* Bare-knuckle business tactics attract regulator interest
* Carlucci heads News America, publisher of New York Post
* Carlucci known among friends as "Johnny Legit"
By Jennifer Saba and Peter Lauria
NEW YORK, Sept 1 Paul Carlucci's name doesn't
appear on any public list of News Corp's (NWSA.O) power
players. As CEO of News America Marketing and publisher of the
New York Post, he is the most influential executive you've
never heard of inside Rupert Murdoch's empire.
That could change as News America Marketing's alleged
bare-knuckle business tactics come under the regulatory
spotlight in the United States amid the phone hacking scandal
that has rocked News Corp's News of the World in Europe.
"Carlucci is a pretty savvy political operator in that he
has been able to wield a lot of power while flying under the
radar, but that's not the case anymore," said a former News
U.S. regulators and law enforcement officials are taking a
close look at the business practices of News America, one of
the nation's largest providers of newspaper inserts, the coupon
circulars that usually bulk up a Sunday edition.
As part of an investigation which began with so-far
unsubstantiated claims that News Corp operatives illegally
hacked into the phones of 9/11 victims, federal authorities are
reviewing lawsuits brought against News America by several
competitors that have cost about $650 million in settlements.
One of the cases that federal authorities are looking at,
according to a U.S. law enforcement official, is a 2004 claim
by Floorgraphics that accused News America of breaking into its
computers and taking corporate data that ultimately caused it
to lose some clients. Floorgraphics was a rival of News America
for grocery store marketing until the company bought it as a
way to settle the lawsuit.
Investigators want to see if this case and other, similar
litigation form a pattern of illegal activity at News Corp. The
U.S. inquiry is only beginning and may ultimately amount to
Carlucci, through a representative, declined comment.
WHO IS PAUL CARLUCCI?
Born in New York and of Italian descent, Carlucci started
his career in advertising sales at the New York Daily News and
rose to high-level ad executive positions at retail stalwarts
Macy's (M.N) and Caldor.
He joined News Corp in 1991 as executive vice president of
News America, eventually replacing Les Hinton as the division's
chief executive. Hinton resigned from News Corp earlier this
year as a result of the UK phone hacking scandal.
In 2005, Carlucci took on the role of publisher of the New
York Post after Murdoch's eldest son, Lachlan, quit the
position. Rupert Murdoch briefly served as publisher before
"He's not Australian or British, and didn't come up in
publishing," said a second former News Corp employee who had
frequent dealings with Carlucci. "He's an outsider who has
managed to become the ultimate insider."
Carlucci, who wears his hair slicked back and usually
carries a Montblanc pen, has a penchant for finely tailored
suits and a reputation for step-on-your-throat business
An executive at Sara Lee SLE.N once said of her dealings
with News America that it "feels like they are raping us and
they enjoy it."
Carlucci, who turns 64 this year, emphatically peppers his
comments with curse words and is known among friends as "Johnny
Legit," according to the first ex-News Corp source.
But supporters of Carlucci view his thuggish depiction as
little more than an anti-Italian bias.
"Paul is a tough businessman, but he's no different than
any other guy who has made a ton of money," said a longtime
friend of Carlucci's who asked to remain anonymous because of
Just because he screens scenes from "The Untouchables" for
employees "doesn't mean he's a mobster," this source added.
John Kimball, the former chief marketing officer for the
Newspaper Association of America, who has been friends with
Carlucci for nearly three decades, said, "He's always been very
perceptive, intelligent, a quick study and a tough, but fair
Carlucci, who walks with a confidence that adds several
inches to his less than 6-foot frame, is big on one hallmark of
the streets: loyalty.
"He treats his people well," said the former News Corp
employee. "If you do right by him, he'll move mountains to do
right by you." That, in essence, embodies the News Corp credo.
CARLUCCI AND MURDOCH
New York Post Editor-in-Chief Col Allan is widely known to
be dismissive of most News Corp executives. There are two,
however, whom he treats with utter respect. One is Murdoch, the
other is Carlucci.
"I never heard Col badmouth Carlucci and I never saw him
try to push Carlucci around," said the second former News Corp
employee, who added that he witnessed Allan do both with plenty
of other executives.
Though Carlucci is not part of Murdoch's inner circle, the
two talk regularly. Brian Tierney, the former owner of the
Philadelphia Inquirer and Philadelphia Daily News, recalls that
after buying the newspapers in 2006, Carlucci served as guide
to the industry newcomer.
"When I first bought the papers, within one month two
people reached out to me to welcome me to the club," said
Tierney, who now serves as chief executive of marketing firm
Real Time Media. "One was (Washington Post Co Chairman) Don
Graham and the other one was Carlucci."
After Tierney expressed interest in the Wall Street
Journal's pay system, Carlucci quickly brokered a meeting for
him with Murdoch.
"I spoke with Paul about possibly using their technology,
and within two hours I got a call from Murdoch's office and met
with him within a week," said Tierney.
Another newspaper executive recounted a meeting he had with
Carlucci that was interrupted by a 30-minute phone call from
Murdoch to go over ads for a Sunday edition of the New York
As tough and shrewd as Carlucci is as a publisher, however,
the fact remains that the New York Post is an unprofitable
newspaper that does not get ad rates that match its influence.
NEWS AMERICA'S LEGAL ISSUES
While profitable, News America has become a low-margin
commodity business with high costs because it has to buy the
paper, print the inserts and pay newspapers to distribute them
at a price that advertisers are willing to pay.
To fight the declining economics, News America has been
accused of engaging in a series of less than ethical, and
potentially illegal, maneuvers.
As New York Times columnist David Carr put it, "The company
has come under scrutiny for a pattern of conduct that includes
below-cost pricing, paying customers not to do business with
competitors, and accusations of computer hacking."
Floorgraphics co-founder George Rebh said in a deposition
that Carlucci, over what was supposed to be a friendly lunch,
bluntly told him, "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 all."
Former News America employee Robert Emmel testified that an
angry Carlucci once called his staff "bed-wetting liberals" and
he could arrange to have them "out-placed from the company" if
they had concerns about doing the right thing.
News America's modus operandi in dealing with lawsuits
brought against it has been to either settle or buy the company
making the allegations.
Floorgraphics dropped its lawsuit alleging computer hacking
against News America after the company agreed to buy it for
$29.5 million. Other settlement beneficiaries include Valassis
Communications, Insignia Systems and the state of Minnesota.
While some have drawn an analogy between these settlements
and News Corp's payment of $1.6 million to the chief executive
of England's Professional Footballers' Association, Gordon
Taylor, over the phone hacking allegations, Carlucci's friend
said they were nothing more than the standard course of
"Every CEO has settled major lawsuits; they often prefer to
cut deals than go to court," Carlucci's friend said. "I don't
think you can draw any conclusions about him from that."
One thing that is indisputable is that Carlucci is more
vulnerable than ever before thanks to the hacking scandal.
"He's OK now, but depending on what happens with the U.S.
regulators, he could come under a lot more pressure," said the
first former News Corp source.
(Disclosure: Peter Lauria worked at the New York Post from
2005 to 2010)
(Reporting by Jennifer Saba, Peter Lauria and Mark Hosenball.
Editing by Tiffany Wu and Robert MacMillan)