Calpers Waves Wet Noodle at Murdochs, While DoJ Appears to Be Sitting On Its Hands

It’s a bit curious that l’affaire Murdoch, which has dominated the news in England, has gotten some air time here, but not in proportion to its importance in the UK and potentially in the US. True, you have to know a bit of who has done what to whom over time, but stuff like hacking the voicemails of dead little girls and live major government officials, lying in Parliamentary investigations, paying hush money, and suborning the police isn’t that hard to explain. And it’s also hard to imagine that a culture that the US operations didn’t share at least some of the aggressive and reckless habits of its siblings across the pond.

At least one party, Calpers, which is the largest pension fund in the US, appears to have decided to use this revelation of the Murdochs’ feet of clay to open up an issue that was worth airing a long time ago: the hold the family maintains on News Corp. The company’s dual class equity structure allows the Murdoch clan to maintain a 40% voting interest, when their economic stake is worth only 12%. The tendency of big institutional investors to support management means that 40% is more than enough to assure effective control (not that one needs to argue the point, given how the Murdochs are the company). And Prince Alwaleed bin Talal holds a 7% stake, and has been and continues to be a loyal supporter of the family.

This means the Calpers effort is dead from the outset. The Murdoch control does serve as useful vehicle to publicize this issue, but don’t mistake it for a serious salvo. From the Financial Times:

“Power should reflect capital at risk. Calpers sees the voting structure in a company as critical. The situation is very serious and we’re considering our options. We don’t intend to be spectators – we’re owners,” Ms [Anne] Simpson [senior portfolio manager and corporate governance chief]. said. “Dual class voting is one way to pervert the alignment of ownership and control…

The dilemma for News Corp’s board is how to establish its independence, the fund manager said. “Where the founder is still in control, as at News Corp, it is hard to see him running the board as a hands-off chairman or letting an independent chairman in to run strategy and the board. And the worst of all worlds would be to bring in a puppet chairman.”

The real problem is the notion that shareholders in liquid, widely held companies are anything other than spectators. It’s much easier for unhappy investors to sell than to try to have an impact on corporate governance. Companies have so many defense mechanisms in place, in particular staggered boards, that it is virtually impossible for dissident shareholders to have an impact. And the way they do is typically indirect: like short sellers, they make such a stink that the damage to the stock force management to change behavior.

And by contrast, the parties in the US that could force change on News Corp. don’t seem to be seriously entertaining the question as to whether any action is needed. The Guardian discusses the peculiar complacency of the US officialdom (hat tip reader Foppe):

What’s not remotely clear at this point, however, is whether the people and organisations who can actually do something to bring the America-based Murdoch empire to heel are paying much attention. I refer mainly to the agencies with subpoena and enforcement power in the federal government, such as the Securities and Exchange Commission and the Department of Justice.

It will, in fact, surprise me if the authorities working for the Obama administration take this up in a serious way. After all, Obama’s typical approach is to insult his allies while he cozies up to his enemies.

Imagine if the roles in this scandal were reversed. That is, imagine that the perpetrators of the voicemail hacking, apparent bribery of police and who knows what else were part of a liberal news conglomerate while Republicans controlled the White House and at least one house of Congress.

You can bet that a George W Bush administration would respond with savage pleasure. It would use the situation like this to punish its political opponents. One would expect the same from any of the plausible Republican candidates for president in 2012. And Republicans in Congress would be frothing at the mouth to ensure that the company paid dearly for its transgressions…

The Obama administration doesn’t seem terribly interested, despite news stories suggesting that an investigation has begun, and his party doesn’t have anything like enough spine to force the issue. The Democrats stand for essentially nothing, as they’ve shown repeatedly in recent years. To be fair, moreover, Washington has other issues on its table – the debt ceiling, for example, which threatens to blow an even bigger hole in the struggling economy…

Would it bite hard or be long-lasting? Probably not. Fox is one of the right wing’s primary propaganda arms, after all, and it employs a variety of out-of-work GOP politicians (especially those who might someday run for president). Punishing that operation would have consequences.

Admittedly, there are efforts afoot to turn up the heat on News Corp, but they come from outside the Administration, and there is no assurance the DoJ will go through anything more than a pro forma effort. Frank Lautenberg asked the FBI and DoJ to investigate a case of alleged hacking that was settled between Floorgraphics and News Corp.

One effort that could change the picture radically is the FBI investigation into allegations of phone hacking of 9/11 families. But that took place so long ago I wonder whether they can make much headway, even if the accusations were accurate.

The obvious avenue is the Foreign Corrupt Practices Act, particularly as more information about efforts to derail police investigations comes to light. As Eliot Spitzer wrote in Slate last week:

Much more importantly, the facts already pretty well established in Britain indicate violations of American law, in particular a law called the Foreign Corrupt Practices Act. The Justice Department has been going out of its way to undertake FCPA prosecutions and investigations in recent years, and the News Corp. case presents a pretty simple test for Attorney General Eric Holder: If the department fails to open an immediate investigation into News Corp.’s violations of the FCPA, there will have been a major breach of enforcement at Justice. Having failed to pursue Wall Street with any apparent vigor, this is an opportunity for the Justice Department to show it can flex its muscles at the right moment. While one must always be cautious in seeking government investigation of the media for the obvious First Amendment concerns, this is not actually an investigation of the media, but an investigation of criminal acts undertaken by those masquerading as members of the media.

What is the FCPA? Enacted after the scandals of the 1970s in which American corporations were bribing overseas officials in order to secure business deals, the FCPA was an effort to bring some baseline of ethics to international business. It prohibits any American company or citizen from paying or offering to pay—directly or indirectly—a foreign official, foreign political figure, or candidate for the purpose of influencing that person in any decision relating to his official duties, including inducing that person to act in violation of his or her lawful duty. Very importantly, even if all such acts occur overseas, the American company and citizen will still be held liable here. So acts in Britain by British citizens working on behalf of News Corp. create liability for News Corp., an American business incorporated in Delaware and listed on American financial exchanges.
The rampant violations of British law alleged—payments to cops to influence ongoing investigations and the hacking of phones—are sufficient predicates for the Justice Department to investigate.

So if nothing comes to pass, it will be because, as has happened so often, Eric Holder is nowhere to be found when a prosecution might inconvenience powerful interests.

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  1. Skippy

    The seeming DOJ inaction with Newcorp in America, sans the provisional FBI inquire (snicker sub prime fraud rebuttal syndrome), as any action would be a direct attack on *America its self*, hence triggering all kinds of Homeland Security provisions.

    Skippy…the Ronnie Raygun library opening special on Feral Faux News, CLASSIC!!!!!STUFF!!!!!

    Outfoxed see:

    Make popcorn and watch the hole series!

    1. skippy

      Sorry for the multi-posts, just wanted to point out the coverage in America to-date, as a high note, was his wife’s actions in parlament…grrrr…tiger wife.

      Skippy…spin spin spin…oh look honey, on the TV, some low pockets has tried to belittle our great leader (ultimate expression of free market exceptionalism {boot licker hannity said so}) and his stoic wife interceded… hooray! Wow she should take that energy and apply the same, too the evil parliamentarians, bad government, bad, don’t they know god decides whom receives his gifts….barf….head back into mister bucket…again.

  2. attempter

    I don’t understand. According to everything I’ve learned about the Ownership Society, we little people are, through things like Calpers, the owners and rulers of big companies like Newscorp. This article sounds skeptical about that.

    (Then there’s the fact that after all that propaganda, the kleptocracy is working hard to liquidate these pension funds which are a major basis of it. That’s one of several ways in which the kleptocrats’ short-run greed undermines their longer-run political tenability. One of the few things we have going for us.)

    1. Skippy

      “short-run greed undermines their longer-run political tenability”

      Naw, they will just change the rules when it becomes untenable, shift the paradigm, hell look at the last 50ish years.

      Skippy…but in the end they will blame in on the earth, its self, and that will be when things get real interesting, brute force needed. Fear the *believers* of which ever stripe they come in…eh.

  3. aeolius

    In the great Russian film “Alexander Nevsky” the eponymous hero, gathering forces to fight the proto-Germans, passes a Mongolian warrior and mutters IIRC “the time ha not yet come”
    I kinda like comparing Obama with Nevsky. He has, like Nevsky to raise the little people against the…. Republicans
    Nyquest is perhaps the priest who plays the organ.
    Let the Fox situation ripen.
    And Obama is surely well informed about Brit. inquires.
    The larger battle here in the UK and Australia is the concentration of media power. I expect that the NYTimes did not do its digging just to discredit NotW.
    I am reminded of the Prokofiev score to Nevsky, and hear the strains of the Russian motif in the ATT T-Mobile objection.
    Get ’em on the ice Barach

    1. Michael Fiorillo


      Can you seriously believe, in July of 2011, that Barack Obama would ever do anything to discomfit the global ruling class? If so, try posting at Daily Kos or MoveOn; I hear the Kool-Aid is still being served there.

  4. niat holder

    The fact that ten+ years have passed,whatever forensics in regard to the families “intercepted” 9/11 communications,the FBI and other 3 letter agencies would’ve had time to destroy or delete evidence.Mueller stonewalled this and obstructed, destroyed alot.The SEC had the records “bluesheeting” from the WTC intranet system CBOE for market surveillance. The SEC has had the opportunity for for TEN+ years (Spitzer followed this trail before he was busted)to pursue the digital trail of the $hort$ pre- 9/11.But, if the GOP/TPTB cabal throw us all into the vortex of a collapsing economy it’ll be a moot point.

      1. John

        I believe he’s referring to the put options bought against American Airlines and United Airlines shortly before 9/11.

  5. required

    AG Holder: I’m shocked, shocked to find that common criminality and rank political corruption is going on here!

  6. Hugh

    “Obama’s typical approach is to insult his allies while he cozies up to his enemies.”

    A common error. This is exactly backwards. It is based on a misunderstanding of who Obama thinks his allies and enemies really are.

    Holder was a corporate lawyer, or perhaps I should say is. He continues to represent the same interests he has throughout his career.

    I guess my questions about the 9/11 phone hacking are what statutes are we talking about and what is the statute of limitations on them?

  7. War Investing

    News Corp was pivotal in anesthetizing key demographics prior to the illegal war of violent aggression against Iraq. The DOJ sits on their hands after banks destroyed neighborhoods coast to coast, and prisons are filled with non-violent offenders, and the expectation is what?

  8. Justicia

    One would think the FCC would take an interest in the Murdoch broadcast licenses as well. “Moral character” is one of the qualifications required of licensees:

    The FCC has broad discretion to establish the qualifications for applicants seeking a television broadcast license and for licensees seeking renewal. The FCC has exercised this discretion to prescribe an assortment of qualifications relating to citizenship, financial solvency, technical prowess, and moral character, and other criteria the commission has deemed relevant to determine the fitness of particular applicants to run a television station.

  9. Lyle

    For Newscorp just like Ford there are two classes of common stock A and B. Only B has votes except in a few cases, not including the directors election. Murdoch holds 38% of the B stock, giving him effective control.

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