The Murdochs' Generational Culture Of Corruption

It's good to be the king. Or in the case of James Murdoch, it's good to be the son of the king.

In announcing that his sons James and Lachlan will be largely taking control of his sprawling media company, press baron Rupert Murdoch did what observers always knew he wanted to do: pass on to his children the worldwide conglomerate that he's built over the last five decades. In the United Sates, of course, that means handing over to his sons one of most important and influential voices in right-wing media and far-right politics, Fox News.

James Murdoch will soon be named CEO of 21st Century Fox, while Lachlan Murdoch will become executive chairman alongside their father, who for now will reportedly maintain a daily presence at the company. Fox News kingpin Roger Ailes will continue to report directly to the senior Murdoch. (Noticeably absent from the succession plans is daughter Elisabeth, a respected media executive who has at times been publicly critical of her brother James.)

That long-awaited changeover was thrown into doubt when the sweeping phone-hacking scandal in England rocked the Murdoch family and their media properties.

Watching father Rupert and son James testify before skeptical members of Parliament in 2011 as the duo did their best to explain away the media scandal raised some doubts about whether the sons would be best-suited to succeed their father. In 2011, more than a third of News Corp. shareholders who voted at a meeting declared that they were not. But of course, while being a publicly traded company, the Murdoch family controls about 40% of the voting shares of News Corp., the publishing operation (New York PostWall Street Journal), and 21st Century Fox, which contains the more profitable TV and film operations, including Fox News.

With James Murdoch's public reputation quickly sinking against the hacking backdrop in 2012, he was jettisoned far away from the scandal klieg lights of London and fitted for a Murdoch corporate job in Los Angeles, where he worked until his latest promotion. As the New York Times points out, “in hindsight, the departure of [James] Murdoch and his removal from involvement with News Corporation's British holdings can be seen as part of a calculated strategy to insulate him from the scandal there and resurrect him in the sprawling media company controlled by his father.”  

Still, UK media regulator Ofcom's report on the hacking debacle excoriated James' leadership, or lack thereof, and concluded that the younger Murdoch “repeatedly fell short of the conduct to be expected of as a chief executive and chairman” as the company engaged in phone hacking and that his failure to stop the wrongdoing was "difficult to comprehend and ill-judged.

In the end, James Murdoch had the right last name and survived the scandal; the type of criminal and political upheaval that not many media companies have had to endure in recent memory. Then again, not many media companies at times resemble a low-level criminal enterprise, which is what Murdoch's empire looked like for years as it hacked into private phone voicemails of the royal family, star athletes and celebrities in search of juicy gossip. In recent years, Murdoch employees have allegedly not only hacked into phones, computers and emails, but also paid off news sources.

The British hacking gale, which raged for more than a year and damaged the company's reputation as well as the Murdoch family name, may have delayed James' final News Corp. ascension, but it couldn't block Rupert Murdoch's master plan of succession. (If James had faced criminal charges in England, then all CEO bets would have likely been off for the son.)

But here's what important to understand about the hacking fiasco and Murdoch leadership: It wasn't an isolated event within the corporation. Instead, there's bountiful evidence that the Murdoch media empire has allowed, if not embraced, corruption and criminality. As Rupert's sons are set to take over the empire, there's little reason that culture will change.

And that culture has been evident in the United States.

Remember Judith Regan? The boisterous book publisher ran an imprint under Murdoch's HarperCollins empire and also hosted a Fox News program during the previous decade. She had a nasty falling out with her employer and was fired after Murdoch's News Corp. claimed she had made “anti-Semitic” remarks. She sued and settled for a reported $10 million.

Why the generous News Corp. settlement? Likely in part because Regan reportedly recorded Ailes urging her to lie to federal investigators about her affair with Bernard Kerik, a former top lieutenant of Rudolf Giuliani when he served as New York City's mayor. At the time, Giuliani was eyeing a possible presidential run, and Ailes allegedly told Regan to lie in order to protect both Kerik and Giuliani.

More recently, Fox News reportedly paid a former public relations executive at the company, Brian Lewis, "approximately $8 million in hush money" after firing him. Like Regan, Lewis, a onetime Ailes confidante, was attacked by News Corp. in the press, accused of “financial irregularities.” But in the end he reportedly walked away with a seven-figure pay day.

What other news organization spends nearly $20 million in order to keep two fired employees from talking publicly about their time of employment? Only news organizations afraid of what former employees will say. And perhaps only news organizations where the boss reportedly tells employees to lie to federal investigators.

That hardball, to-hell-with-the-rules mentality seems to come from the very top.

Because remember, even before the hacking scandal rocked London, a Murdoch media subsidiary in the United States, News America Marketing (NAM), a direct marketing firm, settled a $30 million lawsuit that alleged NAM employees had hacked into a competitor's secure website and stolen proprietary information. (Sound familiar?)

At the time of the alleged hacking, NAM's CEO was Paul Carlucci, who was publisher of the New York Post from 2005 to 2012. Prior to the alleged hacking, the competitor claimed Carlucci had threatened to destroy his company if he didn't sell it to News Corp.

From a pre-trial deposition [emphasis added]:

A: At a certain point in the conversation Mr. Carlucci turned to Richard and said, “So, I understand your --” words to the effect, “So, I understand you're here to sell your company?”

Q: And was there a response?

A: We were -- I was surprised to hear that, and Richard's response was, “No. That's not why we're here. We were really here to meet you, and to discuss the possibility of doing joint promotions.”

Q: What happened after that?

A: ... he followed that by saying, “But from now on, consider me, us your competitor, and understand this, if you ever get into any of our businesses, I will destroy you.” And he said, "I work for a man who wants it all, and doesn't understand anybody telling him he can't have it all."

Carlucci, of course, worked for Murdoch. And now Murdoch's sons take over that culture.

UPDATE: 

Contrary to what Fox News reported last week, 21st Century Fox released a statement to the Hollywood Reporter saying that Ailes will not report directly to Rupert Murdoch. Instead, the Fox News chief “will report to Lachlan and James but will continue his unique and long-standing relationship with Rupert.”

New York magazine writer Gabriel Sherman reports that Ailes himself ordered Fox Business to read “what now appears to be a rogue statement” on-air last week that suggested he would not be directly affected by the change in management:

Just five days earlier, Ailes released what now appears to be a rogue statement to his own Fox Business channel declaring that he would be unaffected by the announcement that Lachlan and James will take control of Fox as part of Rupert's succession plan. “Roger Ailes will continue to run the news network, reporting directly to Rupert Murdoch,” Fox Business reported. According to a well-placed source, Ailes directed Fox Business executive Bill Shine to tell anchor Stuart Varney to read the statement on air. “Ailes told Shine to write the announcement of the move for Varney to say,” the source said. “In it, Ailes inserted language that he would report to Rupert.”

This was, apparently, news to Rupert. And now the Murdochs are correcting the record. “Roger will report to Lachlan and James,” a 21st Century Fox spokesperson told The Hollywood Reporter.

Watch the video of Varney reading the “rogue” statement below: