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News Corp and the FCPA: Focus on the Justice Department

I have tried to avoid writing about the News Corp scandal.  Everyone is writing about it.  The media frenzy goes on and on, with the Murdoch family, pie throwing, dramatic testimony and the usual configuration of scandal enveloping a political administration.

But it is interesting to see in the midst of this controversy that the FCPA has now emerged as a major player in the scandal.  This will bring to the media’s attention all of the issues we in the community find interesting — voluntary disclosure, internal investigations, fines, DPSs, NPAs, compliance and more.

The legal issues surrounding this scandal are not very challenging.  News Corp is a US corporation.  The FCPA clearly applies to foreign bribes paid to police officers since they are “foreign officials” under the FCPA.  No interesting legal issues.  Deal done, let’s move on.

The interesting issue, however, is the Justice Department’s prosecutorial discretion and how it exercises it.  Some have suggested that the Justice Department should defer to the UK SFO since much of the conduct occurred in the UK.  Unfortunately, the UK Bribery Act was not effective when the conduct occurred, and the SFO would have to apply its hodgepodge of bribery laws.  The FCPA is clean and it applies.

From working on Capitol Hill and the Justice Department for many years, high profile cases inject a new element — politics — into the exercise of prosecutorial discretion.  Senators Boxer and Rockefeller jumped into the fray as soon as they could.  Prosecutors have to be careful not to bend to political forces but remain consistent with their handling of cases, its track record, and avoid any allegation of favoritism or unjustified aggressive behavior.  For News Corp, the Justice Department is unlikely to be a very friendly place.

For now, News Corp’s best friend may be time, an internal investigation, and hopes that the controversy will envelop more than News Corp in bribery and hacking. News Corp’s initial handling of the case was a textbook example of how not to handle a controversy: News Corp’s board was Missing in Action and no one acted to try and take control of the issue to minimize the media frenzy.

How this plays out will be interesting considering the political winds against News Corp — this Administration is not likely to cut News Corp any breaks.  This will fun to watch.

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