INSIGHT-Inside Rupert Murdoch's UK newspaper clean-up operation
LONDON Feb 2 (Reuters) - The centre of Rupert Murdoch's British newspaper clean-up operation is an unimposing set of offices in a corner of the company's campus in Wapping, east London.
It is here that the scarred reputation and the future of Murdoch's UK newspaper titles may be rescued or broken for good. The chairman and chief executive of News Corp says he has entrusted the operation, known as the Management and Standards Committee (MSC), to investigate the details of phone-hacking and alleged police bribery by his London tabloids and prevent such events from happening again.
On a typical day, say people who are familiar with the operations of the MSC, up to 100 personnel from several of London's top law firms as well as forensic advisers and computer experts file into the MSC's office through special security to search through more than 300 million emails, expense claims, phone records and other documents that amount to several terabytes of data. Their work is expected to take at least another 18 months. Reams of paperwork that cannot fit in the offices are stored in warehouses at another, secret location. In an unusual arrangement, 15 or 20 police are embedded with the team.
The committee was in the spotlight last weekend, when British police arrested three senior current staffers and one former journalist from Murdoch's Sun tabloid in a bribery investigation. The company's chief executive said he understood the arrests came as a result of documents handed over by the MSC. In December, the committee surfaced an email trail that indicated James Murdoch, Rupert's son and heir apparent, was alerted to the scale of the alleged hacking years ago -potentially contradicting testimony James gave to the British Parliament last summer.
Fact-finding committees are a common strategy employed by multinationals engulfed in scandal. But so far, the committee has brought more strife than relief for New York-based News Corp and its British newspaper division, News International. The MSC's work is earning respect from many who have clashed with the company over phone hacking. But it also faces criticism on multiple fronts, including News International journalists who fear it is tossing loyal staff under the bus, parliamentarians who suspect it is insufficiently independent of Murdoch, and lawyers who allege the committee's main interest is in repairing the company's reputation, not outing the truth.
Mark Lewis, a lawyer for victims of phone hacking by Murdoch's now-defunct News of the World, said News Corp's push to settle the dozens of civil cases against News International - the committee is the primary point of contact for lawyers representing hacking victims - conflicts with its remit of transparency. His clients include the family of murdered schoolgirl Milly Dowler. The revelation that her cell phone was hacked on the orders of a News of the World reporter turned the paper's illegal voicemail interception into an international scandal.
"If they really want the truth to come out, then they should be willing to let things go to a trial," Lewis said. "They should stop trying to settle cases and let it go to a trial."
News International says it "is committed to reaching fair and where possible swift settlements with victims of illegal voicemail interception." It has also launched an online scheme to enable people to settle their cases without having to go to court. Reuters is a competitor of Dow Jones Newswires, a unit of News Corp.
The MSC was set up last July, in the heat of the phone-hacking scandal. News International's long-held defence that illegal voicemail interceptions were the work of a single, "rogue" reporter had crumbled under the weight of evidence of an industrialized hacking operation. Advertisers pulled out of the News of the World. News International closed the 168-year-old tabloid, apologised and agreed to compensate some victims.
The committee consisted of a group of three executives who were relatively new to the company, including Will Lewis, an award-winning former editor of Britain's Daily Telegraph who joined News International as general manager in 2010 and was seen as a rising star at the company before being seconded to the MSC. The committee is chaired by Anthony Grabiner, a leading London commercial barrister.
News Corp said the group would root out the causes of the wrongdoing, cooperate with criminal and civil investigations, and establish new standards of behavior that would ensure no such scandal could recur at Murdoch's remaining British titles: the Sun tabloid, the Times of London broadsheet and its sister, the Sunday Times.
News Corp says the committee is independent of News International. But it isn't independent of the parent company: via Joel Klein it reports to News Corp board member Viet Dinh, who was an associate counsel to the U.S. senate banking committee for the Whitewater investigation of President Bill Clinton. Dinh, who also served as a U.S. assistant attorney general in the George W. Bush administration, has been on the board for eight years, and is godfather to a child of Lachlan Murdoch, Rupert's eldest son.
Klein was initially hired by Rupert Murdoch to head a new education division at News Corp.
In the United States, people in News Corp's headquarters are aware of the growing tensions in London but feel they have no alternative but to stick to their course, according to a company insider.
The committee is divided into teams of lawyers and police who work in soundproofed offices, according to the people who are familiar with the work. The volume of data is so large that there is no question of reading each document. Instead, searches are carried out for key terms, meaning that no one knows what secrets may be buried in the documents - many of them deleted or corrupted emails that have been recently recovered - until the right term is hit upon.
MSC workers try to keep a distance from News International's journalists. At first they were in the same building, but kept bumping into reporters and editors in the lobby or lifts. Now they are in a separate building where they share a floor with BrandAlley, an online clothing retailer in which News International has a stake.
But different buildings do not guarantee peace. News International journalists say they are furious at the committee. When media reports began circulating that an insider had described the MSC's work as "draining the swamp," tempers flared.
"What do they mean, 'drain the swamp'?" asked a News International journalist. "Are they saying we're a bunch of filthy insects?" News Corp, the journalist continued, "is seen as the enemy now. They have failed to exercise due diligence... and their response now is to dump on their own employees. It's a disgrace."
Tom Mockridge, who was brought in from another division to take over News International after the scandal broke, said in an email to staff after the Sun arrests: "News International is confronting past mistakes and is making fundamental changes about how we operate which are essential for our business ... Despite this very difficult news, we are determined that News International will emerge a stronger and more trusted organisation."
"SLOW AND PARTIAL"
Some outsiders see the MSC as an honest but potentially futile attempt at righting wrongs.
"My experience in the civil cases is that they appear to be trying to get to the bottom of things - they have disclosed documents which are unhelpful to the company, for example," said one lawyer acting for phone-hacking victims. "But there's still been a huge problem in getting disclosure which has been very slow and partial, and the claimants have had to fight every step of the way."
Tom Watson, a member of the British parliamentary committee investigating the hacking, said the new board "is a huge improvement on what the company had in the past." But the lawmaker, who once likened News Corp to the Mafia, added: "The governance arrangements of the company and the culture that exists within in it are part of the leadership of James and Rupert Murdoch. So what you end up with is a company in conflict with itself. Unless the Murdochs provide a convincing case that they are as keen for the truth to come out, I don't think they'll have credibility."
Watson said on his Twitter feed on Thursday that the police had started to investigate the Times newspaper over email hacking. News International declined to comment and the police said they would not give a running commentary over their investigation, although they did confirm that they had been in contact with the parliamentarian.
Lawyer Mark Lewis, said the company should have had higher standards in the first place.
"They're doing this bizarre thing of saying that they're cooperating with the police. Well hang on a minute, you're meant to cooperate with the police. That's what we do."
James Murdoch is one executive who could have bridged the culture gap between News International and its parent. The 39-year-old son of Rupert, James arrived at News International in 2007, when the phone-hacking activity at the company appeared to have died down. But six months after his arrival, he approved a 700,000 pound ($1.1 million) payoff to a hacking victim, soccer union boss Gordon Taylor, after it emerged that Taylor had evidence that phone hacking was rife in the organisation. Company insiders describe James as being supportive of the MSC's work but not the driving force behind it or the executive who deals with the committee.
James has consistently said that he did not know all the facts when he approved the payment, despite the revelation by the MSC in December of an email trail that would have alerted him to the scale of the problem, had he read it. His defence was that he likely read the email on his BlackBerry, as he received it on a Saturday, and did not scroll down to read all of the correspondence.
The MSC did not receive any praise for turning up the email trail, with critics, including the parliamentary committee, questioning why it took so long to find. This week, the committee published a response from the MSC's law firm, Linklaters, saying the email had originally been found in hard copy form by a junior employee, who had not appreciated its significance.
The MSC recognizes it has an uphill struggle. With a judge-led inquiry about to start questioning journalists about payments to police, a civil trial involving multiple hacking victims due to start next month if settlements are not reached, and a potential flood of criminal trials of ex-News International journalists later this year, its work is only just beginning. A legal bid by victims to force the private investigator behind the hacking to reveal who gave him his orders is also pending. A ruling against the company in that case could leave the MSC, even with its army of lawyers, with a lot more to manage.