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Thursday, March 28, 2024 | Back issues
Courthouse News Service Courthouse News Service

News Corp.’s Shareholder War Wages On in N.Y.

MANHATTAN (CN) - News Corp. CEO Rupert Murdoch and other executives cannot stay claims of gross mismanagement related to the phone-hacking scandal, a federal judge ruled.

In the summer of 2011, Gregory Shields, G.E. Stricklin and Iron Workers Mid-South Pension Fund filed separate shareholder derivative actions against a group of News Corp. directors and officers in the Southern District of New York.

The lawsuits charged violations of Securities Exchange Act of 1934, breach of fiduciary duty, gross mismanagement, waste of corporate assets and abuse of control.

British authorities had been investigating the media conglomerate's darling, the News of the World, since publication of a November 2005 article about Prince William containing private information.

The journalist behind the article, and a private investigator hired by the paper, admitted to hacking the phones of the royal family roughly two years later.

News International eventually shuttered the paper and apologized to 20 victims, including the family of a murdered child, British soldiers and victims of the London bombings.

The FBI is looking into whether the newspaper also hacked voicemails of those who survived the Sept. 11 terrorist attacks.

Shareholders say that the executives lied to them by failing to disclose liabilities from illicit behavior on public filings.

Noting that another shareholder action is pending in Delaware, News Corp. and its executives moved to stay the cases on Dec. 8, 2011.

U.S. District Judge Paul Gardephe refused Tuesday, pushing forward two of the claims in New York.

News Corp. will not have difficulty defending both lawsuits because New York is "just as convenient" as Delaware for the media giant, the 30-page order states.

One of the New York actions, filed by Iron Workers, names two defendants who are not in the Delaware action - fallen executives Les Hinton and Rebekah Brooks.

Hinton, the former CEO of Dow Jones, resigned a year before the House of Commons Culture, Media and Sport Committee accused him of being "complicit in the cover-up" at News International.

Brooks, former CEO of News International, has been criminally charged for allegedly conspiring to pervert the course of justice as one-time editor of News of the World.

G.E. Stricklin, the shareholder behind the third New York action, must file a new complaint to proceed because the current one lacks jurisdiction.

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