News Corp. Faces Increased Scrutiny In U.S.; First Congress, Now FBI

Until now, Rupert Murdoch has been able to keep his various News Corp (NSDQ: NWS). enterprises in different countries from rubbing off on each other. This time it’s different — amplified by instant, ubiquitous media coverage, the pressure of outrage shared by social media, and, for some, the sheer glee of having a new reason to investigate one of the most powerful global media empires and possibly take it down. Less than two weeks after the first fresh reports of phone hacking in the UK, members of Congress are demanding inquiries and, in response, the FBI is looking in to allegations that now-defunct News of the World targeted 9/11 victims for phone hacking.

An unidentified law enforcement official told the AP Thursday that a preliminary inquiry is underway, prompted by requests from U.S. Rep. Peter King and others to FBI Director Robert Mueller: “The official stressed that the review was in its infancy but declined to discuss the scope of it or say what steps had been taken. The FBI routinely makes preliminary inquiries into issues raised by lawmakers and others to determine whether a full-blown investigation is needed.”

Often those inquiries lead nowhere after the initial publicity burst but every so often there is enough to take them to the next level. At least one senator has asked for the SEC to investigate as well.

As for Congress, so far the senators who are on record include Democrats Jay Rockefeller, Barbara Boxer, Robert Menendez and Frank Lautenberg. It’s hard to believe they will be the last — this bandwagon has lots of room and if Parliament is any sign, other elected officials will hop on. There’s already some talk of calling Murdoch to testify before Congress. Murdoch already has a date with Parliament, grudgingly accepted when it became clear he and son James would be summoned if they did not consent.

Meanwhile, Murdoch told the Wall Street Journal today that News Corp. would have a new “independent” investigation headed by a
“distinguished non-employee” that would examine the charges and also establish a “protocol for behavior” for new reporters across the company. Board member Joel Klein, a former assistant U.S. attorney general in charge of News Corp.’s education efforts, is currently responsible.

It’s not clear whether he will be the one picking the head of the new investigation. For it to be truly independent, that probably will have to be done by the company’s independent directors (who aren’t all very independent). One of them, though, has experience with this kind of thing: venture capitalist Tom Perkins, who resigned from the HP (NYSE: HPQ) board during that company’s privacy scandal in which his own phone records were hacked.