The news business is just that—a business. The scandal involving Rupert Murdoch’s media empire underscores the fact that newspapers and tabloids, like other businesses, are willing to go to extraordinary and possible illegal lengths to gain a competitive advantage.
As the scandal widens day by day, several members of Congress have called for an investigation into News Corp.’s actions to determine whether the company's alleged bribes to British government officials violate the Foreign Corrupt Practices Act (FCPA).
Last week, Murdoch’s Wall Street Journal lashed out at the prospect of an FCPA investigation:
The political mob has been quick to call for a criminal probe into whether News Corp. executives violated the U.S. Foreign Corrupt Practices Act with payments to British security or government officials in return for information used in news stories. Attorney General Eric Holder quickly obliged last week, without so much as a fare-thee-well to the First Amendment.
The foreign-bribery law has historically been enforced against companies attempting to obtain or retain government business. But U.S. officials have been attempting to extend their enforcement to include any payments that have nothing to do with foreign government procurement. […]
Applying this standard to British tabloids could turn payments made as part of traditional news-gathering into criminal acts. The Wall Street Journal doesn't pay sources for information, but the practice is common elsewhere in the press, including in the U.S.
The letter of the law, however, appears to be broader than WSJ’s black and white "government procurement" standard:
The FCPA prohibits individuals and companies from ‘‘corruptly making use of the mails or any means or instrumentality of interstate commerce in furtherance of an offer, promise, authorization, or payment of money or anything of value to a foreign official for the purpose of obtaining or retaining business for, or directing business to any person, or securing any improper advantage.’’
Note also how the WSJ uses a strawman to claim that the FCPA doesn't apply: the question isn't whether a newspaper has the right to pay for news tips generally—it's whether it has the right to secure a competitive advantage by paying government officials for non-public information.
The FCPA was enacted after a long line of corruption scandals, from Watergate to the straw that broke the camel's back—a stunning revelation in 1975 that Lockheed had paid out some $22 million in bribes to foreign officials and political organizations. TIME explained Lockheed's defense:
[Lockheed] issued a defiant statement that sounded almost like an assertion of the right to bribe. […]
Such payments, it said, are a normal and necessary feature of doing business in certain parts of the world, are essential to sales and "are consistent with practices engaged in by numerous other companies abroad."
Ah, the "everyone does it" defense. Sound familiar? It sure sounds like the WSJ's argument that government bribes are merely "payments made as part of traditional news-gathering."
The WSJ's attacks on a possible FCPA investigation didn't end with that bluster-filled editorial. Last week, David Rivkin and Lee Casey, former DOJ officials in the Reagan and Bush administrations, echoed similar arguments, calling the calls for FCPA inquiries "the new First Amendment threat" in their WSJ opinion piece.
Roger Parloff at Fortune also takes a look at the FCPA applicability issue, and points out that regardless of the whether the actual act of bribery falls under the law, "The other part of the law, on the other hand—which requires keeping accurate books and records—seems likely to encompass the conduct being alleged." In other words, even if the bribes themselves are found not to fall within the scope of the law, the FCPA requires accurate corporate disclosures, so that a company or its officers may be found civilly or criminally liable for not disclosing bribes in their corporate paperwork.
One thing is for certain—News Corp. has hired some of the world’s best FCPA and criminal experts to handle the matter:
- In a textbook case of D.C.’s revolving door culture, News Corp. has hired Mark Mendelsohn, who was Deputy Chief of the Department of Justice and who has been in charge of FCPA prosecutions for the last half decade. He left the DOJ last year, and is now advising News Corp. on the other side of the issue.
- News Corp.’s independent directors will be receiving advice from former Attorney General Mike Mukasey and others at Debevoise & Plimpton. This is the second time this year Mukasey’s been in the spotlight on FCPA matters. Just last month, Mukaskey testified before Congress on behalf of the U.S. Chamber of Commerce to weaken the FCPA.
- News Corp. has also hired Brendan Sullivan, one of the top criminal attorneys in the nation.
Whether the FCPA angle of the Murdoch scandal bursts wide open or fizzles out, it does underscore the importance of fighting the U.S. Chamber's attempts to gut the law's reach and effectiveness. If anything, the News Corp. scandal can serve as an impetus to strengthen and clarify the law. After all, there should be no First Amendment right to corruption.
For more on the FCPA, make sure to read Mike Koehler’s always excellent FCPA Professor blog.