(July 11, 2011) — Pension funds in the United States and other institutional investors have sued News Corp. following the ongoing British phone hacking scandal.
Last week, the company announced that it would shut down the UK-based tabloid News of the World, following allegations that employees hacked into the voicemail messages of a range of public officials, celebrities, and members of the royal family. The paper published its final edition on July 10. According to Reuters, shareholders alleged “rampant nepotism” and “failed corporate governance,” addressing revelations involving the newspaper.
The plaintiffs include a trustee for several investment funds, and union and pension funds led by the New Orleans Employees’ Retirement System and the Central Laborers Pension Fund. The lawsuit aims to force directors to pay damages to News Corp for having breached their fiduciary duties.
The shareholders claim that the board failed to intervene when it learned of the allegations of abuse by News Corp chairman and CEO Rupert Murdoch and the allegations of phone hacking. Additionally, the shareholder group has accused New Corp’s board of failing to execute proper oversight when it initially learned of the hacking nearly six years ago. “These revelations should not have taken years to uncover and stop,” the funds claimed in an amended complaint filed July 8 and made public today, obtained by Bloomberg. “These revelations show a culture run amuck within News Corp. and a board that provides no effective review or oversight.”
“Although the scandal first came to light in 2005…it is inconceivable that Murdoch and his fellow Board members would not have been aware of the illicit news gathering practices,” the complaint said. “And yet, the Board took no real action to investigate the allegations until July 7, 2011, when Murdoch selected two of his co-directors to deal with the imbroglio.”
The latest allegations supplement a lawsuit originally filed in May 2011 in Delaware Court of Chancery.
To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742