News Corp.Chairman Rupert Murdoch is "not a fit person" to lead a major international company, U.K. lawmakers said, after his British unit misled Parliament about the extent of phone hacking at its News of the World tabloid.
Mr. Murdoch "turned a blind eye and exhibited willful blindness to what was going on in his companies and publications," the House of Commons Culture Committee said in a report today that split lawmakers along party lines on critical findings. "This culture, we consider, permeated from the top throughout the organization and speaks volumes about the lack of effective corporate governance at News Corp."
The report may increase the chances that U.K. regulator Ofcom deems News Corp. unfit to hold a broadcasting license and asks the New York-based company to reduce its 39% stake in British Sky Broadcasting Group. The phone-hacking scandal prompted News Corp. to abandon a 7.8 billion-pound ($12.6 billion) bid for the rest of BSkyB, the U.K.'s biggest pay- television provider, last year.
Three executives at the News International unit -- Les Hinton, Tom Crone and Colin Myler -- gave misleading testimony to the committee in 2009, the panel said in London. The company failed to disclose documents and made statements that "were not fully truthful," and Mr. Murdoch, 81, and his son James must ultimately take responsibility, the lawmakers said.
"All the pieces of the jigsaw haven't been pieced together," committee member Paul Farrelly, from the opposition Labor Party, told reporters. "At the end of the day, the human cost has to be at the front of our view." He called News Corp. "a company that gave lectures to the public but acted immorally and criminally itself and held itself above the law."
The 11-member committee has been working on its report since July, when the Murdochs were summoned to testify about their roles in the scandal. Father and son told a media-ethics inquiry last week that underlings, particularly Mr. Crone and Mr. Myler, were to blame for their failure to detect any wrongdoing at the now defunct newspaper.
"The News of the World and News International misled the committee about the true nature and extent of the internal investigations they professed to have carried out in relation to phone hacking," the panel said. "Their instinct throughout was to cover up rather than seek out wrongdoing."
The six Labor and Liberal Democrat lawmakers on the committee voted to conclude that Rupert Murdoch is "not a fit person" to lead a major international company and the four members of Prime Minister David Cameron's Conservative Party voted against it. One of them, Louise Mensch, said they "felt that was ultimately outside the scope of a select committee."
"Rupert Murdoch clearly is a fit and proper person to run an international company," said Philip Davies, another dissenting Conservative. "He's been running businesses since before I was born. We've seen absolutely no evidence to suggest that Rupert Murdoch was aware these things were going on."
Labor's Tom Watson argued that those in charge needed to take responsibility. "We found News Corp. carried out an extensive cover-up of its rampant lawbreaking," he told reporters. "The two men at the top of the company need to answer for that ."
The division along party lines may lead to further suggestions that Mr. Cameron and his Conservatives are too close to Murdoch. Culture Secretary Jeremy Hunt is under pressure to resign following the publication of emails last week which showed his office had been providing information to News Corp. about the government's thinking on the BSkyB bid even when Hunt had been in charge of deciding whether to allow it.
The report was skeptical about the elder Mr. Murdoch's claim that the hacking and the cover-up had all been at too low a level for him to know about it. "In his testimony and also the Leveson Inquiry, Rupert Murdoch has demonstrated excellent powers of recall and grasp of detail, when it has suited him," the committee said.
News Corp.'s response was by turns contrite and combative. "Hard truths have emerged from the Select Committee Report: that there was serious wrongdoing at the News of the World; that our response to the wrongdoing was too slow and too defensive; and that some of our employees misled the Select Committee in 2009," the company said. "News Corporation regrets, however, that the Select Committee's analysis of the factual record was followed by some commentary that we, and indeed several members of the committee, consider unjustified and highly partisan."
Ofcom has said it will draw upon the report for its decision as to whether News Corp. is fit to hold a broadcasting license. The regulator asked News Corp. last week to provide documents from civil cases involving phone hacking as it decides whether the matter has compromised the company's ability to run BSkyB, and it said today it will assess the new and emerging evidence.
Tim Bale, professor of politics at Sussex University, said the committee's conclusion was "a really serious accusation to make." The lawmakers are "not the people ultimately to decide whether someone is a fit and proper person, and it's not over until the fat lady, in other words a regulator, sings," he said.
Police probes into phone and computer hacking and bribery have led to about 45 arrests, including former News of the World editors Rebekah Brooks and Andy Coulson, once Cameron's communications chief. News Corp. closed the Sunday tabloid in July after revelations that the newspaper listened to voice-mail messages on the phone of a murdered schoolgirl.
After the hacking scandal first became public in 2006, with the arrest of a reporter, Clive Goodman, and a private investigator, Glenn Mulcaire, the company's "containment approach" was to blame the crime on one "rogue reporter," the panel said. It then shifted blame to "certain individuals," including Mr. Myler and Mr. Crone, "whilst striving to protect more senior figures," notably 39-year-old James Murdoch, News Corp.'s deputy chief operating officer.
Mr. Myler and Mr. Crone "cannot be allowed to carry the whole of the blame as News Corp. has clearly intended," the committee said. "The whole affair demonstrated huge failings of corporate governance."
The two men, summoned before the Culture Committee last September, denied having misled it in 2009. Written evidence later sent to the committee and to the Leveson Inquiry showed that both had been told of claims that hacking had been more widely practiced. Two years later, when James Murdoch accused them of keeping evidence from him, they replied that they had both known about it and showed it to him.
Mr. Hinton didn't tell the truth about payments to Goodman and the extent of his knowledge of the voice-mail allegations, the lawmakers said today. Mr. Crone misled the panel about the significance of the first legal settlement with a victim of hacking, while he and Mr. Myler lied about their knowledge of the participation of other News of the World employees in criminal activity, according to today's report.
Parliament as a whole will be asked to vote on whether the men are guilty of contempt of the legislature. The committee chairman, John Whittingdale, said it wasn't clear what the punishment was for this, as no one has been found guilty of it for decades. Ms. Mensch questioned whether Mr. Myler was fit for his current role, as editor of the New York Daily News.
Mr. Myler said in an emailed statement today that "I stand by the evidence that I gave the committee."
-- Bloomberg News --