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UPDATE 2-News Corp shareholders file new allegations
September 13, 2011 / 2:20 PM / 6 years ago

UPDATE 2-News Corp shareholders file new allegations

* Revised lawsuit adds claims over U.S. subsidiaries

* Plaintiffs say misconduct at news Corp was ‘pervasive’

* Plaintiffs amend case filed in Delaware Chancery Court (Adds details from the complaint, bylines)

By Andrew Longstreth and Tom Hals

Sept 13 (Reuters) - The board of News Corp (NWSA.O) knew more than 10 years ago that the company’s U.S. subsidiaries were illegally hacking competitors’ computers, according to a revised lawsuit filed by shareholders on Tuesday.

Beyond phone hacking by some of the company’s journalists in the U.K., the News Corp board was also long aware of improper conduct at two U.S. subsidiaries, News America Marketing and NDS Group, according to allegations in the lawsuit.

News America Marketing has been the subject of five lawsuits alleging anti-competitive behavior, including one by a competitor that claimed the unit hacked into its computer system 11 on separate occasions, according to shareholders. The litigation forced the company to pay out more than $650 million in settlements to three competitors, they said.

A News Corp representative was not immediately available to comment on the lawsuit. The complaint was filed in Delaware Chancery Court, the forum for many shareholder lawsuits involving big corporations.

News Corp has been engulfed by scandal, centered on its News of the World tabloid in the UK, since July, when it was revealed that phone hacking extended beyond celebrities and politicians to involve murder victims, including schoolgirl Milly Dowler, and British war dead.

British politicians plan to recall Murdoch’s son James, chairman of the company’s British newspaper arm, for further questioning on the scandal after employees contradicted his contention that he did not know the problem extended beyond “one rogue reporter.” [nL5E7KD21T]

The hacking scandal wiped billions of dollars off News Corp’s market value, cost it two senior executives, forced it to drop a $12 billion bid for BSkyB and resulted in the shutdown of the 168-year-old News of the World.

Tuesday’s complaint contends that News Corp’s board failed to properly oversee the company’s chairman and founder, Rupert Murdoch, even when there were warning signs that company’s practices were unethical and illegal.

”For more than a decade, News Corp subsidiaries have engaged in highly improper practices that have subjected News Corp to great financial and reputational damage,’ said the complaint filed in Delaware Chancery Court.

“This misconduct was so pervasive that the News Corp Board must have either been aware of the wrongdoing or was deliberately indifferent to the corporate culture that encouraged this type of behavior.”

The News America unit is one of the largest U.S. providers of newspaper inserts, the advertising circulars that usually are part of a Sunday edition. Federal authorities, as part of a probe that began with so-far unsubstantiated claims that News Corp operatives illegally accessed phone records of Sept. 11 victims, are reviewing lawsuits brought against News America by competitors. [nN1E77N1JN]

The shareholder complaint filed Tuesday also highlights litigation that was filed against NDS, News Corp’s smart card unit, by competitors. NDS was accused of illegally extracting software code from competitors’ cards and making the information available online for hackers.

The plaintiffs in the shareholder case first filed the lawsuit in March over the company’s agreement to buy Shine Group Ltd, a television and film production company run by Elizabeth Murdoch. Shareholders alleged that it was a sweetheart deal that reeked of nepotism.

This is the second time that the News Corp shareholders have amended their complaint. In July it added allegations over the phone hacking scandal.

The case is In re News Corp Shareholder Derivative Litigation, Delaware Chancery Court No. 6285. (Reporting by Andrew Longstreth in New York and Tom Hals in Wilmington, Delaware; editing by John Wallace and Gerald E. McCormick)

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