The new round of criminal charges brought in the UK against former senior News International editors has once again raised the prospect that Rupert Murdoch's New York-based parent company may be prosecuted under US anti-bribery laws, and complicates the rehabilitation of his son James as a possible successor to lead the global media empire.
The charges brought against Rebekah Brooks, who ran Murdoch's newspaper holdings in Britain, Andy Coulson, former editor of the now defunct News of the World, and two other former News International employees exposes the parent News Corporation to possible action under the Foreign Corrupt Practices Act. The FCPA exists to prosecute US-domiciled companies for acts of bribery and corruption that they might commit abroad.
An official of the British ministry of defence, Bettina Jordan Barber, also faces trial for allegedly receiving £100,000 from Murdoch's tabloid newspapers for information that led to a series of published stories. The allegation that money passed hands clearly falls within the legal remit of the FCPA.
Mike Koehler, professor of law at Southern Illinois school of law and author of the blog fcaprofessor.com, said the charges "would be hard for the Department of Justice and the Securities and Exchange Commission to ignore. We have been hearing allegations for a year and a half now, now we clearly have charges against high ranking officials at a foreign subsidiary," he said.
The new charges, and the allegation of bribery of a military official, come at a very sensitive time for the company. The media giant is preparing to split itself in two, separating the TV and broadcasting arm from the scandal-hit newspaper and publishing division.
The developments also bring to a crashing halt the recent perception in America that News Corporation had begun to recover its confidence after months on the defensive as a result of the phone-hacking scandal. Only on Monday, the New York Times ran an article headlined Clouds Lifting Over Murdoch, He's Out to Buy Again.
News Corp has largely shrugged off the scandal in the US, where its shares have risen over 34% in the last year. At News Corp's recent annual shareholder meeting in October, Murdoch comfortably saw off attempts to appoint an independent chairman to the company. James Murdoch has recently been tipped to head Fox Networks, the News Corp television division that includes its flagship Fox channel, home to The Simpsons and American Idol.
But the new charges will increase pressure on the company. Koehler said US authorities would be looking to see how high up the chain of command the bribery scandal reached. "The question will be what did James know and when did he know it," he said. Ultimately he predicted News Corp would reach a settlement with the Justice Department rather than go to trial, but he said that News Corp faced some uncomfortable investigations in the coming months.
The FCPA has two main components, one that relates to the bribing of foreign officials and another that relates to books and record keeping. It is often the latter that causes companies the biggest headaches. Characterising a bribe as "miscellaneous expense" is a serious offence.
"This latest news is an escalation of the FCPA case," said Koehler. But he said he expected the case could still take some years to be resolved.
The latest legal difficulties to hit News Corporation could also potentially have ramifications on its 27 TV licences within the Fox network – the real financial heart of the operation. Three of the licences are up for renewal, and in August the ethics watchdog Citizens for Responsibility and Ethics in Washington (Crew) filed a petition with the US broadcasting regulator, the Federal Communications Commission, that called for them to be denied on the grounds that the company did not have the requisite character to run a public service.
Melanie Sloan, Crew's director, said the charges of the four former News International employees played into its petition. "News Corp argues that the conduct in Britain shouldn't matter here in the US, but the Atlantic ocean doesn't have cleansing properties – if Murdoch is seen to be unfit to run a global company in the UK, then he's unfit in this country, too."
In May, the UK Commons culture committee censured Murdoch in their report into the phone hacking scandal, saying that he was "not a fit person" to exercise stewardship of a major international company.
So far there have been no confirmed cases of News Corporation employees engaging in illegal activities within the US. This week the Daily Beast alleged that the Murdoch tabloids the Sun and the New York Post may have made payments to a US official on American soil in order to obtain a photo of a captive Saddam Hussein, the deposed Iraqi leader, in his underwear. News Corporation has denied the claims.
Mark Lewis, the UK-based lawyer who has represented many of the victims of News of the World hacking, has been investigating possible cases of data breaches within the US but has yet to issue legal proceedings.