Murdoch hack-a-thon: phone-hacking scandal costs billions as court decision shines light on The Sun

Thursday and Friday turned out to be two days of ignominy for the Murdoch family.

The former revealed there is no end in sight to the bills coming in from the phone-hacking scandal at the News of the World and now The Sun — half a billion dollars alone in the three years to June 2021. The latter saw the family’s UK arm lose another attempt to end the mounting cost as a judge in Britain’s High Court sent the family-controlled US company packing.

As a result of that court decision, News Corp and the Murdochs are exposed to a flood of new cases from people who claim they were hacked by journalists and others at The Sun. It was the first time a court confirmed what News has consistently denied — that phone hacking actually happened at The Sun. A court settlement by News last December with UK actress Sienna Miller opened the door on The Sun’s hacking.

But non-Murdoch shareholders in Fox Corporation, the latest version of the Murdoch’s US cable TV, film and production businesses (it used to be known as 20th Century Fox), will know the cost if they are interested enough (and some big fund managers are) as the company has been picking up the cost of the phone-hacking bills every year since the empire was divided in June 2013.

To date that has exceeded A$1.5 billion of the A$2 billion plus in damages and legal costs since 2007 when the phone-hacking scandal was exposed. This doesn’t include legal and other costs involved in closing News of the World (Rupert Murdoch’s effort to offer up a sacrifice to the UK government to keep alive his ambitions to own all of Sky broadcasting — he failed), redundancy expenses, and lost advertising and circulation revenues that are estimated to total another A$1 billion.

The annual return of Murdoch’s News Group newspapers for 2020-21 revealed that the phone-hacking bill for that year was a total of £49 million (more than A$86 million), made up of more than £14 million in actual damages and £33 million in legal costs (News Corp’s and those suing the company — ouch). That was after a £79 million bill in 2019-20 and a massive £164 million the year before. All up £292 million, or about A$514 million at current exchange rates.

That would have wiped out earnings for News Corp’s newspapers over the three years to June 2021 — they totalled A$382 million at current exchange rates, against the A$514 million total for the hacking bill. But fortunately for those shareholders in News Corp, Fox picked up the bill with the phone-hacking costs indemnification part of the separation agreement in June 2013 and constantly noted in every quarterly filing since then.

That discriminates against the non-Murdoch shareholders at Fox and benefits both the Murdoch family and non-family shareholders in News Corp. (That is not something unusual in the history of Murdoch and his media empires.) But what’s new? The Murdochs consistently get others to pay for their errors, especially non-family shareholders.

It was the then-shareholders of the original News Corp (before June 2013) who voted to approve this indemnification arrangement. They probably thought that was going to be a clever move — it made the shares of the new News Corp that much more attractive post-split. But they must have known that the costs of the phone hacking just wouldn’t go away. They must have had an inkling of the enormous liability that was out there, waiting to consume hundreds of millions of dollars in settlements and legal fees.

The Murdochs at Fox must have also had an idea because they accepted the indemnity in the lead-up to the split (as they asked for it at News Corp), but since then they have studiously ignored commenting on it. Now the family’s other half, News Corp, is trying to end the drain in UK courts, really acting on behalf of itself in Fox.

To the A$514 million cost at a £-to-A$ exchange rate of A$1.76 in the three years to 2020-21, we can add a £1 billion estimate (A$1.76 billion) in July last year from the London-based Press Gazette for earlier costs.

In Thursday’s legal action, News Corp asked the High Court to require that any more claims are brought within a “reasonable” timeframe.

Thousands of cases have been through the UK courts in the 15 years after the hacking scandal was first reported, so the approximate A$2 billion actions cost at the News of the World and The Sun will continue to grow and grow, with the tabloid The Sun increasingly the focus of actions. It’s no wonder the Murdochs want to put a lid on it.

The action brought by Miller, settled last December, saw News make what some media reports said was a “substantial settlement” to stop her pursuing a court hearing that was reportedly going to be very embarrassing for News. The telling part of Miller’s action was that she claimed The Sun had hacked her phone to learn about her pregnancy. For years News Corp had claimed The Sun was not involved in hacking — the News of the World was the offender.

Miller’s action and the News settlement have opened the door to potentially new claims. In fact, UK lawyers say there are hundreds, if not thousands, of cases that could be brought.

On Friday High Court Judge Timothy Fancourt dismissed the application from News Group Newspapers — a UK subsidiary of the Murdoch family’s News Corp — to impose a final cut-off date for any new claims linked to the phone-hacking scandal. He said many victims may not yet know that they were targeted by journalists at both News of the World and The Sun.

According to News’ UK action, some 1028 claims have already been settled, plus an additional 358 applications that were made to a compensation scheme run by parent company News International between 2011 and 2016 (which was a first attempt to choke off claims). The number of cases since that process ended is almost three times the number of those early settlements, confirming the industrial-sized phone-hacking activities that went on at News of the World. Now The Sun’s cases loom.

Lawyers for some groups of possible victims at the hearing claimed there could be as many as “20,000 to 25,000 potential victims of NGN’s unlawful information gathering” and there should be no cut-off date.

The hearing was told that there are 52 claims registered, with another 436 at the pre-action letter stage and 82 more “in the pipeline”. Based on previous settlements, the 570 claims could easily top another half a billion dollars, including legal costs.

That means up to last Friday we now know there have been a total of 1946 claims of phone hacking by News of the World and The Sun over some 15 years, or roughly 130 a year.