Updated: News Corp. Scandal: The Legal Fallout

Murdoch @ D8

The repercussions from the phone-hacking done by News Corp (NSDQ: NWS). journalists and executives are piling up so fast it’s hard to keep track. In addition to the public loss of face and obvious ethical implications, the real and potential legal consequences are mounting.

One example: the arrest of Rebekah Brooks, expected at some point but not this soon and especially not on a Sunday.

As part of its early efforts to one day get a fresh start, News Corp. is already hiring outside firms to help it out. That includes legal talent from Williams & Connolly. As NYT’s DealBook reports, that’s a departure from its usual go-to law firms.

Here’s a list of the legal fallout thus far:

»  British police have arrested seven people thus far in connection with the phone hacking scandal; and two others were arrested because they are believed to be involved in the bribing of police officers, according to a report today from The Associated Press.

»  Prime Minister David Cameron has appointed a judge to oversee a criminal inquiry into the phone hacking activities at News of the World and elsewhere. Deposed News Corp. executive Rebekah Brooks, along with both Murdochs, have agreed to testify before a committee in Parliament next week. (Brooks’ appearance may be in doubt following Sunday’s arrest.)

»  Attorneys representing actor Jude Law filed a lawsuit today against The Sun, another News Corp. owned tabloid, saying the newspaper’s employees illegally hacked his phone. Law already has a lawsuit going against News of the World; his former fiancee Sienna Miller has already received £100,000 and an apology from NOTW.

»  Law wasn’t the only actor filing suits today. British actor Hugh Grant is suing the London Metropolitan Police; according to the report in Bloomberg, that’s a strategy that some possible victims are pursuing to get any evidence the police have about whether their phones were accessed or not. In April, Grant published a transcript of a conversation he had with an ex-NOTW journalist in the New Statesman, in which the journalist said that phone hacking was common practice.

»  Senior execs at News of the World are alleged to have bribed British police in order to get phone numbers for members of the royal family. As noted above, there have already been two arrests related to this allegation.

»  A few big News Corp. shareholders, including Amalgamated Bank and Central Laborers’ Pension Funds, have already filed shareholder lawsuits against Murdoch, saying he ran the company in an irresponsible way. More such lawsuits are probably on the way. Even though shareholder lawsuits don’t necessarily amount to much–they can and are filed over practically anything that makes a company’s stock go down–such allegations have a big lift when there’s a real, and well-publicized, scandal behind them.

(It’s worth noting that these shareholders already had lawsuits underway, as The Telegraph reported last night; in March, they filed a lawsuit arguing that News Corp.’s £415m purchase of his Murdoch’s daughter’s TV company was a case of “rampant nepotism.” Now that the NOTW phone-hacking scandal is breaking, they’re adding additional allegations to the suit.)

And in the U.S.

»  The FBI is considering an investigation against News Corp. It will mostly hinge on whether any of the hacking activities occurred in the U.S. Among the groups who are upset: families of Sept. 11 victims, who believe that British tabloid reporters may have hacked into victims’ cell phones.

The first reports of FBI interest came out from anonymous leaks early this week, but today U.S. Attorney General Eric Holder confirmed that a federal investigation is underway. Members of Congress asked him to open the investigation, Holder said.

»  One criminal charge which really might not be a stretch: anti-bribery charges. As any white-collar defense lawyer can tell you, the feds have stepped up enforcement of the Foreign Corrupt Practices Act, or FCPA, in recent years. That law bars companies that do business in the U.S. from bribing foreign officials. A ProPublica story considering the FCPA ramifications of this whole business notes that News of the World reporters are alleged to have paid British cops $160,000 in total.

»  And there’s also been talk of Congress asking the Murdochs or other News Corp. execs for answers directly. Rep. John Conyers (D-Michigan), a senior lawmaker on the House Judiciary Committee, released a statement noting that News of the World, “which maintained a bureau in Hollywood, had for years illegally intercepted the voicemail messages of private individuals residing in the United States,” Conyers added.

»  Brooks was arrested by appointment Sunday and questioned for hours. Her arrest followed by three days the arrest of Neil Wallis on suspicion of conspiring to intercept communications. Wallis was a former deputy editor at News of the World and, following that, was a communications consultant to Scotland Yard. Brooks resigned the day after he was arrested.

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