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How Bad Is News Corp.?Michael Wolff on the state of the Murdoch empire andits Mob-like structureBy on August 8, 2011

In my biography of Rupert Murdoch, I referred to News Corporation as Mafia-like,provoking the annoyance of my publisher’s libel lawyers. I explained to them that I did notmean to suggest this was an organized crime family, but instead was using “mafia” as ametaphor to imply that News Corp. saw itself as a state within a state, and that thecompany was built on a basic notion of extended family bonds and loyalty.

But just because it’s a metaphor doesn’t mean it isn’t the real thing, too.

Well-sourced information coming out of the Department of Justice and the FBI suggests adebate is going on that could result in the recently launched investigations of News Corp.falling under the RICO statutes.

RICO, the Racketeer Influenced and Corrupt Organizations Act, establishes a way toprosecute the leaders of organizations—and strike at the organizations themselves—forcrimes company leaders may not have directly committed, but which were otherwisecountenanced by the organization. Any two of a series of crimes that can be proven tohave occurred within a 10-year period by members of the organization can establish apattern of racketeering and result in draconian remedies. In 1990, following the indictmentof Michael Milken for insider trading, Drexel Burnham Lambert, the firm that employedhim, collapsed in the face of a RICO investigation.

Among the areas that the FBI is said to be looking at in its investigation of News Corp. arecharges that one of its subsidiaries, News America Marketing, illegally hacked thecomputer system of a competitor, Floorgraphics, and then, using the information it hadgleaned, tried to extort it into selling out to News Corp.; allegations that relationships theNew York Post has maintained with New York City police officers may have involvedexchanges of favors and possibly money for information; and accusations that Fox chiefRoger Ailes sought to have an executive in the company, the book publisher JudithRegan, lie to investigators about details of her relationship with New York policecommissioner Bernie Kerik in order to protect the political interests of Rudy Giuliani, then apresidential prospect.

The U.S. is in an awkward if not downright ridiculous position in terms of the maelstromthat has engulfed News Corp. in Britain.

While News Corp. does most of its business in the U.S., prosecutors here have nojurisdiction over the phone hacking crimes that were committed in the U.K. And it’s quitepossible, because of differences in news gathering operations in the U.S., and in cell

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phone protocols, that no hacking was committed here. And while hacking may have takenplace by British reporters against targets in the U.S.—as alleged in Jude Law’s suit—thatremains to be proven.

And yet, what has happened in the U.K. is far from mere rogue behavior in a remoteforeign division. Rather, News International is a division that has long been one of the corecomponents of the company, both in terms of revenue and brand, and one that hasreported to the highest echelons of the company: Rupert Murdoch himself, his closestconfidants, and, more recently, his son, James.

Still, it could well be that even with its U.K. operation shuttered or sold, its executives puton trial, and with the opprobrium of the British government and public heaped on it, thecompany can continue with its same ethos and methods of operation in the U.S. (Indeed,given the declining growth of the newspaper business, the share price of the companymight well go up without them. The shareholders would have benefited from News Corp.’scrimes.)

Here is where the RICO logic comes in. The usual path of a criminal investigation followsthe crimes back to the source—that’s what happened to News Corp. in the U.K. when theroyal family discovered that its voice mail messages were appearing in the press. But in aRICO investigation, you are really following the ethos and methods of operation of a groupor organization to the crime. In other words, criminal activity is not seen as an isolated orparticular event—as News Corp. has desperately and unsuccessfully tried to portray thecrimes that occurred in the U.K.—but as an established pattern of conduct.

As it happens, much of this pattern of conduct at News Corp. has long been hiding in plainsight. How the company has gotten away with such behavior is, in fact, a subtext of theinvestigations that are now unfolding.

Partly, the company has escaped legal scrutiny because this is a boys-will-be-boys sort ofstory. News Corp.’s by-any-means aggressiveness has become so much a part of itsidentity that it seemed almost redundant to find fault with it. Everybody knew butnobody—for both reasons of fear and profit—did anything about it; hence its behavior hasbecome, however unpleasant, accepted.

And partly, it’s because the fundamental currency of the company has always been rewardand punishment. Both the New York Post and Fox News maintain enemy lists. Almostanyone who has directly crossed these organizations, or who has made trouble for theirparent company, will have felt the sting here. That sting involves regular taunting and,often, lies—Obama is a Muslim. (Or, if not outright lies, radical remakes of reality.) Threatspervade the company’s basic view of the world. “We have stuff on him,” Murdoch wouldmutter about various individuals who I mentioned during my interviews with him. “We havepictures.”

Similarly, the Post and Fox News heap praise and favors on partisans, who in turn dothem favors (the police, in New York as well as London, receive and return the favors).

This reward and punishment has translated into substantial political power, both in termsof regulatory advantages and, too, in the ability of the company to shield itself from thekind of scrutiny that it has taken a perfect storm of events to have it now receive.


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Then, too, as one of the largest media organizations, it has insured a hands-off attitude (ifnot policy) from other media organizations—those which have business with it, or whoseexecutives want to protect their prospects of working for it, or that extend courtesies in thehope they will be extended back.

There’s also the money. Ultimately, if you have the goods or the savvy with which todamage the company, you get paid off. In London, that’s how News Corp. thought it couldcontain the hacking scandal, with big cash payments to and confidentiality agreementswith the hacking victims. In the U.S., Floorgraphics, the company that News AmericaMarketing tried to extort, was bought for far more than its value when it persisted in its suitagainst News Corp. Judith Regan received an outsize settlement when she pushed herclaim that Ailes had pressured her to lie about her relationship with Kerick.

A former News International executive of my acquaintance reminds me of a detail I haveforgotten: There are rat traps throughout News International’s headquarters in Wapping,the old distillery and warehouses where Rupert Murdoch moved his British papers in thelate 1980s as a way to break the print unions. There are rat traps even in Murdoch’s ownoffice. And the rats there are very large.

Beyond the obvious metaphor that the freely running rats suggest, there’s another. NewsCorp. has never had anything more than a thin skin of an orderly, well-resourced, highlyregulated corporation. Underneath the first layer is a kind of unreconstructed, evenDickensian, do-anything-to-survive world. Indeed, in some ways it is a culture in rebellionagainst the decorous and straightlaced world. News Corp. revels in its anti-establishmentview. If it has a central philosophy, it’s against regulation and, in a sense, even modernity.When I was beginning my book, just after the company acquired Dow Jones, Murdochwas being encouraged to think about a new branding campaign for the company(“branding” is a modern concept Murdoch would otherwise sneer at)—the notion hefastened on and had to be talked out of involved making the symbol of the company apirate ship.

Just as this conversation was going on so was a conversation about the editorial oversightboard Murdoch had agreed to as a condition of buying the Wall Street Journal. He thoughtit was a joke. He thought the people who believed that he would take such a boardseriously and honor its terms were a joke. Of course, he wouldn’t be bound by hisagreement! (And, indeed, he promptly cast it aside, supplanting the paper’s editor, whichhe had expressly committed not to do.)

News Corp. protects, too, its reprobates, its pirates, seeing them as, somehow, the soul ofthe company.

There is the inexplicable story of Richard Johnson, the Post’s Page Six editor whoadmitted to taking payoffs from sources that wanted favorable coverage. He has continuedto thrive in the company. There’s the executive at News America Marketing, Paul Carlucci,who despite the apparent and costly illegalities that occurred under his management, waspromoted within News Corp. And there’s Bill O’Reilly: well-documented charges of sexualharassment have not in the least dimmed his career at Fox News.

It’s all about the organization. It’s an organization all about doing what Rupert wants youto do, or doing what you imagine Rupert wants you to do, or doing what you imagine yourboss imagines Rupert wants done. There are few companies as large as News Corp. that


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are so devoted and in thrall to one man. There are few companies which, over so long,have so assiduously hired the kind of people who would be in thrall to one man. Indeed,News Corp. can be quite a disorganized and scattered company, and yet its drivingpremise, what unites and motivates this oft-times gang-that-couldn’t-shoot-straightenterprise, is to do as Rupert would have you do.

It’s a superior and blind kind of loyalty. “Can you…?” Murdoch says to several executivesvisiting with him on his boat (this is the old boat—much smaller than the grander one hehas now) when he receives a phone call that he needs to take in private. The executivesjump in the water and swim around the boat until the call is done (and this story is notapocryphal).

The most direct method of undoing this sort of enterprise is undoing this sort of loyalty.

In London, there have now been 10 arrests. While British law does not provide for the kindof U.S.-style plea bargaining that can easily flip a co-conspirator, there is, ever-moreapparently, no where else to turn. There will be no News International safe haven in termsof cash or comfort. While the company continues to pay legal fees, and, in the case ofRebekah Brooks, apparently continues to keep her on the payroll (despite representationsotherwise), this is a last gasp of the company’s ability to buy dedication. There are toomany questions now. In other words, the value of loyalty is fast running out. In the end, itwill be a human drama, as all scandals are, about lives and careers upended and thenecessity to save yourself.

In the U.S., curiously, the company has, for the last few years, been undoing its ownloyalty program. Arguably, the hacking scandal has unfolded not just because theorganization is, at its heart, antipathetic to reasonable community standards, but becausethe organization itself is in turmoil. James Murdoch has been the manager of this scandal,and James is simply not as cunning, or perhaps even as cutthroat, a pirate as his father.The coterie that has long surrounded Murdoch, executives who have carefully managedand tempered him, which included Peter Chernin, the COO, Gary Ginsberg, his chiefcommunications lieutenant, and Lon Jacobs, the general counsel, have beensystematically parted from the company, not least of all because James Murdoch hasbeen consolidating his influence over his father by dispatching the men who might havecompeting influence. Although each of these men has been paid bountiful amounts tomaintain a minimum loyalty, the truth is they are embittered, too—and they knoweverything.

“You don’t get it,” Rupert’s son-in-law, Matthew Freud, the infamous London PR man,told me almost a year ago. “If there was a conspiracy in the company, the conspiracy wasto keep Rupert from knowing.”

Freud’s convoluted formulation answered a question I hadn’t asked and suggests that 10months before the Milly Dowler revelations and the bottom falling out of the scandal,Murdoch intimates were sensing how close this could come to the center and essence oftheir lives. Indeed, it’s not clear why you would have to conspire to keep someone fromknowing what he did not know, nor why you would, unprompted, make admitting to acover-up a main thesis of your defense.

You wouldn’t—except if you understood (and Freud is one of the people within thecompany to have a gimlet-eyed understanding of it) that everything that happens at News


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Corp. is systemic, that this is an organization predicated on a certain view of the world thatfosters a certain behavior (that might turn weaker stomachs), that its nature runs from thetop to bottom and bottom to top. And that the necessary and desperate and ultimatestrategy has to be an effort to protect the man at the center of it all. Because there isnothing without him.

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