Photo: Reuters
Photo: Reuters

Fox News turmoil recalls News Corp. hacking scandal

Rupert Murdoch's empire survived the hacking affair only after a painful corporate restructuring that transformed his pirate ship into a more orderly frigate

Settlements for alleged inappropriate behaviour that continued unabated.

A proudly pirate-like office culture that somehow seemed just fine—until suddenly it didn’t.

A parent company’s professed ignorance of the alleged misbehavior that was either willful or genuine but outside the norms of responsible corporate governance just the same (to put it mildly).

Fox News, 2016?

You might think. But I was referring to the British phone hacking scandal earlier this decade that engulfed Rupert Murdoch’s British newspaper division; shut down News of the World, his London tabloid; forced Murdoch and his son James to testify before Parliament; sent people to jail; and shook the rest of Murdoch’s giant global media company to its foundations.

The Murdoch empire survived the hacking affair, but only after a painful corporate restructuring that was devised to transform Murdoch’s pirate ship into a more orderly frigate—or rather, two of them, since the company divided in 2013. (Now there’s 21st Century Fox, for television and movies, and News Corp., for print.)

Yet, here we are again. The sexual harassment case at Fox News Channel, a division of 21st Century Fox, is eerily similar terrain. And, as such, it raises important questions about just how far the corporate transformation that followed the hacking situation truly went.

The answer will depend on how the Murdochs and their corporate hierarchy handle it from here.

Executives who work at the 21st Century Fox headquarters have said that the problems they have confronted at Fox News are because of one man only, Roger Ailes, who was forced out as the network’s chairman last month. And the Murdochs’ naming of a new, permanent Fox News leadership team on Friday—Bill Shine and Jack Abernethy—was the sort of move that usually brings closure.

Yet, Shine and Abernethy were integral parts of Ailes’ management regime. Executives at 21st Century Fox say they are satisfied they weren’t aware of Ailes’ alleged misdeeds and, apparently, were therefore in no position to stop them. With new details still emerging about the way that management handled sensitive sexual harassment cases, however, you can be certain that this thing isn’t over.

For 21st Century Fox, the initial harassment lawsuit that led to Ailes’ downfall, filed by former anchor Gretchen Carlson, seems like a break in the mouldy wall of an old house. Forced to look inside, you are finally confronted with all that degradation you feared was there but didn’t really want to know about.

Hardly a week has gone by without some new revelation—another accusation against Ailes; a previously undisclosed harassment settlement; word of obscured budget lines for Ailesian “black ops" aimed at keeping prying reporters at bay (especially his chief journalistic pursuer, Gabriel Sherman of New York magazine).

Every new wave of information has lapped that much closer to the shores of 21st Century Fox, with the same questions that bedeviled the company during the phone hacking scandal: What did people there know and when did they know it? And if they didn’t know it, why didn’t they?

Throughout the scandal, corporate higher-ups have said they were in the dark because Ailes had nearly complete autonomy for his network and his budget, in no small part because of the large profits he was generating at Fox News.

Therefore, 21st Century Fox officials said, they had no knowledge of Fox News’ $3.15 million settlement payment in 2011 to Laurie Luhn, the former Fox News booker who charged she had a 20-year abusive relationship with Ailes—one of several missed warning signs that something was seriously wrong.

Ailes denied her charges. The settlement took care of the rest. And Ailes would go on to draw more harassment accusations in the years that followed.

The Luhn case provides “quite a precise parallel" to the British hacking affair, Nick Davies, who led the hacking coverage at The Guardian, told me on Friday.

That matter also featured a settlement that could have, and should have, been a warning flare—the roughly £700,000 that News of the World paid to a British football union executive, Gordon Taylor. A private investigator had hacked into Taylor’s phone for a story the newspaper was pursuing about him.

News Corp. officials, including James Murdoch, had maintained to members of Parliament that phone hacking was the province of just one reporter, Clive Goodman, who had pleaded guilty in 2007 to using information from hacked voicemail messages of royal staff members.

Corporate email messages relating to the Taylor case, however, showed hacking was in wider use at the newspaper.

It became particularly damaging for James Murdoch when parliamentary investigators reported that he had, in fact, received an email chain discussing the potential extent of the hacking long before he said he learned of it. (The younger Murdoch, who had only newly taken oversight of the newspaper, said he had not read that chain in full.)

Regardless of what he did or did not know, the biggest takeaway was that the cavalier corporate culture set by his father had enabled the scandal to happen.

“I think it’s fair to say that Murdoch always looks at the bottom line and if things are making money, he’s a happy man," Davies of The Guardian—author of the book Hack Attack—told me. “He’s not going to ask too many questions."

Sherman’s article last week detailing the work of their “Black Room"—which also ran a campaign against him—noted that all of that work by Ailes’ operatives had to have been paid for, and accounted for, somehow. In the past couple of weeks, Fox has systematically shed those “consultants," whose pay wasn’t enough to draw the notice of corporate headquarters. It’s still baffling that the Luhn settlement wasn’t either, though it came in the thick of the hacking case.

Luhn’s story implicated other Fox News executives, including Shine, who, she said, would summon her to New York from Washington for work visits that Ailes took as opportunities for assignations.

It’s the sort of collateral involvement that caused people inside and outside the network to wonder whether a wholesale house-cleaning wasn’t in order, as Sarah Ellison reported in Vanity Fair last week.

That didn’t happen, obviously, with 21st Century Fox indicating on Friday it found that Shine—who has said he did not know about the relationship—played an unwitting role at worst.

However, in its staffing announcement, 21st Century Fox noted that the Fox News chief financial officer Mark Kranz, who would have approved Luhn’s payment—and other Ailes budget items—was retiring. (It did not elaborate on the future of the Fox News executive vice-president for legal and business affairs who oversaw the sexual harassment settlements, Dianne Brandi.) So, it’s keeping the onus on Fox News.

Still, even Davies says that the internal investigation that led to Ailes’ ouster and all that has followed is an important change from the hacking scandal, when the company was slower to act.

Moving forward, executives at 21st Century Fox indicate they will be keeping a much closer eye on Fox News, that profits will no longer suspend the basic rules of modern corporate life. But the elder Murdoch will be in the lead, continuing his physical presence at the network.

Whether this augurs real change will depend on which kind of ship Murdoch thinks he’s commanding—the orderly frigate of the post-hacking era, or that rowdy corsair he’s always loved.