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Thread: British hacking scandal reaches United States

  1. #1

    British hacking scandal reaches United States

    [SIZE="4"][B]British hacking scandal reaches U.S.[/B][/SIZE]

    (CNN) -- The phone-hacking scandal embroiling Rupert Murdoch's News International has crossed the Atlantic, with a senior lawmaker's calls for a probe into whether British newspapers targeted Americans.

    Sen. Jay Rockefeller, D-West Virginia, said he was especially concerned about whether journalists tapped into the phones of the victims of the September 11, 2001, terrorist attacks.

    "The reported hacking by News Corporation newspapers against a range of individuals -- including children -- is offensive and a serious breach of journalistic ethics," Rockefeller said in a statement Tuesday.

    "This raises serious questions about whether the company has broken U.S. law, and I encourage the appropriate agencies to investigate to ensure that Americans have not had their privacy violated," he said. "I am concerned that the admitted phone hacking in London by the News Corp. may have extended to 9/11 victims or other Americans. If they did, the consequences will be severe."

    The hacking scandal has shut down a popular British newspaper and summoned a former prime minister to court.

    Legally, the United States has the authority under federal anti-bribery laws to potentially prosecute News International. The chance of that happening is slim at the moment, but Rockefeller's call for a probe could make things messier for Murdoch on American shores.

    News of the World, Britain's 168-year-old newspaper, printed its last edition Sunday after accusations that its reporters illegally eavesdropped on the phone messages of murder and terrorist victims, politicians and celebrities. Police have identified almost 4,000 potential targets of phone-hacking.

    There were also claims that reporters may have bribed police officers.

    The potential liability flows from journalists at News of the World to its parent, News International; to its parent, News Corporation, which is a publicly held company in the United States.

    After the closure of News of the World, News International still owns The Sun, The Times and The Sunday Times in Britain. News Corporation also encompasses Fox News, The Wall Street Journal, the New York Post and Harper Collins publishers.

    The alleged police bribes could be a violation of the Foreign Corrupt Practices Act (FCPA), which prohibits companies and their employees from giving money or anything of value to a foreign official in order to obtain or retain business, said Mike Koehler, a professor of business law at Butler University in Indianapolis.

    "So, there does seem to be a basis for a U.S. investigation at this point," he said.

    If anyone at News Corporation participated in payments to police officers or authorized such payments or even knew about them and failed to stop them, the case could wind up at the U.S. Department of Justice.

    But while the jurisdiction exists, it's not likely that the United States will prosecute News Corporation, said lawyer Richard Cassin, who helps clients comply with the FCPA.

    "The chances are very slim unless the payments we know about turn out to be the tip of the iceberg," he said.

    Even then, a U.S. case seems unlikely, Cassin said.

    That's because U.S. authorities trust the British legal system, older than America itself, to handle the case. America usually goes after cases that are not being prosecuted elsewhere and in which widespread, systematic bribery can be proved, Cassin said.

    News Corporation, he said, does not fit the bill.

    The biggest case for a FCPA violation to date involved the German company Siemens AG, which paid $1.36 billion in bribes to foreign officials working on projects including the United Nations oil-for-food program in Iraq and others in Nigeria, Bangladesh, China, Russia and Vietnam.

    The company paid a record $800 million in fines and penalties for the FCPA violation.

    But the United States took on that case partly because Germany did not prosecute Siemens, Cassin said, for what amounted to widespread bribery.

    However, were a U.S. case against News Corporation to arise, the potential implications for the Murdoch media empire are numerous -- and none of them are good, Koehler said.

    An investigation would most certainly attempt to answer the question of how widespread bribes were within News Corporation. Were other employees -- all over the world, for that matter -- making similar payments?

    The FCPA stipulates that U.S.-listed companies, their employees or agents may not make bribes to foreign officials. A second portion of the law applies to accounting requirements for public companies, said Don Zarin, author of "Doing Business Under The Foreign Corrupt Practices Act" and a partner with the Washington-based law firm of Holland & Knight.

    "They have to keep books and records in reasonable detail that reflect the transactions," he said.

    So, if a bribe was made and not properly noted, the U.S. Securities and Exchange Commission and the Justice Department could each have a case, Zarin said.

    A telephone call or an e-mail from an editor in London to his or her boss in New York could prove key, he said.

    "If you send an e-mail to the boss saying, 'I'm going to pay $10,000 to police officers for this information,' that would provide the jurisdictional basis or potential liability on the part of possibly the British employees," Zarin said.

    If any employee of News Corporation, which is listed in the United States, knew about and authorized such a payment, "they could have potential exposure," he said.

    And if Murdoch -- the 80-year-old Australian-born head of News Corporation who became a U.S. citizen in 1985 -- knew what was going on and authorized it, even implicitly, "he could have some potential exposure," Zarin said.

    The penalties can be severe, including jail time and fines, he said. And ignorance confers no protection.

    "The SEC has brought cases against U.S. companies who had no knowledge of what foreign subsidiaries were doing, but had misbooked it," he said, adding that the SEC blamed the companies for not having set up the internal controls that would have caught the illegal behavior.

    A Justice spokeswoman said she could not comment on the possibility of the department's involvement.

    If the charges wind up being nothing more than civil accounting violations, the SEC would handle the case and Justice would not become involved, said James Tillen, coordinator of the FCPA Practice Group at Miller and Chevalier, a Washington-based law firm specializing in international regulatory issues, tax and litigation.

    That would still carry a major risk to those involved.

    "The SEC has a lot of bite in significant fines, penalties, prohibiting people from serving as officers in public companies," he said. "That can derail a career quickly."

    But a criminal prosecution by federal prosecutors would be the most to fear, since it would carry the potential of jail time, Tillen said.

    SEC fines can range up to $25 million per violation in such cases, but totals regularly exceed $100 million because the agency can force the company to disgorge ill-gotten gains.

    The Justice Department can impose a criminal fine on individuals of up to $100,000 and five years in prison for each count on a bribery charge, he said. Multiple counts could lead to higher fines and sequential prison terms.

    But fines are typically pegged to how much a company or an individual gained as a result of the crime, Tillen said. That can be easy to figure out when the subject is a contract, but any case involving Murdoch's empire might present more of a challenge. "How many more newspapers did you sell?" he asked.

    Still, U.S. authorities may choose not to intervene at all.

    "If the Department of Justice were satisfied that the U.K. had sufficient ability to prosecute this, then they may step aside," Tillen said. "If they weren't satisfied, then they could be very interested."

    England passed an aggressive law, the U.K. Bribery Act, which became law July 1, but it is not retroactive, Tillen said. The predecessor legislation that would apply "is a hodgepodge" of laws, some of which date back more than a century, he said. "That's part of the problem."

    As things now stand, the nearly 4,000 miles that separate Washington from London won't put off U.S. investigators. "Of the 10 largest fines in FCPA history, eight have been against foreign companies," Tillen said.

    But that may change. Rep. James Sensenbrenner, R-Wisconsin, has criticized the act as putting U.S. companies at a competitive disadvantage and held hearings last month intended to water it down, Tillen said. "The criticism is that it's being overly enforced by SEC and DOJ to reach activities that it shouldn't reach," such as taking officials out for free meals, he said.

    A spokeswoman for Sensenbrenner provided CNN with a statement Monday from the congressman.

    "I plan to introduce a bill that would reform the Foreign Corrupt Practices Act and bring it up-to-date with the changing world," Sensenbrenner said in the statement. "We need to bring clarity to what is and what is not illegal. My intent is to make sure that the stop signs and red lights are clearly visible for American companies doing commerce internationally.

    "Right now, there is confusion regarding who qualifies as a foreign official. Foreign law enforcement officers are clearly foreign officials and it is absolutely absurd to imply that any changes to the FCPA would change that status or permit U.S. businesses to bribe policemen," he added.

    CNN's Ted Barrett contributed to this report.

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  2. #2
    An amazing amount of speculation and projectionism in that article.

    Not suprising.

    Funny, they seem far more concerned about this, than any of the multitude of leaked Secret Documents under the Bush and Obama regimes.

    Also not suprising.

    In any event, prosecute to the fullest extent fo the Law, and see what happens.

  3. #3
    [QUOTE=Warfish;4061076]An amazing amount of speculation and projectionism in that article.

    Not suprising.

    Funny, they seem far more concerned about this, than any of the multitude of leaked Secret Documents under the Bush and Obama regimes.

    Also not suprising.

    In any event, prosecute to the fullest extent fo the Law, and see what happens.[/QUOTE]

    Fish, at any time there are always several serious problems that run concurrently. This story has serious implications for our supposed free media.

    And I readily admit that I despise Murdoch and his whole operation but I would be in favor of an investigation if similiar issues arose with any of the media conglomerates. We have a serious problem in this country as it relates to the media.

  4. #4
    [QUOTE=intelligentjetsfan;4061105]And I readily admit that I despise Murdoch and his whole operation but I would be in favor of an investigation if similiar issues arose with any of the media conglomerates.[/QUOTE]

    That would be easier to believe, that your personal anti-FOX bias was not the root cause of your posting, if you could point to any of your previous threads whereby you expressed the same level of outrage over, for example, stolen and leaken confidential/top secret security documents under the Bush Administration, the leak of which could have had grave national security repurcussions.

    See, it's alot like the Valerie Plame "scandal". Outrage is often selective, and leans heavily towards ones own politics. Plame leak = huge deal, national security document leak = no big deal or no comment.

    In any event, point stands, if they broken the Law, nail them to the Wall.


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