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News Corp’s Possible Settlement Amount – Not The Media’s Finest Moment

Before Wal-Mart’s FCPA scrutiny dominated the news cycle in April 2012, there was News Corp.

In July 2011, the U.K. Guardian reported 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” and the next day the Guardian, based on my comments and those of others, made the link between these payments and the Foreign Corrupt Practices Act.

What followed over the next 10 days was the most intense worldwide media coverage of the FCPA in its history.  (See here for the prior post detailing News Corp.’s FCPA scrutiny).

Like Wal-Mart’s FCPA scrutiny, News Corp.’s continued FCPA scrutiny continues to generate much media attention and some of it is completely off-base.

For instance, earlier this week on his media and modern life column in the Guardian (see here)  Michael Wolff wrote that a possible settlement of FCPA charges by News Corp. “could be as high as $850 million” and “could go as high as billions.”

Anything of course is possible, but Wolff’s reporting (he is also the author of the book “The Man Who Owns the News:  Inside the Secret World of Rupert Murdoch”) should have been met with skepticism by anyone knowledgeable about FCPA enforcement.

The largest FCPA settlement in history is the $800 million enforcement action against Siemens in 2008.   All of the top FCPA enforcement actions involve foreign procurement.  No FCPA enforcement action outside the context of foreign procurement (such as payments to secure foreign licenses, permits, etc.)  has topped $100 million.

News Corp.’s FCPA scrutiny is not based on payments in connection with foreign procurement.  Given the nature of the allegations against it and the type of company News Corp.  is, a record-setting – or even top – FCPA enforcement action is unlikely.

Moreover, even though every company has different disclosure practices, none of the common data-points suggesting an imminent FCPA settlement have been disclosed by News Corp.

Nevertheless, Wolff’s report spread like wild-fire around the internet and among various news organizations and was also carried forward by several websites devoted to the FCPA.

Similar to Las Vegas Sands FCPA reporting in March (see here for the prior post), news of News Corp.’s possible settlement amount was likewise not the media’s finest FCPA moment.

In an analyst call on June 11th, after publication of Wolff’s column, the following exchange occurred between an analyst and Murdoch.

Julie Tanner

Good morning. Julie Tanner with Christian Brothers Investment Services. […]  And my question’s related to the settlement with the Department of Justice, if the board could comment on that? And if so, how much is that? […]

Rupert Murdoch

So let me start with your first question. Nice to see you again. I suspect your question is triggered by an article that was published in the Guardian, which is testimony to the fact, the old adage, that those who are talking don’t know, and those who know aren’t talking. The reality is that there is no settlement that’s been arranged with the Department of Justice. There have been no discussions of amounts. There have been no discussions of fines, period. We have an ongoing cooperative relations with the Department of Justice. That is where things stand. […]

Murdoch’s statements to the market are actionable under the securities laws for any material misrepresentation or omission.  Thus, those interested in following News Corp.’s FCPA scrutiny should place a greater emphasis on his statements than a media and modern life column.

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