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citizens for responsibility and ethics in washington

July 22,2011 Honorable John D. Rockefeller, Chairman Honorable Kay Bailey Hutchison, Ranking Member Senate Committee on Commerce, Science and Transportation Washington, DC 20510 Honorable Fred Upton, Chairman Honorable Henry A. Waxman, Ranking Member House Committee on Energy and Commerce Washington, DC 20515
BY FAX

Dear Senators Rockefeller and Hutchison and Representatives Upton and Waxman: Citizens for Responsibility and Ethics in Washington ("CREW") respectfully requests that the Senate and House Commerce Committees hold hearings to determine whether Rupert and James Murdoch are of the requisite character to allow News Corp. to retain its 27 Fox broadcast licenses in the United States. While normally this might be an issue for the Federal Communications Commission ("FCC"), given the nearly unbelievable scope of the misconduct and FCC Chairman Julius Genachowski's previous statements that the commission will not get involved, I it is imperative that Congress step in. News Corp. executive James Murdoch has been accused of lying to a British parliamentary select committee when he testified earlier this week. Two former News of the World senior executives, including the paper's lawyer, have said Mr. Murdoch provided untrue information regarding an out-of-court settlement made to Gordon Taylor, the chief executive of the Professional Footballers Association.' Colin Myler, editor of the paper until it was shuttered two weeks ago, and Tom Crone, the paper's long-standing legal manager, said they had expressly advised Mr. Murdoch of an email suggesting the paper's claim that only one rogue reporter had hacked voicemails was untrue.' The existence of the so-called "for Neville" email- named after the paper's former chiefreporter

See Molly Peterson, News Corp.'s U.S. Woes Unlikely to Put Pressure on U.S. Broadcast Licenses, Bloomberg News, July 13,2011.
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Lisa O'Carroll, James Murdoch Lied to MPs, Say Former NoW Editor and Lawyer, The Guardian, July 21,2011.
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Honorable John D. Rockefeller Honorable Kay Bailey Hutchison Honorable Fred Upton Honorable Henry A. Waxman July 22, 2011 Page Two Neville Thurlbeck - was apparently critical in the paper's decision to pay Mr. Taylor approximately 700,000 pounds after he threatened to sue in 2008. In their statement, Messrs. Myler and Crone said, "James Murdoch's recollection of what he was told when agreeing to settle the Gordon Taylor litigation was mistaken. In fact, we did inform him of the 'for Neville' email which had been produced to us by Gordon Taylor's lawyers. ,,4 The email is believed to have been critical in the decision to pay Mr. Taylor such a large sum because had its existence been revealed, it would have undermined the company's insistence that only one reporter had been involved in the hacking.' At the parliamentary hearing, Mr. Murdoch claimed the email had been concealed from him by Messrs. Crone and Myler when he was persuaded to sign off on the settlement with Mr. Taylor. When questioned specifically by MP Tom Watson as to whether he had seen or been made aware of the email at the time he agreed to the settlement, Mr. Murdoch replied, "No, I was not aware of that at that time."? John Whittingdale, the chairman of the Culture, Sport and Media Select Committee said in light of the statement by Messrs. Myler and Crone, the committee would be asking Mr. Murdoch to reappear as the committee viewed the '''for Neville' email as one of the most critical pieces in the whole inquiry," because it demonstrated the hacking was not limited to just one reporter. 7 In fact, given the timing of the Taylor settlement, the statement by Messrs. Myler and Crone indicates Mr. Murdoch was made aware over two years ago that more than one reporter had engaged in phone hacking, but took no action. In another development, Sen. Frank Lautenberg explained in a letter yesterday to Attorney General Eric H. Holder Jr. and FBI Director Robert S. Mueller, Illl that in 2005, he was informed by the New Jersey company FLOORgraphics that the U.S. Attorney's Office for the District of New Jersey, the FBI, and the Secret Service had initiated an investigation into allegations that News America, owned by News Corp., had illegally gained access to FLOORgraphics' password-protected computer system to obtain the company's confidential

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O'Carroll, The Guardian, July 21,2011.

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Honorable John D. Rockefeller Honorable Kay Bailey Hutchison Honorable Fred Upton Honorable Henry A. Waxman July 22,2011 Page Three information.' Apparently, News America had sought to purchase FLOORgraphics, which rebuffed the offer, leading News America's chief executive officer Paul Carlucci to warn FLOORgraphics' owners: "From now on, consider us your competitor and understand this: if you ever get into any of our businesses, I will destroy you. I work for a man who wants it all, and doesn't understand anybody telling him he can't have it a11."9 Mr. Carlucci's boss was Rupert Murdoch. A few years later, FLOORgraphics discovered the computer breaches took place 11 times over four months and traced the hacking back to an IP address registered to News America's offices in Connecticut. 10 The company eventually sued News Corp. and during the trial evidence showed the hacking gave News America access to information that could be used to damage FLOORgraphics, including details of every sale the company had made, its client list and sales proj ections. II Soon after the computer hacking the company began losing clients, many of whom switched to News America. 12 The case was settled when News America purchased FLOORgraphics for approximately $29.5 million. 13 These latest allegations follow prior revelations that News Corp. employees regularly hacked the voicemails of celebrities, members of the British royal family, British soldiers and murder victims and that those on the company payroll bribed members of Scotland Yard for information that would help News Corp. sell more papers. Here in the U.S., a former New York City police officer said he was offered money by a News Corp. journalist to retrieve the phone records of 9/11 victims, and actor Jude Law has said his phone was hacked while he was in New York City.

8 Letter from Sen. Frank Lautenberg to Attorney General Holder and FBI Director Robert Mueller, July 20,2011.

9 Ed Pilkington, US Senator Invokes Web-Hacking Trial in Call for Murdoch Inquiry, The Guardian, July 21,2011. 10Id.
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Pilkington, The Guardian, July 21, 2011.

Honorable John D. Rockefeller Honorable Kay Bailey Hutchison Honorable Fred Upton Honorable Henry A. Waxman July 22,2011 Page Four As you know, broadcast frequencies may be used only by people of good "character" who will serve "the public interest," and speak with "candor.':" "Significant character deficiencies" may warrant disqualification from holding a license. 15 The actions of Messrs. James and Rupert Murdoch demonstrate they do not have the requisite character to retain the 27 broadcast licenses News Corp. currently maintains. Courts have upheld the FCC's consideration of character in making licensing determinations as reasonable and appropriate in judging whether a license holder or applicant is likely to obey FCC rules requiring openness and honesty with the commission." The FCC may consider an applicant's past conduct, including non-broadcast conduct, as a guide to how the applicant is likely to operate a broadcast station in the future. 17 In looking at misconduct, the FCC must consider whether misconduct is isolated or represents a pattern of misbehavior as well as how recently it occurred." An inquiry that concerns itself only with felony convictions or crimes of moral turpitude is inadequate. 19 The revocation of the licenses oflicensees who the FCC found "lacked candor" has been upheld." Although rare, the FCC has seen fit to withdraw broadcast licenses in the past. In 1980, the commission withdrew RKO's radio and broadcast licenses because its parent company lied

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See 47 U.S.C. § 308. In re Comparative Broadcast Hearings, 1 FCC.2d 393 (1965).

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16 Contemporary Media, Inc. V FCC, 214 F.3d 187 (D.C. Cir. 2000), cert. denied, 532 U.S. 920 (2001).

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In re RKO General, Inc. (WNAC-TV), 78 FCC.2d 1 (1980).

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In re John Clarence Cook, 1 FCC.2d 1534 (1965). Kay v. FCC, 396 F.3d 1184 (D.C. Cir. 2005), cert denied, 546 U.S. 871 (2005).

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Honorable John D. Rockefeller Honorable Kay Bailey Hutchison Honorable Fred Upton Honorable Henry A. Waxman July 22, 2011 Page Five and bribed foreign officials." In 2003, the commission found owners of Georgia radio station WMGA lacked "basic character qualifications.i'" Therefore, there is precedent to withdraw News Corp. 's broadcast licenses. Given the reprehensible conduct of News Corp., the company's demonstrated pattern of illegally hacking both in the U.K. and the U.S., the likelihood the company paid bribes in the U'K, and perhaps in the U.S., and the Murdochs' demonstrated lack of candor both after learning about the company's misconduct in 2008 and when questioned about it earlier this week, congressional hearings examining whether the Murdochs have the requisite character to retain the broadcast licenses are clearly appropriate.

Melanie Sloan Executive Director

cc:

Honorable Julius Genachowski Chairman, Federal Communications Commission

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In re RKO General, Inc. (WNAC-TV), 78 FCC.2d 1 (1980).

Reynolds Holding and Richard Beales, No U.S. Peril for News Corp., at Least Not Yet, New York Times, July 20,2011.
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