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News Corp. Inquiry Is Following A Typical Path

In July 2011, world-wide media attention focused on News Corporation and its potential Foreign Corrupt Practices Act exposure.  See here for a detailed prior post.

Recently, News Corp. has been back in the news.  Last week, various news outlets (see here from Reuters for instance) reported that New Corp.’s potential FCPA exposure has escalated as U.S. authorities continue to investigate the company.  Among other things, the report noted that “much of the evidence police are examining in the News Corp case was handed over to investigators by the company, who have set up a special clean-up unit in London and hired batteries of lawyers in Britain and the United States, some of whom specialize in FCPA cases.”

Over the weekend, it was reported (see here from the Guardian) that five senior journalists of The Sun (a News Corp. owned paper) were arrested concerning allegations of payments to police officers and others including Ministry of Defense and other military officials – all “foreign officials” under the FCPA.  As relevant to the FCPA’s books and records and internal control provisions, reports suggest that company records show many of the intended recipients of the problematic payments being recorded in company records under false names.

The recent News Corp. news and the escalation of the investigation are not surprising.  In fact, the inquiry is following a typical path for an FCPA inquiry.  In this July 2011 post, I noted (as to “what is likely to happen next”) that News Corp. would cooperate in the investigations and that cooperation in the FCPA context often means conducting an internal, independent review of the conduct at issue and sharing the results, witness statements, key documents, etc. with the enforcement agencies on a near real-time basis.   Indeed, the New York Times reports (here) that “those arrested have been presented with receipts, expenses reports, messages and other internal documents during questioning.”

The July 2011 post noted that the gray cloud hanging over News Corp. is likely to last for a couple of years because it is typical for an FCPA enforcement inquiry to begin based on a certain set of limited and discrete facts  but that before the enforcement agencies will  agree to resolve an FCPA matter, it is typical for the agencies to ask the “where else” question.  I noted that News Corp. was likely to conduct a targeted world-wide review of its operations to understand whether the London police payments were isolated or whether other News Corp. employees around the world, or in other business units or divisions, made similar payments to “foreign officials.”  The recent developments suggest that this is the case.  As I indicated to the Guardian (here), the recent arrests and allegations spread the alleged bribery to a different newspaper, to a different segment of the company, and to other public officials.

In short, the News Corp. FCPA inquiry is following a typical path and the recent news surrounding News Corp. is not surprising nor is it likely to be  the last.

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