NEW YORK News Corp shareholders suing over the purchase of a business run by Chairman Rupert Murdoch's daughter filed a revised complaint, saying the British phone hacking scandal reflects how the company's board fails to do its job.
Shareholders called it "inconceivable" that directors were not aware sooner of the questionable news practices that led to the closure of the News of the World tabloid, given that news of the hackings first surfaced in 2005.
This, the shareholders said, reflects a board that "provides no effective review or oversight," in a corporate culture "run amuck," according to the amended complaint dated July 8 and filed in Delaware Chancery Court. Lawyers for the shareholders provided a copy of the complaint on Monday.
The shareholders had sued News Corp's board in March over the agreement to buy Shine Group Ltd, a television and film production company run by Elisabeth Murdoch, for an estimated $480 million in equity plus $135 million of debt.
They contend the purchase had no legitimate strategic or business purpose, but that Rupert Murdoch agreed to it out of "blatant nepotism" to give his daughter a seat on News Corp's board, and giving her a $250 million windfall.
News Corp has described the claims relating to Shine as meritless.
The plaintiffs include a trustee for several investment funds, and union and pension funds led by the New Orleans Employees' Retirement System and the Central Laborers Pension Fund. The lawsuit seeks to force directors to pay damages to News Corp for having breached their fiduciary duties.
Shares of News Corp were down 5.9 percent at $15.77 in morning trading.
The case is In re: News Corp Shareholder Derivative Litigation, Delware Chancery Court, No. 6285.
(Reporting by Jonathan Stempel; Editing by Lisa Von Ahn)