Were the Murdochs -- Rupert and his son James -- being truthful when they told Parliament last week that they were unaware of the extent of the phone hacking and police payoffs by reporters of the now-defunct tabloid The News of the World? As the details of this scandal continue to unfold, enveloping as well the Prime Minister and members of his cabinet, one of the areas of interest appears to be the conduct of the lawyers who represented the Murdochs during the hacking, and the ensuing lawsuits and arrests. It now appears that the various law firms and lawyers representing the Murdoch corporations -- News Corporation and its subsidiary News International -- may have known for several years of widespread phone hacking and payoffs to the police by reporters and editors at the tabloid. The British authority regulating lawyers has opened a formal inquiry into the role of these lawyers in the hacking scandal.
This inquiry will likely focus on the following issues: Did the lawyers representing the corporations know about widespread phone hacking and payoffs to the police? If they did know, did they disclose this information to the Murdochs? If they did, then the Murdochs were not being truthful with Parliament. If they did not reveal to the Murdochs the extent of the criminality, what exactly did they tell the Murdochs? Here are some recent disclosures that raise many questions:
The law firm representing the tabloid The News of the World (one its clients is the Queen of England) learned about a critical email in 2007 describing illegal payments to the police, but apparently kept that information secret for several years. Did they disclose this to the Murdochs? Confidentiality privileges ordinarily do not apply if lawyers are involved in perpetrating crimes or frauds (Rule 1.6(a)(2) of Model Rules of Professional Responsibility).
Another law firm was retained by the News Corporation in 2007 ostensibly to do an internal investigation into possible phone hacking by the tabloid's reporters, but it appears that its real mandate was to defend the company in a wrongful termination lawsuit filed by Clive Goodman, the tabloid's "Royal reporter," jailed in 2007 for hacking. Goodman claimed that hacking was widespread, and that he should not have been singled out and fired for what he did. Did the Murdochs hire this firm to do an objective investigation, or to cover up any misconduct that was discovered?
At the time the News Corporation was defending the Goodman lawsuit, the Corporation also was paying Goodman's legal fees to defend against Goodman's charges that phone hacking was rampant. Why did the Corporation pay his legal fees?
The law firm defending the News Corporation in 2007 reviewed numerous emails that appear to have contained evidence that criminality was rampant, including hacking and payments to the police to conceal the wrongdoing. The firm represented in a letter to the Murdochs, which Parliament has seen, that hacking was limited to one "rogue reporter." However, the former Director of Public Prosecutions who was called in to review these same emails, after only a very cursory review, stated that evidence of widespread criminality contained in these emails was "blindingly obvious." Were the lawyers incompetent in not seeing this? Was their review unduly narrow and focused only on the one reporter? Or were they intentionally concealing this information?
A secret confidentiality agreement prepared by the law firm representing the News Corporation in an invasion of privacy lawsuit brought by soccer union official, Gordon Taylor. The settlement bars the lawyers from revealing the details of the negotiations leading to a record $1.6 million dollar settlement. The huge settlement was authorized by James Murdoch, who, as noted above, claimed that he had no knowledge of the extent of the hacking. His assertion is disputed by substantial evidence, both direct and circumstantial. Three executives in the corporation claim that they told Murdoch of widespread hacking. Other incriminating evidence is contained in the emails, noted above, the numerous lawsuits brought by other victims of the hacking, and a transcript of instructions to the tabloid's reporters on how to hack phone messages. Given this mountain of evidence, is it credible for Murdoch to claim ignorance, or was he "mistaken," as the executives diplomatically allege?
The law firm that negotiated the Taylor settlement started at $99,000 dollars, and ended at the record $1.6 million dollars. But $1.6 million dollars was the amount Murdoch claimed at the outset of the negotiations that he could never settle for. Why, then, did he go along with the settlement? Did his lawyers advise him of the risks he was exposed to if the case went to trial and the details of the settlement were made public? Would revealing the details of the settlement negotiations contradict Murdoch's claim that he believed the hacking was limited to one reporter?
James Murdoch has claimed that he merely relied on the advice of his "distinguished counsel" in settling for what is a record amount for a private lawsuit. What was the advice given to him by his distinguished counsel? Was it lawful legal advice? Or was it advice on how to conceal damaging information that could lead to a scandal? Is this one of the reasons that legal fees were paid to News Corporation executives?
Prosecutors in the U.S. have been known to try to coerce corporations that are being investigated for criminal conduct into waiving claims of lawyer-client confidences asserted by targets of the investigation, as well as threatening the corporation with prosecution if they pay the legal fees of corporate employees who may be targets of the investigation. That policy has been condemned as undermining the employee's Sixth Amendment Right to Counsel (U.S. v. Stein, 435 F. Supp.2d 330) and has been significantly modified by the U.S. Department of Justice. However overzealous these prosecutors may have behaved, one cannot ignore the understandable impulse behind this prosecutorial policy. From the U.S. prosecutor's standpoint, a corporation under investigation should not be paying the legal fees of employees who are in a position to give incriminating testimony against the corporation. When the employee's legal fees are being paid by the corporation, there is good reason for prosecutors to believe that the lawyers will act in the corporation's interest to keep these employees from cooperating with the government.
The theory behind this U.S. prosecutorial policy seems to be at play in the UK, but from the Murdoch side of the courtroom. The News Corporation has paid the legal fees of several employees caught up in the scandal who may be in a position to reveal incriminating details about the conduct of the corporation, either in condoning phone hacking and police payoffs, or covering up the misconduct. The hacking scandal is one thing. But as we've seen so many times in U.S. criminal investigations, the cover up may be even worse. And in the U.K., as in the U.S., the role of the lawyers in counseling the Murdochs is being closely scrutinized.