How Bad Is News Corp.?

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Source URL: http://www.adweek.com/news/advertising-branding/how-bad-news-corp-133928

How Bad Is News Corp.?

Michael Wolff on the state of the Murdoch empire and
its Mob-like structure
By on August 8, 2011
In my biography of Rupert Murdoch, I referred to News Corporation as Mafia-like,
provoking the annoyance of my publishers libel lawyers. I explained to them that I did not
mean to suggest this was an organized crime family, but instead was using mafia as a
metaphor to imply that News Corp. saw itself as a state within a state, and that the
company was built on a basic notion of extended family bonds and loyalty.
But just because its a metaphor doesnt mean it isnt the real thing, too.
Well-sourced information coming out of the Department of Justice and the FBI suggests a
debate is going on that could result in the recently launched investigations of News Corp.
falling under the RICO statutes.
RICO, the Racketeer Influenced and Corrupt Organizations Act, establishes a way to
prosecute the leaders of organizationsand strike at the organizations themselvesfor
crimes company leaders may not have directly committed, but which were otherwise
countenanced by the organization. Any two of a series of crimes that can be proven to
have occurred within a 10-year period by members of the organization can establish a
pattern of racketeering and result in draconian remedies. In 1990, following the indictment
of Michael Milken for insider trading, Drexel Burnham Lambert, the firm that employed
him, collapsed in the face of a RICO investigation.
Among the areas that the FBI is said to be looking at in its investigation of News Corp. are
charges that one of its subsidiaries, News America Marketing, illegally hacked the
computer system of a competitor, Floorgraphics, and then, using the information it had
gleaned, tried to extort it into selling out to News Corp.; allegations that relationships the
New York Post has maintained with New York City police officers may have involved
exchanges of favors and possibly money for information; and accusations that Fox chief
Roger Ailes sought to have an executive in the company, the book publisher Judith
Regan, lie to investigators about details of her relationship with New York police
commissioner Bernie Kerik in order to protect the political interests of Rudy Giuliani, then a
presidential prospect.
The U.S. is in an awkward if not downright ridiculous position in terms of the maelstrom
that has engulfed News Corp. in Britain.
While News Corp. does most of its business in the U.S., prosecutors here have no
jurisdiction over the phone hacking crimes that were committed in the U.K. And its quite
possible, because of differences in news gathering operations in the U.S., and in cell

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phone protocols, that no hacking was committed here. And while hacking may have taken
place by British reporters against targets in the U.S.as alleged in Jude Laws suitthat
remains to be proven.
And yet, what has happened in the U.K. is far from mere rogue behavior in a remote
foreign division. Rather, News International is a division that has long been one of the core
components of the company, both in terms of revenue and brand, and one that has
reported to the highest echelons of the company: Rupert Murdoch himself, his closest
confidants, and, more recently, his son, James.
Still, it could well be that even with its U.K. operation shuttered or sold, its executives put
on trial, and with the opprobrium of the British government and public heaped on it, the
company can continue with its same ethos and methods of operation in the U.S. (Indeed,
given the declining growth of the newspaper business, the share price of the company
might well go up without them. The shareholders would have benefited from News Corp.s
crimes.)
Here is where the RICO logic comes in. The usual path of a criminal investigation follows
the crimes back to the sourcethats what happened to News Corp. in the U.K. when the
royal family discovered that its voice mail messages were appearing in the press. But in a
RICO investigation, you are really following the ethos and methods of operation of a group
or organization to the crime. In other words, criminal activity is not seen as an isolated or
particular eventas News Corp. has desperately and unsuccessfully tried to portray the
crimes that occurred in the U.K.but as an established pattern of conduct.
As it happens, much of this pattern of conduct at News Corp. has long been hiding in plain
sight. How the company has gotten away with such behavior is, in fact, a subtext of the
investigations that are now unfolding.
Partly, the company has escaped legal scrutiny because this is a boys-will-be-boys sort of
story. News Corp.s by-any-means aggressiveness has become so much a part of its
identity that it seemed almost redundant to find fault with it. Everybody knew but
nobodyfor both reasons of fear and profitdid anything about it; hence its behavior has
become, however unpleasant, accepted.
And partly, its because the fundamental currency of the company has always been reward
and punishment. Both the New York Post and Fox News maintain enemy lists. Almost
anyone who has directly crossed these organizations, or who has made trouble for their
parent company, will have felt the sting here. That sting involves regular taunting and,
often, liesObama is a Muslim. (Or, if not outright lies, radical remakes of reality.) Threats
pervade the companys basic view of the world. We have stuff on him, Murdoch would
mutter about various individuals who I mentioned during my interviews with him. We have
pictures.
Similarly, the Post and Fox News heap praise and favors on partisans, who in turn do
them favors (the police, in New York as well as London, receive and return the favors).
This reward and punishment has translated into substantial political power, both in terms
of regulatory advantages and, too, in the ability of the company to shield itself from the
kind of scrutiny that it has taken a perfect storm of events to have it now receive.

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Then, too, as one of the largest media organizations, it has insured a hands-off attitude (if
not policy) from other media organizationsthose which have business with it, or whose
executives want to protect their prospects of working for it, or that extend courtesies in the
hope they will be extended back.
Theres also the money. Ultimately, if you have the goods or the savvy with which to
damage the company, you get paid off. In London, thats how News Corp. thought it could
contain the hacking scandal, with big cash payments to and confidentiality agreements
with the hacking victims. In the U.S., Floorgraphics, the company that News America
Marketing tried to extort, was bought for far more than its value when it persisted in its suit
against News Corp. Judith Regan received an outsize settlement when she pushed her
claim that Ailes had pressured her to lie about her relationship with Kerick.
A former News International executive of my acquaintance reminds me of a detail I have
forgotten: There are rat traps throughout News Internationals headquarters in Wapping,
the old distillery and warehouses where Rupert Murdoch moved his British papers in the
late 1980s as a way to break the print unions. There are rat traps even in Murdochs own
office. And the rats there are very large.
Beyond the obvious metaphor that the freely running rats suggest, theres another. News
Corp. has never had anything more than a thin skin of an orderly, well-resourced, highly
regulated corporation. Underneath the first layer is a kind of unreconstructed, even
Dickensian, do-anything-to-survive world. Indeed, in some ways it is a culture in rebellion
against the decorous and straightlaced world. News Corp. revels in its anti-establishment
view. If it has a central philosophy, its against regulation and, in a sense, even modernity.
When I was beginning my book, just after the company acquired Dow Jones, Murdoch
was being encouraged to think about a new branding campaign for the company
(branding is a modern concept Murdoch would otherwise sneer at)the notion he
fastened on and had to be talked out of involved making the symbol of the company a
pirate ship.
Just as this conversation was going on so was a conversation about the editorial oversight
board Murdoch had agreed to as a condition of buying the Wall Street Journal. He thought
it was a joke. He thought the people who believed that he would take such a board
seriously and honor its terms were a joke. Of course, he wouldnt be bound by his
agreement! (And, indeed, he promptly cast it aside, supplanting the papers editor, which
he had expressly committed not to do.)
News Corp. protects, too, its reprobates, its pirates, seeing them as, somehow, the soul of
the company.
There is the inexplicable story of Richard Johnson, the Posts Page Six editor who
admitted to taking payoffs from sources that wanted favorable coverage. He has continued
to thrive in the company. Theres the executive at News America Marketing, Paul Carlucci,
who despite the apparent and costly illegalities that occurred under his management, was
promoted within News Corp. And theres Bill OReilly: well-documented charges of sexual
harassment have not in the least dimmed his career at Fox News.
Its all about the organization. Its an organization all about doing what Rupert wants you
to do, or doing what you imagine Rupert wants you to do, or doing what you imagine your
boss imagines Rupert wants done. There are few companies as large as News Corp. that

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are so devoted and in thrall to one man. There are few companies which, over so long,
have so assiduously hired the kind of people who would be in thrall to one man. Indeed,
News Corp. can be quite a disorganized and scattered company, and yet its driving
premise, what unites and motivates this oft-times gang-that-couldnt-shoot-straight
enterprise, is to do as Rupert would have you do.
Its a superior and blind kind of loyalty. Can you? Murdoch says to several executives
visiting with him on his boat (this is the old boatmuch smaller than the grander one he
has now) when he receives a phone call that he needs to take in private. The executives
jump in the water and swim around the boat until the call is done (and this story is not
apocryphal).
The most direct method of undoing this sort of enterprise is undoing this sort of loyalty.
In London, there have now been 10 arrests. While British law does not provide for the kind
of U.S.-style plea bargaining that can easily flip a co-conspirator, there is, ever-more
apparently, no where else to turn. There will be no News International safe haven in terms
of cash or comfort. While the company continues to pay legal fees, and, in the case of
Rebekah Brooks, apparently continues to keep her on the payroll (despite representations
otherwise), this is a last gasp of the companys ability to buy dedication. There are too
many questions now. In other words, the value of loyalty is fast running out. In the end, it
will be a human drama, as all scandals are, about lives and careers upended and the
necessity to save yourself.
In the U.S., curiously, the company has, for the last few years, been undoing its own
loyalty program. Arguably, the hacking scandal has unfolded not just because the
organization is, at its heart, antipathetic to reasonable community standards, but because
the organization itself is in turmoil. James Murdoch has been the manager of this scandal,
and James is simply not as cunning, or perhaps even as cutthroat, a pirate as his father.
The coterie that has long surrounded Murdoch, executives who have carefully managed
and tempered him, which included Peter Chernin, the COO, Gary Ginsberg, his chief
communications lieutenant, and Lon Jacobs, the general counsel, have been
systematically parted from the company, not least of all because James Murdoch has
been consolidating his influence over his father by dispatching the men who might have
competing influence. Although each of these men has been paid bountiful amounts to
maintain a minimum loyalty, the truth is they are embittered, tooand they know
everything.
You dont get it, Ruperts son-in-law, Matthew Freud, the infamous London PR man,
told me almost a year ago. If there was a conspiracy in the company, the conspiracy was
to keep Rupert from knowing.
Freuds convoluted formulation answered a question I hadnt asked and suggests that 10
months before the Milly Dowler revelations and the bottom falling out of the scandal,
Murdoch intimates were sensing how close this could come to the center and essence of
their lives. Indeed, its not clear why you would have to conspire to keep someone from
knowing what he did not know, nor why you would, unprompted, make admitting to a
cover-up a main thesis of your defense.
You wouldntexcept if you understood (and Freud is one of the people within the
company to have a gimlet-eyed understanding of it) that everything that happens at News

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Corp. is systemic, that this is an organization predicated on a certain view of the world that
fosters a certain behavior (that might turn weaker stomachs), that its nature runs from the
top to bottom and bottom to top. And that the necessary and desperate and ultimate
strategy has to be an effort to protect the man at the center of it all. Because there is
nothing without him.
Advertising & Branding Technology Television The
Press Commerce Mobile News of the World Online phone hacking Phonehacking Scandal Rupert Murdoch Newspaper

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