It began in the United Kingdom, and it has just splashed ashore in the United States: a wave of speculation, however far-fetched, that one of Rupert Murdoch’s sons could be prosecuted under the Foreign Corrupt Practices Act, an international anti-bribery law.
The phone-hacking scandal that has rocked the Murdoch empire, shuttered a Murdoch-owned tabloid and caused trembling at 10 Downing Street, Scotland Yard and Parliament could lead to the prosecution of James Murdoch under the FCPA, media outlets in the U.K. speculated over the weekend. A follow-up report by the Associated Press left the impression that action against Murdoch interests, not only by the Department of Justice but also by the Securities and Exchange Commission, is a possibility.
Legally, it seems to be possible. But based on the history of FCPA enforcement and the political priorities of the Obama administration, it seems highly unlikely.
We’ll explain our views below. But first, the history of the speculation:
It seems to have started with comments by Professor Mike Koehler of Butler University, who writes the FCPA Professor blog and frequently comments on the FCPA, which was enacted in 1977. “I would be very surprised if the U.S. authorities don’t become involved in this conduct,” Koehler told The Guardian, a U.K. newspaper and Murdoch empire rival. Koehler noted that the DOJ may be smarting from the perception that in FCPA-related actions, rich big shots generally emerge unscathed.
News Corp. comes under FCPA jurisdiction, because it is based in New York and listed on the Nasdaq stock exchange in the U.S. Koehler noted that the FCPA “requires that payments to government officials need to be in the furtherance of ‘obtaining or retaining’ business.” He added: “If money is being paid to officials, in this case the police, in order to get information to write sensational stories to sell newspapers, that would qualify” as a potential foreign bribery case.
Other British media outlets, eager to jump on the anti-Murdoch bandwagon, followed up on Koehler’s remarks over the weekend. “James Murdoch could face criminal charges in America over News of the World payments to police officers, it was claimed today,” The Mail Online reported on Saturday. “It has emerged that U.S. prosecutors could seek to bring criminal charges, fines and possibly seize assets from the American-registered News Corp.”
In our mind, none of this frothy speculation takes account of reality.
First, the Justice Department doesn’t often go after actual people alleged to have violated the FCPA. The department prefers instead to investigate companies, preferably those with big cash reserves to pay big fines in settlements that the department can later tout in press releases and to Congress as a sign of its effectiveness.
When it does base a case on individual prosecutions, the department often goes after people without the money and clout to fight back. For example, the department has spent enormous resources prosecuting a group of international defense products salesmen– people who sell bullets and bullet proof vests and the like – in an FCPA case. The defendants generally worked for small companies or themselves.
But as James Stewart recently noted, when the Justice Department prosecuted powerful Tyson Foods of Arkansas, the large poultry processor, for foreign bribery, it didn’t go after any individual executives, even though there was evidence they had covered up the illegal conduct.
Second, the Barack Obama administration seems practically allergic to political confrontation. In Justice Department matters, it would rather let Republicans pick the U.S. Attorneys in conservative redoubts like Texas and Utah than get into a fight about it with the GOP. It dropped plans to close the Guantanamo Bay military prison and to try 911 mastermind Khalid Sheikh Mohammed in a New York court when faced with opposition – much of it stoked by the powerful Murdoch-led Fox News.
Do we really think the Justice Department will be so bold as to prosecute the owners of one of the main engines of the U.S. conservative movement?
You know our answer to that question.
Meanwhile, we tend to agree with Dick Cassin, who writes the FCPA Blog and who thinks the Brits can handle the Murdoch affair by themselves. “Even if there’s FCPA jurisdiction over Murdoch’s company and the alleged crimes — and there probably is — why speculate about a criminal FCPA prosecution?” Cassin writes. “There’s just no reason to go there.” (Although if you’re a British journalist who detests the Murdochs, Koehler’s comments were an invitation to flail away.)
“For the record,” Cassin writes, “we’ve heard no speculation from the DOJ itself, and we don’t expect to. The folks there wouldn’t insult their counterparts in London, who are more than able to handle this case on their own.”