RPT-NEWSMAKER-Can school reformer Joel Klein reform News Corp?

Mon Jul 18, 2011 7:45am EDT

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(Repeats NEWSMAKER first released late on July 15)

* Klein part of Murdoch's "inner circle"

* Has 'restless energy' to take on new challenges

* Friends say not afraid to stand up to Murdoch

By Joseph Ax and Noeleen Walder

NEW YORK, July 15 (Reuters) - When Joel Klein stepped down from running New York City's schools last year to head the education division at News Corp (NWSA.O), he seemed to be trading the glare of government for private sector comforts.

Now he is back in the public eye.

News Corp chairman and CEO Rupert Murdoch has turned to him to "provide important oversight and guidance" as the embattled media group grapples with allegations that reporters at British tabloid News of the World hacked into the cell phones of politicians and other targets.

In response to the growing crisis, News Corp has rushed to create a management and standards committee that reports directly to Klein. His power seems likely to grow after Rebekah Brooks stood down from running News Corp's British newspaper operations and Les Hinton resigned as Dow Jones CEO.

Klein, 64, joins a hastily formed "inner circle" of Murdoch, his son James, and Chief Operating Officer Chase Carey to fight the crisis, a source familiar with the company's plans said.

He has kept a low profile since the announcement and News Corp is silent on the details of his duties. It will not conduct an internal investigation while the police investigate in order to avoid interference, the source said.

Klein's extensive legal background -- most notably, he ran the U.S. Justice Department's antitrust division in the late 1990s, overseeing the government's case against Microsoft -- prompted Murdoch to turn to him for guidance, the source said.

Former colleagues say Klein is unflappable, even in times of turmoil.

"He was the guy who engendered a lot of trust in the clients, so when they had crises, he would stay calm and help them work their way through things," said Paul Smith of Jenner & Block. He worked alongside Klein at the law firm of Onek, Klein & Farr in the 1980s.

'RESTLESS ENERGY'

A Harvard Law School graduate, Klein earned a reputation as a stellar appellate lawyer in private practice before serving as deputy White House Counsel under President Bill Clinton.

Before becoming chancellor of the New York City school system, Klein headed the U.S. operations of multinational media giant Bertelsmann AG (BTGGg.F). His wife, Nicole Seligman, is general counsel for Sony Corp (6758.T) and represented Clinton during his impeachment proceedings while a partner at the prominent law firm Williams & Connolly.

Former colleagues say he awakens at 5 a.m., responds to emails with alacrity and plays a mean game of tennis.

"Joel doesn't like to do anything that he's not going to excel in," said Peter Scheer, executive director of the First Amendment Coalition and a former colleague at Onek, Klein & Farr.

Klein is not known as an expert in crisis management, but his lack of experience has not been an issue in the past, those who know him said. New York City Mayor Michael Bloomberg entrusted the nation's largest public school system to Klein for eight years, although he lacked formal education experience.

"I think the best analogy for it is being head of the antitrust division," said Phillip Malone, who helped run the Justice Department's antitrust investigation of Microsoft Corp(MSFT.O) under Klein. "None of which he had much personal experience with -- he had done mostly appellate work -- but he is incredibly good at putting together teams and managing them and knowing what has to get done."

In prosecuting Microsoft, Klein brought in famed attorney David Boies to handle the trial.

At News Corp, where his pay package could be worth $4.5 million this year, including bonuses, he built a team of education executives, including some hires from New York: Kristen Kane, the former COO of the city's education department, and Diana Rhoten, founder of a New York City firm that develops new media and technology products for schools.

RUNNING THE SCHOOLS

Klein, a product of New York City public schools, took a leave of absence from law school to take education classes and teach math in a Queens public school.

Years later, as schools chief, Klein's push for greater accountability for teachers and principals and his emphasis on data-driven initiatives made him a national voice in school reform.

"He took over a huge, huge bureaucracy having to make major changes," said New York City Corporation Counsel Michael Cardozo. "I think he did an absolutely miraculous job."

His eight-year tenure was not immune to criticism. Parent groups attacked him for closing schools, politicians accused him of favoring charter schools over public schools and unions lambasted him for his efforts to end tenure and seniority.

"He really doesn't know how to do any of the glad-handing," said councilwoman Gale Brewer. "He lives a little bit in his head, I think -- that's what very smart people sometimes do."

Klein's reputation for independence should lend credibility to News Corp's response to the crisis, friends said.

"If he's empowered to conduct an investigation without constraints, he'll get the full picture, Scheer said.

Scheer said Klein would not be afraid to stand up to Murdoch and would be keen to show his independence.

He said some critics of Murdoch might suggest he is placing Klein in an advisory role to win the benefit of the association without empowering him to "get to the bottom of the mess."

"All I can say is, Joel Klein would not let himself be used that way if that were happening," Scheer added. (Reporting by Joseph Ax and Noeleen Walder; editing by Jesse Wegman and Andre Grenon)

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