News Corp in fresh storm – FT.com
upert Murdoch’s News Corp was on Tuesday facing a fresh barrage of allegations over its business practices after an Australian newspaper released 14,000 emails concerning one of the group’s security subsidiaries.
The emails, said to be from the hard drive of a former head of security at NDS, a former News Corp subsidiary, appear to show that the company paid computer hackers to work with its “operational security” unit. The cache sheds further light on commercial disputes between News Corp and pay-TV rivals that now span Australasia, Europe, and the US.
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The Australian Financial Review claimed that NDS’s activities in Australia in 1999 caused millions of dollars of damage to Mr Murdoch’s rivals in the country’s nascent pay-TV market. The business models of Austar, Optus and Foxtel were all damaged by a wave of high-tech piracy at that time.
The Australian newspaper said the emails had originated from the computer of Ray Adams, a former commander in the Metropolitan Police in London, who served as head of operational security for NDS in Europe from 1996 to 2002.
News Corp and NDS had no immediate comment.
Allegations of fierce competitive behaviour, which were not illegal under Australian law at the time, the AFR said, came a day after the BBC’s Panorama programme levelled similar charges against NDS’s conduct in the UK.
The television programme said that NDS used hackers to crack the security of the encryption cards of OnDigital, the UK broadcaster ITV’s entrant in the pay-television market, which went bust in 2002 in the face of competition by News Corp’s British Sky Broadcasting unit.
In one email purportedly from the hard drive, NDS employees discuss the fact that a European pay-TV company which News Corp was poised to take a stake in was “totally hacked” by pirates. The sender of the email debated whether, in light of the News Corp interest in the company, NDS should “start to protect [the particular model of encryption used by the company] while leaving the main . . . platform compromised”.
In a detailed statement after the Panorama programme, NDS denied it had ever used hackers against other companies.
“Like most companies in the conditional access industry – and many law enforcement agencies – NDS uses industry contacts to track and catch both hackers and pirates. This is neither illegal nor unethical. And, to ensure that all activity remains completely within legal bounds, NDS staff and their contacts operate under a clear code of conduct for operating undercover.
“These allegations were the subject of a long-running court case in the United States. This concluded with NDS being totally vindicated and its accuser having to pay almost $19m in costs – a point that the BBC neglected to include.”
Some of the emails released on Tuesday did play a part in that case, where the US pay-TV platform Echostar won part of its claim, but was awarded such low damages that it was ordered to pay NDS’s costs.
Tom Watson, the opposition Labour MP who has led British parliamentary investigations into Mr Murdoch’s group and its role in a phone hacking scandal, said he had written to the broadcasting regulator Ofcom, asking it to include the Panorama allegations in its inquiry into whether Mr Murdoch and News Corp were “fit and proper” to own a broadcasting licence. To date, 22 people have been arrested in connection with the phone hacking investigation at the News of the World newspaper.
In the US, the FBI unit responsible for inquiries under the Foreign Corrupt Practices Act is scrutinising a separate UK police investigation into alleged corrupt payments to public officials by journalists at The Sun. The FBI has also started its own investigation.
Mr Murdoch’s son James was a non-executive director of NDS when OnDigital was allegedly hacked, but there is no suggestion that he knew of any illegal activities.
In the Panorama programme, Mr Adams denied ever having seen or handled encryption codes or cards that would have allowed anyone to hack OnDigital’s machines.
NDS acted as the technical and security company serving all of News Corp’s pay-TV businesses around the world.
In 2008, News Corp sold down its stake in NDS from 67 per cent to 49 per cent in a deal with the private equity company Permira. The two, as joint owners, sold NDS to Cisco of the US earlier this month for $5bn.