EXCLUSIVE: Investigators Reach Out To News Corp. Whistleblower In U.S.

Blog ››› ››› ERIC BOEHLERT

In another sign that allegations of News Corp. misconduct are being closely reviewed by law enforcement in the United States in the wake of the company's sweeping phone-hacking scandal in Britain, Media Matters has learned that investigators have reached out to Robert Emmel, a former News Corp. employee turned-whistleblower.

Emmel has been a key source of insider information regarding alleged misconduct at the News Corp. subsidiary, News America, which previously admitted that its computers were used to hack into a competitor's secure website. That revelation that has attracted new attention in recent months.

In 2005, a News America competitor based in New Jersey, along with members of competitor's Congressional delegation, began urging federal investigators to look into the computer hacking allegation, but no active criminal case was ever pursued. (The New Jersey U.S. Attorney's office – run by none other than Republican Chris Christie – declined to prosecute Murdoch's company at the time.) In fact, no investigators ever interviewed Emmel about the News Corp. misconduct he claimed to have witnessed.

Now, in the wake of the widespread phone-hacking done by Murdoch's tabloid journalists in Britain, U.S. investigators are taking a fresh look at the News America allegations and for the first time have reached out to Emmel, confirms Philip Hilder, an attorney for Emmel.

When the phone-hacking story first broke, U.S. investigators began looking into the claim made in the British press that News Corp. had tried to hack into the phone messages of 9/11 victims. In addition, investigators are seeing if there is a broader problem at News Corp. (Earlier this week, an attorney representing News Corp. shareholders who are suing the company,suggested there is a "pattern of misconduct" inside the company.)

News Corp. is feeling the heat. It recently warned investors that on-going criminal investigation on both sides of the Atlantic "could damage our reputation" and "impair our ability to conduct business."

For the last five years, Robert Emmel has been doing his best to "damage" News Corp.'s reputation, accusing News America of engaging in "criminal conduct against competitors," using "deceptive and illegal business practices," breaking antitrust laws, and defrauding News Corp. shareholders.

Indeed, since having a falling out with his employer in 2005 and then being fired in 2006, Emmel has gone from being an account director at Murdoch's powerhouse grocery-coupon agency, to becoming the company's most public and persistent business critic; with the internal documents to back it up. According to an estimate made by the Guardian, News Corp. has paid 29 lawyers more than $2 million in legal fees to stop Emmel from telling his story.

Forced into bankruptcy because of his long legal battle with News Corp. (the company sued him for misappropriation of trade secrets; a judge threw out all six charges), Emmel is currently under a court-ordered, non-disclosure injunction. However, the injunction does not prevent him from cooperating with any law enforcement officials formally investigating News America.

Emmel first became problem for News America when it was sued by its competitor, Floorgraphics Inc. (FGI) after company executives discovered FGI's secure website had been broken into nearly a dozen times and confidential information had been obtained. They alleged Murdoch's company was spreading lies about FGI and using its proprietary information to steal away clients.

Unable to interest federal prosecutors, Floorgraphics filed a civil suit against Murdoch's company. At the trial, Emmel provided a damaging insider's view of News America:

Emmel testified that News America took money from clients to place ads in hundreds of supermarkets that had gone bankrupt or had been closed; that the company maintained a "stores not called on" list and a "do not pay list" of supermarkets where News America allegedly kept revenues from clients even though no ads were placed; and that a "freeze" policy maintained by News America kept lists of its vendor supermarkets frozen in time so they appeared to clients to be available for in-store ads when in fact they were no longer in business.

He also testified that News America's CEO, Paul Carlucci, once denounced as "bed wetting liberals" people inside the company who were concerned about doing the right thing.

Soon after Emmel testified, and just six days into the trial, News Corp. settled with FGI. Looming right behind FGI though, were two more News America competitors (Insignia and Valassis), each bringing legal action, each charging anti-competitive practices, and each featuring Emmel on their possible witness list.

In a video deposition for the Valassis case:

Emmel testified that News America paid excessive amounts to retailers for exclusive in-store advertising rights in order to exclude competitors. News America paid Eckerd drug stores substantial guarantee payments because they wanted to exclude Insignia. News America allegedly lost money on the contract, as News America was unable to sell enough ads to cover the payments.

News Corp. eventually settled all the lawsuits, at a cost of nearly $700 million.

But since the allegation of computer hacking is more than five years old and the statute of limitations has run out without any criminal case being persued, that means prosecutors likely can't act on it, and the charges cannot come back to haunt Murdoch's company, right?

Wrong. With the FBI investigating News Corp.'s questionable business practices and trying to determine if there is a larger pattern of corruption, the Los Angeles Times recently detailed how previous transgressions could still prove costly when coupled with more recent conduct:

"They absolutely will look at past conduct," said Rebecca Lonergan, a former prosecutor in the U.S. attorney's office who teaches at USC's Gould School of Law. She said past behavior is a factor that the government would consider in determining whether a criminal investigation is merited and to show a corrupt corporate culture.

"Old information can be relevant to a prosecution based on new, recent conduct, and can even be part of such a prosecution," said Anthony S. Barkow, executive director of the New York University School of Law Center on the Administration of Criminal Law.

In the wake of the U.K. hacking scandal, U.S investigators are trying to determine if, over the years, there has been a pattern of business misconduct within News Corp.

According to Emmel, there has.

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