News Corp, shareholders agree to phone hacking deal
By Jennifer Saba and Tom Hals
(Reuters) - News Corp (NWSA.O: Quote) will receive $139 million worth of insurance proceeds in a rare cash settlement that resolves a lawsuit by shareholders alleging the board failed to investigate the company's phone hacking scandal.
The $139 million, which will be paid by the liability insurance for the board members, is the largest cash settlement in such a derivative case, according to one of the plaintiff's attorneys.
In a derivative lawsuit, shareholders seek to step into the shoes of the company and hold board members and officers responsible for harm caused to the corporation. The cases often settle for changes to corporate governance, and as is the case with News Corp, any payment goes to the company, with shareholders benefiting indirectly.
The original lawsuit, brought by plaintiffs including the labor union-owned Amalgamated Bank and the New Orleans Employees' Retirement System, accused the board of refusing to investigate alleged phone hacking because the directors were more interested in protecting the interests of the Murdoch family.
Rupert Murdoch, who is chairman and CEO of News Corp, controls the company. His sons, Lachlan and James, sit on the News Corp board.
Since the breadth of the phone hacking and bribery scandal in Great Britain came to light in 2009, scores of News Corp employees have been arrested and one of its most popular tabloids News of the World was shuttered.
The lawsuit also alleged that Murdoch used News Corp funds for political donations to advance his conservative political agenda, which the plaintiffs said showed the board lacked independence and could run afoul of election laws.
As part of the deal, News Corp said it would adopt enhanced corporate governance procedures - including a policy to disclose to its shareholders political contributions made directly by the company. Continued...