Legal action over Shine deal amended to include World shutdown

A group of institutional investors are amending an ongoing suit against News Corp. to include charges that the company failed “to exercise proper oversight and take sufficient action” in the British phone hacking scandal that led to the shuttering of the company’s News of the World on Sunday.

Several News Corp. shareholders, led by Amalgamated Bank, filed an amended complaint to a lawsuit originally filed in Delaware Court of Chancery in May. That suit challenged News Corp.’s purchase of Shine Group, which was majority-owned by Rupert Murdoch’s daughter Elisabeth, as a case of self-dealing to enrich the Murdoch family. The suit names chairman and CEO Rupert Murdoch, his sons James and Lachlan, and several News Corp. execs as defendants.

In the amended complaint, the shareholders blame Rupert Murdoch for the placement of Rebekah Brooks, a former News of the World Editor who now runs News Corp.’s U.K. newspaper division News Intl., and Andy Coulson, a former aide to British prime minister David Cameron, who were both at News of the World during the time of the phone hacks. Coulson turned himself in and was arrested on Saturday.

The amended complaint called the News of the World hacking scandal “the most recently revealed manifestation of the Board’s utter capitulation to the control and domination of (Rupert) Murdoch.”

“These revelations should not have taken years to uncover and stop,” the complaint states. “These revelations show a culture run amuck within News Corp. and a board that provides no effective review or oversight.” In the amendments, the suit states that Brooks admitted to bribing police at a 2003 select committee hearing, and alleges a widespread coverup among News Intl. and News Corp. executives, naming the chairman and CEO specifically. “It is inconceivable that Rupert Murdoch did not actively inquire into the tabloids’ workings,” write the plaintiffs.

The original suit alleges that Rupert Murdoch “habitually uses News Corp. to enrich himself and his family members at the company’s and its public shareholders’ expense,” citing News Corp.’s purchase (at “an artificially inflated price” of $615 million) of Shine Group.

The complaint also finds fault with the News Corp. board of directors’ decision to allow Elisabeth Murdoch to participate in meetings as a non-voting observer and estimates that she personally gained “at least $250 million” from the Shine sale. The plaintiffs argue that this is “a strong example” of the board’s “deeply disabling conflicts vis-a-vis Rupert Murdoch.”

News Corp. declined to comment.

As of Monday, the allegations have not stopped with News of the World; new charges have been leveled at The Times of London and The Sun over alleged misconduct in relation to former prime minister Gordon Brown. The Guardian has reported that the Abbey Bank found that a “blagger” acting for the Sunday Times “on six occasions posed as Brown and gained details from his account.”

Lawyers for Brown were also reportedly deceived by a con artist working for the Sunday Times.

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