying his daughter’s television production company. The amended lawsuit now accuses News Corp. of a “culture run amuck,” with a board that “provides no effective review or insight.”

“The biggest problem for News Corp. has been the steady drip, drip, drip nature of the bad news that continues to seep out,” says Keil, the crisis communication specialist at Purple Strategies.

Probe Reaches United States
Multiple media reports say U.S. prosecutors are examining whether News Corp. employees tried to hack into the voicemails of those killed in the September 11 terrorist attacks in the United States. In addition, the federal government is investigating whether News Corp. employees did, in fact, bribe police. A British newspaper has reported that News of the World reporters unsuccessfully tried to induce a former New York City police officer to provide private phone records of the September 11 victims.

Federal investigators also are examining whether a News Corp. marketing unit in the United States used questionable tactics, including computer hacking, to crush a competitor. The U.S. Attorney’s Office in the Southern District of New York, well known for handling high–profile criminal investigations, is involved in the probe. Ellen Davis, spokesperson for the U.S. Attorney’s Office, had no comment on the investigation.

An investigation of this size and importance will likely not reach any resolution before the end of the year, observers say. Besides gathering evidence and conducting interviews, investigators are likely trying to determine whether anyone allegedly involved in the scandal can be persuaded to confess and testify against others in exchange for a plea arrangement.

“This is a high–profile case, so it could take at least a couple of months,” says Kerr, the GWU criminal law professor. “Often if there is a conspiracy, it is only broken when a group of people know they are facing charges and somebody chooses to come forward.”

Lawyering Up, Big Time
News Corp. always has had at its disposal lawyers with significant expertise, notably Viet Dinh, a former U.S. assistant attorney general who has been a member of the company’s board since 2004. Now a law professor at Georgetown University Law Center, Dinh also started his own Washington, D.C.–based law firm.

News Corp. also hired Joel Klein, another former U.S. assistant attorney general and the lead prosecutor in the government’s antitrust case against Microsoft Corporation. More recently, Klein served as chancellor of the New York City Department of Education.

Since the scandal unfolded, News Corp. has hired a team of high–profile defense lawyers, including former U.S attorney general Michael Mukasey. Now a partner at Debevoise & Plimpton LLP in New York, Mukasey also was hired earlier this year by the U.S. Chamber of Commerce to lobby Congress to weaken the impact of foreign bribery laws on companies.

In fortifying its defenses, News Corp. also brought in Mary Jo White, former U.S. attorney for the Southern District of New York and a partner at Debevoise & Plimpton. White has defended numerous clients in the media spotlight, including Bank of America Corporation’s former chief executive officer Kenneth D. Lewis.

In London, News Corp. has retained Kathleen Harris and Lord Anthony Grabiner. Harris, a partner at Arnold & Porter LLP, works in the firm’s white collar criminal defense practice group. She previously served in the United Kingdom’s Serious Fraud Office. Grabiner, considered one of Britain’s top lawyers, has been put in charge of News Corp.’s Management and Standards Committee, which will handle all investigations related to the scandal. Klein will advise the board of directors on the committee’s progress.

News Corp. also brought on board noted Washington, D.C., defense lawyer Brendan V. Sullivan Jr., a senior partner at Williams & Connolly LLP. Sullivan defended the late U.S. Senator Ted Stevens, whose case was dismissed after allegations that government misconduct had corrupted the trial.

The hiring of these lawyers “tells you that News Corp. thinks this is a high–stakes matter,” says Jeff Ifrah, a founding partner at Ifrah Law in Washington, D.C., and a former federal prosecutor. “If News Corp. wants to fight, they’ve got the folks on the team who can fight. Whether they fight comes down to the facts and the consequences. But it’s not surprising and it doesn’t tell you much beyond that they wanted and hired some of the best lawyers for white collar defense.”

Ifrah found the hiring of Mark Mendelsohn, a partner in the litigation department at Paul, Weiss, Rifkind, Wharton & Garrison LLP, particularly revealing. Mendelsohn, who served as deputy chief of the fraud section of the Justice Department’s criminal division, is “internationally acknowledged and respected as the architect and key enforcement official” of the department’s modern Foreign Corrupt Practices Act (FCPA) enforcement program, according to the firm’s Web site. 

“It tells you,”  Ifrah says, “that maybe the company is particularly concerned about that area.”

Lawyers who advise corporations on how to handle potential criminal charges say News Corp. should be treading carefully.

“One of the things that News Corp.’s lawyers must be working overtime to ensure is that nobody engages in conduct that makes things worse—destroying records, trying to influence witnesses, lying in police interviews,” says MacDougall, the white collar defense specialist at Akin Gump. “This case is all about records, and when the winds of trouble start blowing, many people can’t resist the urge to start erasing files. In case after case, the underlying conduct can be defended, but actions taken after the investigation begins cannot.”

Potential FCPA Liability
The federal probe is apparently looking into whether News Corp. violated any aspect of the Foreign Corrupt Practices Act (FCPA). The statute makes it a criminal offense for a U.S. person or entity to bribe a foreign official with the goal of obtaining or retaining business.[1]

James G. Tillen, a partner specializing in FCPA issues at Miller & Chevalier Chartered, says the facts in the News Corp. situation are “one step removed” from a typical case brought under the statute.

“In the typical case, the payment to the official is for the official to take an action that directly financially benefits the company,” says Tillen, who coordinates Miller Chevalier’s FCPA & International Anti–Corruption Practice Group. “This case involves paying police to get information, then that information is used for a news article. The argument would be that the news article could lead to additional sales.”

But Tillen says the defense could argue that the statute was not intended to cover this type of conduct. “There could be arguments that this payment was simply for information,” he adds.

Tillen, however, points out that the accounting provisions of the FCPA require publicly listed companies to maintain accurate books, records, and internal controls. The accounting provisions are written “much more broadly” than the anti-bribery provisions, he says.

“Those requirements would be applicable not only to News Corp., but also to its subsidiaries,” Tillen says. “If they didn’t record payments to the police or payments to the people who assisted in the hacking, this could be considered an accounting provision violation. And the fact that this activity appears to have gone on suggests that the company did not have sufficient internal controls.”

Typically, Tillen says anti-bribery allegations result in criminal charges, while accounting provision violations result in civil charges, with the U.S. Securities and Exchange Commission working in coordination with the Justice Department. There are some criminal charges associated with the accounting provisions. However, the federal government tends to file civil charges instead, according to Tillen, or both civil and criminal charges at the same time.

“The reason there may be more of an appetite for accounting provision civil charges is the standard of proof is much easier,” Tillen says. From Tillen’s perspective, the News Corp. case has already brought FCPA enforcement to a “whole new level of attention.”

“FCPA lawyers are even more famous,” Tillen says. “And more companies are paying attention to compliance and hiring lawyers to ensure that they are complying.”

Other Problem Areas
It is also possible that the U.S. investigation could find News Corp. in violation of the federal Computer Fraud and Abuse Act.

“It could be that somebody in London has a voicemail box that is stored in California,” Kerr says. “If that voicemail box was hacked, even if by a reporter in London, it will still be considered unauthorized access into a California computer, and clearly a U.S. crime.”

Kerr explains that the law broadly covers hacking into computers from abroad, “as long as there is some minimal connection” to the United States. How minimal the connection must be, says Kerr, is not entirely clear.

Kerr adds that if someone in the United States knew about the hacking, then a conspiracy charge could also be brought. The Federal Bureau of Investigation is likely delving into the records to determine server locations and voicemail box access.

So far, the Federal Communications Commission (FCC) has stayed out of the controversy. But there has been growing concern about media consolidation, and critics are petitioning the agency to change media ownership regulations.

“What News Corp. has done far better than any other media giant is consolidate power, all as a result of Murdoch’s business acumen,” says Dave Saldana, communications director of Free Press, a Washington, D.C.–based nonprofit organization working to reform the media. “When you have a media outlet that’s so enormous, it has the power to influence you in ways that you don’t even know you are being influenced.”

Attorneys who specialize in FCC matters say there is nothing particularly quantifiable, but when a corporation such as News Corp. is able to acquire so many outlets, it benefits from the willingness of the regulatory agencies to allow so much consolidation.

“From the business perspective, it’s certainly in their economic interest to have multiple outlets,” says Andrew M. Klein, a managing attorney at Klein Law Group, PLLC.

Perhaps, experts say, the consolidation tempted News Corp. employees into a sense of importance and entitlement. They could have broken laws in the interest of staying on the “cutting edge” of a story, and then thought they were part of an organization too big for consequences.

FCC experts say the commission could use section 308 of title 47 of the U.S. Code to look at the character of an applicant when granting licenses. Nevertheless, most experts say it is unlikely that the FCC will simply yank News Corp.’s licenses based on the phone-hacking scandal.

“In general, the FCC and regulators see poor behavior routinely, and consequences aren’t always as severe as one would like,” says Klein, who specializes in telecommunications and litigation. In addition, News Corp. has a great deal of political clout that can influence the situation.

“While it is not clear whether News Corp. engaged in any wrongdoing in the United States, the company does have a lot of political capital here, including supporters in Congress and among the leadership in Washington, D.C.,” Klein says. “When there are questions raised about a company’s behavior, the fact that the company has a good reputation and political capital is of material benefit to the company.” 

Media’s Tainted Image
The Murdoch media empire is certainly experienced in fending off bad press. On top of accusations of biased content, News Corp.’s Fox News Channel also has faced a series of allegations of gender and age discrimination, sexual harassment, and retaliation in its newsrooms.

But the phone-hacking scandal appears to “have legs,” says Keil of Purple Strategies. News Corp. has announced its internal investigation and has said it will hold a review of journalistic standards at its U.K. newspapers. But that is just not a strong enough message, according to Keil.

The problem, as Keil puts it, is that News Corp. has yet to show the world that it has recognized the problem and is actively working to right itself.

“Given how this story has grown and expanded in a negative way, I’d recommend immediate proactive and voluntary steps designed to create an image of transparency and accountability,” Keil says.

American University’s Raskin says law professors, when they teach constitutional law, tend to view the media as the “good guys.” But this case changes everyone’s view of who the good guys are.

“Here we have a situation where the media not only allegedly engaged in criminal conduct, but appear to have been colluding with government power to violate the rights of individuals,” Raskin says.

To Raskin, the allegations against News Corp. do not provide any sort of First Amendment shield in the United States.

“The First Amendment has never been read to confer upon reporters and editors the right to break the law,” he says. “Newspapers are not allowed to run people over on the way to get a story, or bribe government officials to get access to information.”

But it’s not just News Corp. suffering from a “black eye” in public perception. The role of the media is being questioned and, some would argue, devalued as a result of the scandal. And with newspapers and other traditional news sources vying for survival, new media outlets, including blogs and citizen journalist reports, may be able to use such incidents to their advantage.

“We’re moving into a brave new world of cable and broadband and wireless, a world of constantly unfolding technology,” Raskin says. “That’s a far cry from what Benjamin Franklin or Thomas Paine or the various pamphleteers or newspapermen in our history had in mind.”

Raskin, who is also a Maryland state senator, says the case represents an “overdue awakening that we come to reckon with the political and social power of the media and the way it can collaborate with the government.”

“The big paradigm shift is one of people’s perception of the media—are they heroes or villains?” Raskin says. “And in a deeper sense, are media companies now operating primarily as profit-seeking corporations rather than as truth–seeking guardians of the public?”

Saldana of Free Press worries that the average person has been so inundated with stories about the phone–hacking scandal that when they think of the media, that’s what will come to mind.

“It denigrates the entire profession,” says Saldana, a former news producer and a lawyer who has specialized in First Amendment issues. “It’s like in hockey. Over the course of the season, hundreds of incredibly beautiful goals showing unbelievable skill are scored. But what’s shown as a sports highlight is a fight when somebody hits someone with a stick or someone gets bloodied. So what does the average person know about hockey? It’s extremely brutal and full of fights.”

In Britain, there are allegations that phone hacking was not exclusive to News of the World. Actor Hugh Grant, the public face of the “Hacked Off” campaign for media reform, claims that numerous newspapers have been involved in such conduct.

Lawmakers there are discussing reforms to prevent journalists guilty of gross malpractice from working in the news industry. The United Kingdom already has more laws governing privacy than the United States, and in 2001 it established the Press Complaints Commission. However, some lawmakers want to see more statutory regulation.

“A big debate is going on to ensure we avoid ‘state control of the media’ whilst we stop ‘media control of the state,’” says Lewis, the London attorney representing the Dowler family and other phone–hacking victims.

There are also calls for increased media regulation in the United States. However, as any law student can recite, the protections for the press are greater in this country, given the First Amendment. Indeed, most First Amendment experts, and certainly free speech advocates, don’t see any possibility of a government code for journalism ethics ever coming to fruition.

In the end, perhaps the ultimate result will not be increased government scrutiny or control, but, possibly, more self–regulation within the media industry.

“Just because you’re the media doesn’t mean you’re wearing the white hat,” says Raskin. “We have to remember that.”

Note
[1] 15 U.S.C. § 78.

Anna Stolley Persky, a regular freelance writer for Washington Lawyer, worked as an off–air reporter for three years at News Corp.’s Fox News Channel.