Murdoch & Co. Do D.C. Shuffle

Transcripts of FCC depositions of Rupert Murdoch and his Fox minions were required reading here last week as the probe into Fox’s alleged illegal foreign ownership rolled on.

At issue in the ongoing review is whether Murdoch deceived the Federal Communications Commission in 1985 over the sources of financing used to buy six Metromedia TV stations that are now the core of the Fox network. The NAACP, with an assist from NBC, accuses Fox of violating rules that bar foreigners from owning more than 25% of U.S. TV stations.

Fox insists the charges are nonsense, pointing to Murdoch’s decision to become a U.S. citizen to avoid FCC sanctions. Moreover, Fox says the NAACP/NBC claims are rendered moot because Murdoch owns 76% of the voting stock of Fox Television’s holding company.

Whatever the outcome of the Fox investigation, it seems clear from the line of questioning that FCC interrogators believe Fox was less than candid in disclosing that 99% of the equity used to finance the Metromedia purchases was coming from Australian-based News Corp.

At the same time, the transcripts do not appear to contain the “smoking gun” that would lead to ultimate FCC revocation of Fox licenses. D.C. insiders are predicting the FCC may hit Fox with either an order to restructure or a fine. A worst-case scenario for Fox would be for the FCC to designate the case to an administrative law judge for a hearing.

The transcripts themselves are chock full of drama, intrigue and comic relief. At the conclusion of the Australian-born Murdoch’s grilling, NAACP attorney Laura Blackburne asked the media mogul whether he owns pet kangaroos.

Murdoch himself was in strictly business mode. He exploded in anger when an FCC interrogator zeroed in on the origins of the Metromedia financing. “We said it here. We said it a dozen times, and either your people can’t read, don’t understand English or understand damned instruction (sic), or you have a witch hunt in this,” he railed.

Here’s Murdoch’s take on tax laws, and why he rarely pays it much attention: “If you listen to tax lawyers, they run your whole damn life,” said Murdoch. “I mean, you’ve got to decide what you’re going to do and do it and pay your taxes. That’s the philosophy I work under. Sorry.”

Then there was Tom Herwitz, the former FCC lawyer-turned-Fox station general manager, who now professes to be separate from Fox with his stalled SF Broadcasting endeavor. Yet Herwitz admitted at the conclusion of testimony that Fox was bankrolling his attorney fees.

And there was Mickey Gardner, Fox’s former D.C. counsel, who conceded he wrote a memo questioning the wisdom of a proposed Fox restructuring after the FCC OK’d the Metromedia buys. “We have been in agreement that it is paramount to avoid any corporate restructuring which would potentially invite re-examination of Fox TV’s ownership structure,” he wrote in 1990.

Other noteworthy nuggets were uncovered from the exhibits and transcripts, including the following:

* Steve Sewell, a highly respected FCC attorney who worked on the Fox/Metromedia case before his retirement, provided a sworn statement claiming he was unaware that 99% of the coin to finance Murdoch’s station buys was coming from Australian sources. Yet Fox rounded up several former FCC staffers to contradict Sewell’s statement, and Fox lobbyist Preston Padden last week claimed Sewell “flat-out refused” to review the 1985 documents before making his blanket statement.

* Murdoch, within a year of becoming a U.S. citizen in 1985, was angling to become a “dual citizen” of both the U.S. and Australia for purposes of holding on to his two Australian TV stations. The idea was dropped when Aussie authorities balked at the idea.

* Gardner insisted the FCC was well aware of the sources of financing for Murdoch, and granted the application because a fourth network was “intoxicating” and good for the public interest.

* William Reyner, Fox’s D.C. attorney, is convinced that Murdoch will emerge unscathed at the FCC. “I don’t think there’s any basis for fines, restructurings or anything,” he says. “Three times we told (the FCC) that News Corp. had substantially all or all of the equity” in the Fox stations. Fox, he says, “will be prepared” to challenge any FCC penalties.

* Seventeen former and current Fox witnesses, including Murdoch and his former top lieutenant, Barry Diller, were queried by the FCC. The agency has given interested parties until Feb. 27 to comment on the Fox transcripts, with replies due March 9. A final decision could be rendered by April.

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