Shareholders File New Charges Against News Corp. Management
September 13, 2011 12:00 pm ET by MMFA Staff
A group of News Corp. shareholders has filed new charges against the company's senior management and board of directors "for repeated failures to correct illegal conduct that has severely battered the company's reputation and market value."
From a press release announcing the charges:
A group of News Corp. shareholders has brought fresh charges against the media giant's senior management and board of directors for repeated failures to correct illegal conduct that has severely battered the company's reputation and market value.
Beyond the phone hacking scandal that has engulfed the company - leading to arrests of senior News Corp. executives and investigations by the U.K. government, and the closure of the popular News of the World tabloid - shareholders outline incidents involving several News Corp. U.S. subsidiaries, revealing that hacking, privacy breaches and anticompetitive practices were not confined to the newspaper division.
Shareholders allege that based on the reported longevity of documented wrongdoing - in some cases going back at least to the late 1990s - News Corp.'s board was well aware of widespread misconduct at several of its U.S. subsidiaries. The company was forced to pay nearly $1 billion in verdicts and settlements resulting from third-party privacy breaches at its consumer marketing unit News America Marketing.
The new charges are contained in a second amended complaint filed in Delaware Court of Chancery by News Corp. shareholders, led by Amalgamated Bank, trustee for various LongView investment funds, the New Orleans Employees' Retirement System and Central Laborers Pension Fund. The shareholder group is represented by leading securities and corporate governance law firms Grant & Eisenhofer P.A. and Bernstein Litowitz Berger & Grossmann LLP.
"The revelations surrounding News Corp.'s corporate governance lapses get worse with each new disclosure," said Grant & Eisenhofer partner Jay Eisenhofer. "In fact, our new complaint shows that the illicit phone hacking and subsequent cover-ups at News of the World were part of a much broader, historic pattern of corruption at News Corp., under the acquiescence of a board that was fully aware of the wrongdoing, if not directly complicit in the actions."
In the newly amended complaint, shareholders also accuse board members of breaching their fiduciary duty in approving a $5 billion share buyback this past July as a means of buttressing the company's waning stock price in the face of the hacking scandal. Investors assert that the buyback mechanism potentially increases Murdoch's voting power and could permit him to obtain absolute voting control without providing any premium to News Corp.'s current public majority shareholders. The buyback plan, shareholders contend, is just another illustration of the way in which Murdoch runs News Corp. like a "personal fiefdom."