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Old allegations of spying could haunt News Corp. in U.S.

Even though lawsuits have been settled, that wouldn't prevent the government from revisiting such allegations in investigations of possible phone hacking in America.

July 29, 2011|By Joe Flint, Los Angeles Times
  • News Corp. headquarters in New York.
News Corp. headquarters in New York. (Bloomberg )

As British lawmakers and Scotland Yard investigate allegations of illegal phone hacking by News Corp. and its now-closed News of the World tabloid, old accusations of corporate espionage made against the media giant in the United States could receive new attention in the weeks ahead.

Over the last decade, several lawsuits against units of News Corp. alleged corporate espionage — specifically, hacking into computer systems of business rivals to gain competitive information. In some cases, the companies that filed claims were acquired by News Corp. and the suits went away.

Most of these cases are likely past the time when legal action could be brought, but these allegations could provide a hook for a fishing expedition by the government to determine whether hacking was limited to News Corp.'s British tabloid or part of the broader corporate culture.

"They absolutely will look at past conduct," said Rebecca Lonergan, a former prosecutor in the U.S. attorney's office who teaches at USC's Gould School of Law. She said past behavior is a factor that the government would consider in determining whether a criminal investigation is merited and to show a corrupt corporate culture.

"Old information can be relevant to a prosecution based on new, recent conduct, and can even be part of such a prosecution," said Anthony S. Barkow, executive director of the New York University School of Law Center on the Administration of Criminal Law.

The case receiving the most attention is a 2004 lawsuit filed by a New Jersey marketing company called Floorgraphics Inc. against News America, a publishing unit of News Corp. Floorgraphics competed against News America in retail advertising and marketing.

That suit, filed in New Jersey federal court, alleged that News America "intentionally, knowingly, and without authorization" broke into its computer system and "repeatedly accessed, viewed, took, and obtained FGI's most sensitive and private information." The matter was later settled, and then News Corp. bought Floorgraphics in 2009.

Last week, Sen. Frank R. Lautenberg (D-N.J.) asked the FBI and Justice Department to revisit the Floorgraphics case as investigators look into accusations that News of the World reporters attempted to listen to the voice mail messages of victims of the Sept. 11, 2001, attacks.

"I wanted to make sure that you were fully aware of the case of Floorgraphics and News America as it may be relevant to your current investigation," Lautenberg wrote. Federal officials have contacted at least one lawyer who represented Floorgraphics in its suit against News America, one person with knowledge of the matter said.

News America is not the only News Corp. company that has been accused of bad behavior.

News Digital Systems, or NDS, faced similar allegations almost a decade ago by three companies: Vivendi's French pay-TV operator Canal Plus and U.S. satellite broadcasters Dish Network and DirecTV.

NDS makes set-top box technology to deter the theft of satellite television signals when they enter a customer's home.

In 2002, however, Canal Plus claimed NDS engineers had cracked its secret code, extracted the anti-piracy software and leaked it on the Internet. Dish and DirecTV alleged misappropriation of trade secrets. These actions were an attempt to give NDS a competitive advantage by weakening its rivals, the suits alleged.

In the case of DirecTV and Canal Plus, both suits went away when News Corp. struck deals with the companies. In 2002, News Corp. bought Vivendi's Italian pay-TV platform Telepiu, and in 2003, it took control of DirecTV.

Settlements in some of the suits would not prevent the government from digging into the cases, Lonergan said, because the government is not bound by those settlements.

A News Corp. spokeswoman declined to comment for this story.

joe.flint@latimes.com

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