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News Corp. Development

Before Wal-Mart’s FCPA scrutiny dominated the headlines in April 2012, the most intense instance of worldwide media coverage of Foreign Corrupt Practices Act scrutiny belonged to News Corporation in July 2011.  As noted in this [1] prior post, various media outlets reported, among other things, that “up to five [U.K. police] officers were paid between them a total of at least £100,000 in cash from the News of the World” – a then News Corp. publication.  

From there, the story spread and grew to include allegations of potential other payments.

The prior post detailed, in a Q&A format, the various FCPA implications of News Corp.’s FCPA scrutiny including how police officers have been alleged recipients of improper payments in prior FCPA enforcement actions.  The prior post also discussed the obtain and retain business element of the FCPA and how, during the past decade, the DOJ has brought numerous FCPA enforcement actions outside the context of foreign government procurement.

Very soon after the story broke, The Wall Street Journal (which is published by Dow Jones – an entity owned by News Corp) went on the offensive  [2] stating:

“The political mob has been quick to call for a criminal probe into whether News Corp. executives violated the U.S. Foreign Corrupt Practices Act with payments to British security or government officials in return for information used in news stories. Attorney General Eric Holder quickly obliged last week, without so much as a fare-thee-well to the First Amendment.”

“The foreign-bribery law has historically been enforced against companies attempting to obtain or retain government business. But U.S. officials have been attempting to extend their enforcement to include any payments that have nothing to do with foreign government procurement. This includes a case against a company that paid Haitian customs officials to let its goods pass through its notoriously inefficient docks, and the drug company Schering-Plough for contributions to a charitable foundation in Poland.”

“Applying this standard to British tabloids could turn payments made as part of traditional news-gathering into criminal acts. The Wall Street Journal doesn’t pay sources for information, but the practice is common elsewhere in the press, including in the U.S.”

Some were even so bold to suggest [3] (again on the editorial page of the Wall Street Journal) that the FCPA inquiry of News Corporation was “inappropriate” because the  “the FCPA was certainly not intended to police news-gathering .”  I noted in response that bribery was not a First Amendment issue, but also agreed that the intense media coverage of News Corp.’s FCPA scrutiny shined a needed light on the FCPA’s new era.

I specifically noted that News Corp.’s FCPA scrutiny, like so many others, raised two distinct questions as to the FCPA’s new era of enforcement.  The first question is whether – given the DOJ and SEC’s current enforcement theories – the London police officer payments can expose News Corporation to FCPA liability.  That answer is yes and the First Amendment is not relevant to this question.  The second question is whether Congress intended, or whether Courts would agree, that the FCPA applies to the numerous FCPA enforcement actions (actions typically resolved through non-prosecution and deferred prosecution agreements and thus subject to little or no judicial scrutiny) in this new era that have nothing to do with obtaining or retaining foreign government contracts or influencing foreign laws or regulations.  The Story of the Foreign Corrupt Practices Act [4] instructs that the answer is no and indeed the DOJ/SEC have an overall losing record when put to its burden of proof in such cases (see here [5]).

Notwithstanding the open issues, News Corp.’s FCPA scrutiny escalated and the company’s internal investigation and cooperation in the government’s investigation followed a typical path as noted in this [6] prior post.  As highlighted in this [7] prior post, in connection with the Hollywood film studios sweep, New Corp.’s 20th Century Fox received an SEC letter of inquiry asking for “information about potential inappropriate payments and how [various] companies dealt with certain government officials in China.”

As noted in this [8] prior post, in March 2013, no less than the Dow Jones owned Wall Street Journal reported as follows regarding News Corp.’s FCPA scrutiny.

“Since 2011, the Justice Department has been overseeing a criminal investigation of News Corp. relating to revelations that its British papers hacked phones and bribed public officials to get information for articles. Almost two years later, that probe is nearing completion, government and company officials said, setting the stage for settlement negotiations between the U.S. and News Corp.  News Corp., which has hired law firm Williams & Connolly to oversee the FCPA case, is expected to make its final presentation detailing the company’s global bribery investigation to the Justice Department next month, according to people familiar with the matter. It will be then up to the Justice Department to spell out what punishment or sanctions, if any, the agency wants, and at that point negotiations will likely begin. The Justice Department doesn’t publicly discuss cases that close without charges filed. Both sides expect an agreement would include a monetary settlement of some kind, based on the alleged violations in the U.K. The government has also investigated potential misconduct in the company’s former Russian outdoor billboard subsidiary, according to people familiar with the case, specifically whether it paid bribes to local officials to approve sign placements in that country.” (emphasis added).

Fast forward to the present.

Recently News Corp. disclosed [9] as follows.

“On January 28, 2015, News Corporation (the “Company”) was notified by the United States Department of Justice that it has completed its investigation of voicemail interception and payments to public officials in London and is declining to prosecute the Company or Twenty-First Century Fox, Inc.”

The DOJ rarely responds to media requests about FCPA matters, but various sources have quoted a spokesperson from the DOJ sayings that it has closed its probe into “possible violations of the FCPA concerning bribes allegedly paid for news leaks.”

The New Corp. development is a fitting follow-up to yesterday’s post titled “The Black Hole of FCPA Enforcement. [10]

Words of course matter in an SEC filing and it is perhaps worth noting that News Corp.’s disclosure, by its own words, is limited to the DOJ and payments to public officials in London.

Perhaps time will tell another potential end result of this most notable instance of FCPA scrutiny, or perhaps it has already been told.