FCC Updates, New Internal Checks Needed to Detect, Guard Against News Corp. Illegality
Frequent updates at the FCC by News Corp. and the addition of internal watchdogs are good ways to guard against the kind of illegality in the U.S. that continues to swirl around the company and its newspapers in the U.K., said industry executives. News Corp. closed its News of the World newspaper two Sundays ago after it was revealed its reporters hacked into the phone systems of politicians and private citizens. The FBI and Justice Department have reportedly opened investigations into the scandal after several U.S. lawmakers pushed for increased scrutiny based on potential violations of the Federal Foreign Corrupt Practices Act (CD July 14 p7). News Corp. recently hired Williams & Connolly, a prominent Washington, D.C., criminal defense firm, as the legal stakes of the scandal continue to grow.
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The issue seems to have moved into other industries, as Rep. Mary Bono Mack, R-Calif., asked communications companies if there are safeguards in the U.S. to prevent privacy breaches similar to the News Corp. incident. The chairman of the House Commerce Subcommittee on Manufacturing sent letters Monday to the heads of USTelecom, CEA, CTIA, NCTA and the Information Technology Industry Council, seeking a response by Aug. 2. Bono Mack asked if the associations expect to see a rise of phone hacking in the U.S., and if it’s necessary to adopt new practices, laws or regulations to prevent phone hacks and other privacy breaches. The letter follows discussions last week between Bono Mack and AT&T, Verizon Wireless, Apple and Google (CD July 15 p13).
The effect on News Corp.’s broadcast licenses could grow in coming months as the cycle for broadcast license renewals begins next year, starting with D.C., Virginia, Maryland and West Virginia, said a broadcast lawyer. Even without a prominent conviction as a result of the investigation, those processes could see new interest as groups seek to limit News Corp.’s power, the lawyer said: Filers could range from groups aligned with liberal causes to those who aren’t typically engaged at the FCC to indecency foe Parents TV Council, using the scandal as a path toward achieving various goals. There’s a relatively low standard required to have a standing to file a petition to deny a renewal, and being a viewer of one of News Corp.’s TV stations at issue could suffice, the lawyer said. News Corp. didn’t return a request for comment.
Keeping the agency up to date on the status of the legal proceedings and the new steps taken to ensure new violations don’t occur is important, said communication lawyer Andy Lipman of Bingham McCutchen. “You don’t want the commission to read about it the news.” Agency officials want to “hear it directly from the company and what steps the company is taking” to prevent other problems, he said. The way to mitigate the effect of the legal proceedings in the U.S. is to “file reports now and file reports as things happen,” said another broadcast lawyer. That way News Corp. can “never be accused of lack of candor,” a significant consideration by the commission, the lawyer said.
"There’s an imperative on Murdoch to indicate that they put protections in place to show they stopped violations of law,” said Lipman of News Corp. Chairman Rupert Murdoch. That’s something the company should be “proactive on, rather than reactive, especially with several applications still pending” at the FCC, said Lipman: Such steps could include the use of ombudsmen, stricter news gathering controls and additional levels of editorial oversight at the News Corp. stations.
The FCC is unlikely to block or prevent renewal of News Corp. broadcast licenses solely based on the character concerns raised as part of the U.K. scandal, said a TV-industry lawyer. The last time a broadcast license was revoked by the FCC, in 1980, was based on the character factor, because RKO General misrepresented itself and its previous conviction status to the FCC rather than crimes themselves, the lawyer said. News Corp. would see the most harm if allegations similar to those in the U.K. emerge from News Corp.-owned stations in the U.S. or if there is a conviction within the corporate structure, an officer for instance, said the broadcast lawyer.
From a perception point of view, News Corp. is in an especially difficult situation, said CEO Richard Levick of Levick Strategic Communications, which helps companies deal with crisis communications. The News Corp. position is unique it that it has effectively “infuriated all three political parties in the U.K. and both American parties,” he said. “What Rupert needs to do is stop being defensive and stop thinking he can spin his way out of this,” said Levick. The company could help its own case by allowing the News Corp.-owned Wall Street Journal to aggressively pursue the story, he said. Such transparency would be “important for the integrity of the fourth estate and would be for the long term benefit for Rupert Murdoch and News Corp.,” he said. Shares of News Corp. fell 4.3 percent Monday and Standard & Poor’s placed the company on “creditwatch negative” for the increased risks related to the scandal.