"Follow The Money"
A full investigation of the alleged criminal conduct of News Corporation International and its subsidiaries must include a full accounting of how they generated funds to pay police, detectives and "secret" settlements, who knew it when, and what the external auditors reported to the Board.
As each new story appears in the news media, the company's external auditors should be examining the company records to determine whether there are or were any possible illegal acts which effect the financial statement. Certainly the closing of the News of the World and the BSkyB bid withdrawal should be enough. Mr. Murdoch has said "he will put it right" and that [they are] "...trying to be as transparent as we possibly can." Thus, he must, and we must all agree:
The police officers who engaged in criminal conduct should be tried and if convicted they should be imprisoned and have the proceeds of their crimes confiscated. Convicted police officers should be banned from working for any government agency and deemed unfit to have an investigator's license.
The companies, their employees and executives that engaged in intentional illegal conduct should -- as the evidence dictates -- be convicted, fined to the full extent of the law, have the proceeds of their crimes confiscated, barred from public contracts, deemed unfit to have a public license to do business, or be placed under supervision of an independent monitor. These are options that are used to punish a company that intentionally violates the law and lies about it to investigators. It should be no less the case just because this particular company publishes newspapers. Where appropriate the companies should also have to pay damages to each victim.
How will we know what happened? Of course, witnesses, informants and company records -- including emails -- are essential. A critical part of the investigation will come from "following the money" -- who was it paid to, how did they get the money from the corporate bank accounts and what company records -- if any -- were created, falsified or destroyed before during or after the alleged criminal events?
Public companies are required to keep accurate financial books and records. It is a crime to falsify the records. In addition, as to U.S. companies, The Public Company Accounting Oversight Board (established by Congress) promulgated Auditing Standard AU 317 which requires auditors to make a very extensive inquiry when they have information that an illegal act has or is likely to occur involving company employees, agents and executives. Allegations of bribing police officers is clearly information which requires inquiry by the auditor. AU 317 is also triggered when:
* Investigation by a governmental agency, an enforcement proceeding, or payment of unusual fines or penalties
* Violations of laws or regulations cited in reports of examinations by regulatory agencies that have been made available to the auditor
* Large payments for unspecified services to consultants, affiliates, or employees.
Given the police investigations, testimony before UK Parliamentary Committees, public statements and interviews of company executives and news stories there should be lots of information in the files of the external auditors about what company executives told them when the "possible illegal acts" became public knowledge.
In a similar fashion the Board and its Audit Committee, the internal and external auditors, executives at all levels, and relevant employees should provide documents and testimony to the police and Judicial inquiries about: what they knew, when did they know it, and what did they do when they found out?
There are many references in the news to the Foreign Corrupt Practices Act. In sum, this US law makes it a crime for public companies: 1) to give things of value to foreign government officials to "obtain or retain business," or 2) to falsify the company's financial books and records. Thus, if News Corp. paid UK police officers in an attempt to obtain or retain business they may have violated U.S. law. If they truthfully entered the payments to the police in the company books and records there may be no violation on the second FCPA prong. However, if an entry was made intentionally and it was materially false, criminal liability can result for the company and all involved.
During the Washington Post's investigative reporting of President Nixon's attempts to cover up the Watergate burglary, it's source, "Deep Throat" gave the reporters the best advice. "Deep Throat" said that the truth would be discovered if they "follow the money." They did and it ultimately led to the resignation of President Nixon. The result of the News Corp. investigation is yet to come.
If the investigators in the UK and US governments "follow the money," they will identify the depth of the criminal conduct -- if any -- of the companies, the board members, the executives and the employees.
Illinois Senator Dick Durbin (D) called for a Congressional investigation days after the FBI and the US Department of Justice confirmed they are reviewing the facts.
If Mr. Murdoch is true to his word to "put it right"and to "be transparent" News Corp. officials will not wait for government investigators to ask for documents. They should open all of their books and related legal files (including letters of engagement and instruction) so law enforcement can trace the money trail for some fast answers and to help ensure justice is done for the public and for the victims of any illegal acts.
Theodore S. Greenberg is a former career prosecutor who investigated money laundering, fraud, corruption and violations of the FCPA as Chief of the Money Laundering Section and Deputy Chief of the Fraud Section, at the U.S. Department of Justice, and as an Assistant United States Attorney for the Eastern District of Virginia.