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Friday 14 December 2012

Murdoch Stateside Court Case

Seemingly going unreported despite the increasing notoriety of the defendants is a class action for securities fraud lodged at the US District Court in the Southern District of New York. Here, plaintiffs including a UK Local Government pension fund are suing News Corporation, News International, and also Rupe, Junior, Les Hinton and Rebekah Brooks, just to be on the safe side.

Securities fraud in this instance refers to the price of News Corp shares, the allegation being that some information regarding the less than totally legal behaviour of some of Rupe’s troops in the UK had not been disclosed in a timely manner so that potential investors could form a properly informed judgment as to whether or not it was worth putting their money into the Murdoch empire.

That so little is known about this action seems strange, given that it has been rumbling on since papers were first filed in July 2011 (my thanks to @jpublik for the tip). And why the action was taken is not hard to see if the News Corp share price movements during 2011 are examined: after fluctuating between $18 and $19 in April and May, there was a fall in August to under $14.

The volume of shares traded as the price fell shows spikes that suggest heavy selling, possibly automatically triggered, and one can only assume that the investors taking the action baled out during one of these episodes. The News Corp share price did not recover that $19 level until January this year (it later went well above $20 on the prospect of the company being split up).

So who is taking the action? Well, there is a US Trust and a Union pension fund, but the interest for those in the UK is that the action has been joined by the Avon Pension Fund, which is nowadays administered by Bath And North East Somerset Council (aka BANES). Avon was a county set up as part of the 1973 Local Government reorganisation, but later abolished.

And the latest development is that News Corp is trying to have the action dismissed. The grounds for this are that the allegation of non-disclosure of wrongdoing is incorrect, and that evidence of voicemail interception had been disclosed as early as January 2011. But what really put the lid on the whole affair was the July 2011 revelation that the Screws had Millie Dowler’s phone hacked.

It was the Dowler revelation, and the subsequent closure of the Screws, that hit the share price, and it is more than likely that this will form the central plank of the case against News Corp, along with the likelihood that someone high up in that organisation knew about it. So if Rupe and his Stateside troops get this action dismissed, I reckon they can count themselves very lucky indeed.

And if not, well, it could get even more messy – and a lot more expensive.

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