News Corp Is Accused Of Helping Pirates Rip-Off Cable Rivals In Australia

rupert murdoch

Rupert Murdoch’s News Corp., already engulfed in a U.K. phone-hacking scandal, faces fresh investigations in Australia and Britain as lawmakers said police should probe an alleged piracy scheme to topple pay-TV rivals.

NDS, a pay-TV software maker co-owned by News Corp., set up a unit in the mid-1990s to hack smartcard codes and leak them online, giving viewers free access to competitors’ programs, the Australian Financial Review newspaper said yesterday. The report, which cites internal documents and e-mails, echoes allegations made by the BBC’s Panorama program this week. News Corp. denied the claims.

“If these allegations are true they mark a sinister new low in the hacking scandal,” said U.K. lawmaker Tom Watson, who’s on a parliamentary committee preparing a report about News Corp.’s handling of the phone-hacking probe. Britain’s media watchdog Ofcom “has a duty to investigate,” he said.

The claims increases pressure on James Murdoch, the deputy chief operating officer of News Corp. and chairman of U.K. pay- TV company British Sky Broadcasting Group Plc, as he seeks to move on from the phone-hacking scandal at News Corp.’s British tabloid unit. Murdoch, 39, was a non-executive director of NDS when the alleged smartcard hacking took place.

‘Fit and Proper’
Murdoch, the son of Chairman Rupert Murdoch, has already faced calls from investors to step down from News Corp.’s board and resign from his role at BSkyB, the U.K.’s biggest pay-TV company. The BBC said there’s no evidence he was aware of the NDS scheme.

Ofcom, the regulator, is currently evaluating whether James Murdoch is “fit and proper” to hold a broadcast licence on behalf of BSkyB, in which News Corp. has a 39 per cent stake. Ofcom said today it will consider all relevant evidence. The phone-hacking scandal prompted News Corp. to close the News of the World tabloid in July and drop its 7.8 billion-pound ($12.4 billion) bid for full control of BSkyB.

“If the allegations are proven, then it makes a mockery of the regulations that protect viewers,” said Mark Lewis, a lawyer for victims of News Corp.’s phone hacking who testified before the parliamentary committee. The claims “stretch the definition of ‘fit and proper,'” under U.K. law, he said.

‘Factual Inaccuracies’
News Corp.’s Australian unit, News Limited, said in a statement the Australian Financial Review’s report is “full of factual inaccuracies, flawed references, fanciful conclusions and baseless accusations which have been disproved in overseas courts.”

The piracy hurt News Corp.’s rivals in Australia and Britain, helping to ruin one of them, the news reports said. Both reports said NDS initially aimed to detect fraud and to fight piracy against News Corp.’s own pay-TV offerings, and only later began to promote and facilitated piracy.

“Any allegations of criminal activity should be referred to the Australian Federal Police for investigation,” Rebekka Power, a spokeswoman for the country’s Communications Minister Stephen Conroy, said in an e-mailed statement. The claims are “serious,” she said.

The allegations may complicate a proposed takeover of Austar United Communications Ltd. by Foxtel, 25 per cent-owned by News Corp. The deal, if approved by Australia’s competition regulator, would create the country’s largest pay-TV provider.

Pay-TV Competition
The BBC said NDS paid a hacker to crack the pay-TV technology of British rival ITV Digital and leak the codes online, contributing to the company’s collapse in 2002. At the time, ITV was threatening pay-TV revenue at BSkyB, BBC said.

“NDS has consistently denied any wrongdoing,” News Corp. spokeswoman Miranda Higham said March 26. A federal jury and appeals court that heard similar allegations “rejected” the claims, as did the U.S. Department of Justice, she said.

NDS, now co-owned by London hedge fund Permira Advisers LLP, is being sold to Cisco Systems Inc., the largest maker of equipment for computer networks, for $5 billion.

Vivendi Universal SA’s Canal Plus unit sued NDS in the U.S. in 2002 over the same allegations and eventually resolved the lawsuit by selling an Italian business to News Corp.

U.S. satellite-TV broadcaster Dish Network Corp. accused NDS in court arguments in 2008 of hacking the security code of its access cards and causing at least $90 million in damages.

NDS, which provided encryption technology for Dish rival DirecTV Group Inc., was accused in that case of recruiting satellite-TV hackers and pirates to crack codes. A jury in California found that NDS wasn’t liable for a 2000 Internet post with information on how to hack Dish’s cards.

Stolen Hard-Drive
The internal e-mails cited by the Australian Financial Review are from a stolen hard-drive that was used as evidence in Echostar’s pay-TV piracy trial against News Corp. in a U.S. court, NDS spokeswoman Amy Lucas said today in an e-mail.

EchoStar and Dish became separate companies in 2008 when EchoStar Communications Corp. changed its name to Dish Network Corp., focusing on satellite television, and spun off EchoStar Corp.

James Murdoch has given up several influential positions following the phone-hacking scandal where journalists intercepted the mobile-phone voice mails of politicians, celebrities and victims of crime to get scoops.

Auction house Sotheby’s said March 16 that Murdoch will leave its board. He resigned from the board of London-based drug maker GlaxoSmithKline Plc in January and stepped down as executive chairman of News Corp.’s U.K. unit, News International, last month.

News Corp. has said James Murdoch will focus on his main job as deputy chief operating officer to oversee the company’s international television operations.

Lawmaker Report
The younger Murdoch’s future at BSkyB also hinges on a report that U.K. lawmakers are preparing on the phone-hacking scandal following testimony he gave the committee last year that was later contradicted by former subordinates.

Lawmakers began the inquiry in July after Murdoch said Parliament had been misled about the extent of phone hacking during a previous probe in 2009. It has questioned him twice for the new report, once alongside his father Rupert, News Corp.’s 81-year-old chief executive officer.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

–With assistance by Jonathan Browning in London and Joe Schneider in Sydney. Editors: Simon Thiel, Tony Aarons.

To contact the reporter on this story: Erik Larson in London at [email protected] Amy Thomson in London at [email protected]

To contact the editor responsible for this story: Anthony Aarons at [email protected] Kenneth Wong at [email protected]

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