Complaint says board feared angering Murdoch
As the drumbeat of a U.K. phone hacking scandal rolls along, so does a lawsuit against News Corp.’s board by a handful of investors in Delaware Chancery Court. Amended and re-filed three times, most recently this week, the suit charges directors and top execs of breaching fiduciary duty for not investigating earlier and engaging in a cover up.It’s the only legal action against News Corp. in the U.S. related to the hacking scandal. Cases by individual people who say they’ve been hacked are all over England and been hinted here, but never materialized. And it’s a high bar in Chancery Court to prove what people knew, or should have know, and when. News Corp. declined to comment. It has a Management and Standards Committee to lead internal inquiries and aid British po lice investigating hacking and corruption. There have been dozens of arrests and a massive public outcry in the U.K. that caused a major business setback — forcing the conglom to abandon a deal to buy BSkyB. Plaintiffs in the Delaware suit, led by Amalgamated Bank, claim the committee came late and directors were too afraid of disturbing chairman-CEO Rupert Murdoch to follow red flags that started waving a decade ago. News Corp. stock rose 0.94% Tuesday to close at $20.51, near its 52-week high as investors shrug off the scandal. In fact some are pleased that it’s harder for Murdoch to pursue dynastic succession or risky acquisitions. His son and heir apparent James was running U.K. operations when the scandal erupted and is now back at News Corp.’s New York headquarters. “The board refused to investigate known illegal conduct because doing so would put the board at odds with (Murdoch) and the Murdoch family and their close friends,” the suit says. “The board is conflicted on any matter where the Murdochs’ interests differ from the company and its outside shareholders.” And the suit says Murdoch wields disproportionate control through major shareholder Prince Alwaleed bin Talal. Murdoch keeps the prince in his pocket, the suit says, by investments in his Rotana Group. “As a result of this mutually beneficial relationship between the Murdoch family and Prince Alwaleed and the Prince’s publicly professed unwavering support for the family, the Murdochs’ effective voting control is nearly 50%.” The original suit was filed in spring 2011 after News Corp. acquired Shine, a company owned by Murdoch’s daughter Elisabeth, for about $480 million. Plaintiffs accused the board of breaching its fiduciary duty on that deal, without any reference to hacking. But a stream of revelations, ruling and testimony in the U.K. as the scandal unfolded provided fodder to expand the complaint last June, again in September, and, most recently, Tuesday night. News Corp. has about month to file a motion to dismiss, and plaintiffs to oppose. A person close to the suit said the judge could hear oral arguments in September or October.