A group of News Corp. shareholders, already suing News Corp. alleging failures in corporate governance including those tied to the News of the World phone hacking scandal, have added additional allegations involving hefty payments the company made to resolve privacy breaches at a marketing division.
The shareholders — led by Amalgamated Bank, trustee for various LongView investment funds, the New Orleans Employees Retirement System and Central Laborers Pension Fund — allege that the illicit phone hacking 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,” shareholder attorney Jay Eisenhofer, partner with Grant & Eisenhofer.
A News Corp. spokeswoman did not immediately respond to a request for comment.
Their amended complaint, filed in Delaware Court of Chancery, focuses on News Corp.’s efforts to resolve lawsuits involving News America Marketing, which rivals sued for anti-competitive behavior.
“In one case, a former NAM director testified that the company issued false press releases impugning a rival it was trying to purchase, while mutilating and removing the competitor’s signage from retailers,” the shareholders said in a press release accompanying their 94-page amended complaint. “Equally disturbing, the NAM competitor learned that its secure computer system had been breached on at least 11 separate occasions.”
The shareholders noted that NAM was ordered to pay $300 million in damages and that the company paid $650 million to settle three of the lawsuits.
They also cite allegations that News Corp.’s smart card unit NDS was accused by EchoStar of “illegally extracting software code from competitors’ cards and posting the information online, allowing hackers to create counterfeit cards that could be used to intercept television programming.” A jury ruled in favor of EchoStar on several counts, but awarded paltry damages of just over $1,000. NDS won an appeal ruling in which EchoStar is to pay its legal costs, but the satellite provider is pursuing its own appeal.
The shareholders originally sued News Corp. in March, charging that News Corp.’s acquisition of Shine Group was a sweetheart deal that benefited Rupert Murdoch’s daughter, Elisabeth. She has since withdrawn her name from consideration for a seat on the News Corp.
The shareholders first amended their complaint this summer to include the charges of phone hacking at News of the World, alleging that the full breadth of the scandal could have been prevented and that it has battered the company’s share price.
In their most recent amended complaint, the shareholders also accuse board members of breaching their fiduciary duty in giving the greenlight to a $5 billion share buyback program in July. They says that the buyback mechanism is a way for Murdoch to increase his voting power “and could permit him to obtain absolute voting control without providing any premium to News Corp.’s current public majority shareholders.”
The shareholders also are represented by Bernstein Litowitz Berger & Grossman.