Hack Attack
Page 33
Over the previous seven days, various senior politicians and foreign leaders had arrived with some fanfare at the front of the building, waving at the photographers and stepping through the famous black door. This visitor had been asked to avoid the watching eyes of the media. This was an important visit – the first official meeting between the new prime minister and a person who held no government post – but it was secret. This was Rupert Murdoch coming for tea, to give the Conservative leader a chance to thank him for his support during the election campaign. As he came in from the side alley, he was greeted by one of Cameron’s closest advisers, Andy Coulson.
This was a sociable time for Murdoch’s men and women. On the following weekend, down at the Hay literary festival on the Welsh borders, his executives from BSkyB entertained three Conservative MPs and five members of the new Conservative Cabinet, including the new junior minister responsible for the media, Ed Vaizey. They also entertained one former Labour minister, Tessa Jowell, who pointedly asked Vaizey if his private office knew that he was accepting hospitality from BSkyB while holding a brief for government policy on the media. Vaizey, according to one witness, ‘went a bit pale’.
Very soon, Murdoch’s UK chief executive, Rebekah Brooks, was a guest at the prime minister’s official rural retreat at Chequers, forty miles north of London. His editor at the Sun, Dominic Mohan, became the first editor to be allowed in to meet Cameron; his editor at The Times, James Harding, was the second; his editor at the News of the World, Colin Myler, was the first Sunday newspaper editor.
It is a rule of life in the power elite that there is no such thing as a purely social act.
The following month, on 15 June 2010, James Murdoch confirmed the rumours that had been bouncing around the media world for months when he announced the biggest deal in the history of his father’s global corporation: News Corp would buy the entire remaining shareholding of BSkyB, to go with the 39% which they already owned. This was big. With an opening offer of 675p a share, which rose eventually to 850p, News Corp had set aside £8.2 billion for this one project. Thomson Reuters, who specialise in financial data, rated it as the year’s most expensive single cross-border deal, not just in the UK but anywhere in the world.
News Corp had spent more than two years nursing their plan, gathering cash and waiting for the right political moment to make their move. That moment had arrived, albeit with an unforeseen complication. The election on 6 May had seen the Conservatives win the most seats, but not enough to have an outright majority in the House of Commons. For five days, Gordon Brown had remained in post while he and Cameron separately attempted to link up with the Liberal Democrats, whose seats now held the balance of power. Finally, with the Sun baying for Brown’s blood and accusing him of being a squatter in No. 10, Cameron had won the day and formed a coalition government with the Lib Dems.
Now, with the unpredictable Brown ousted, News Corp were ready. For Rupert Murdoch, this was a chance to take complete control of the richest broadcaster in Britain, with an annual income of £5.9 billion, compared to the BBC’s £4.8 billion, with all that that meant for his commercial power. It was a chance, too, for him to become not only the biggest newspaper player in the country but also the dominant broadcaster, one of only three TV news providers (along with the BBC and ITN), one of only two radio news providers (along with the BBC) and the giant of pay TV with 67% of viewers, with all that that meant for his political power. More than that, it was a chance to use BSkyB’s massive operating profit, then running at £855 million a year, to borrow even more money and to take over one of the few remaining global media groups which was still bigger than his. Time Warner or Disney were the favoured targets. Then, finally, nearly sixty years after Rupert Murdoch inherited his father’s share of a single newspaper in Adelaide, News Corp would be the biggest media business in the world. As if to mark his rise into the final heights, the mogul had recently baptised his daughter, Grace, in the Holy Land waters of the River Jordan, with his guests, including Tony Blair, all dressed in white. If all went well, the deal would be done in time for his eightieth birthday in March 2011.
For James Murdoch, however, there was an extra attraction. If News Corp controlled BSkyB, its cash flow would make it the company’s biggest single earner, tilting the balance of power from New York to London, from father to son. According to two News Corp sources, Rupert Murdoch knew very well that the bid was another round in James’s power-grab but thought that he could control him. That illusion was quickly shattered when James upset News Corp’s plans to run the bid from New York by giving the job to Deutsche Bank in London before his father had made a move. ‘We were left at the gate,’ according to one senior executive in New York.
However, to seal the deal, the Murdochs first had to do what they least liked doing: they had to handle the media regulators, particularly the hated Ofcom. News Corp was armed with the weapons of passive power: a special relationship with government, based on the privilege of access and the advantage of fear. It also had problems: all the irritations of democracy and a great many silent enemies.
On 15 June, James Murdoch telephoned the new Secretary of State for business, Vince Cable, to give him formal notice of the bid. Cable was potentially a problem. He had never been part of the plan – a Liberal Democrat with whom News Corp had no relationship, thrust into government by the need to form the coalition. Worse, Cable was clever and one of the few British politicians who genuinely understood the world of high finance. Worse still, he had a track record of tough and outspoken criticism for capitalists who abused their power. It would be up to Cable to decide whether to refer the bid to Ofcom.
James Murdoch, however, was sure he was on to a winner. Without irony, he glanced back to his study of ancient history, to the moment when Julius Caesar risked everything to seize absolute power for himself, and decided that the internal code name for the bid should be ‘Project Rubicon’. In Caesar’s case, the politicians who held power in Rome turned and fled when they heard that the mighty general had marched his army across the River Rubicon to attack them. In James Murdoch’s case, he looked down on those who now held power in London and evidently expected an equally easy adventure.
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There were two key players on the small team which James Murdoch had assembled in London to pilot the bid: Matthew Anderson, head of communications and strategy, known as Rasputin to some senior executives in New York who openly loathed him as James’s Yes Man; and Fred Michel, head of public affairs, a very English Frenchman, clever and charming, who had settled in the UK to specialise in the lobbying of politicians. From the outset, Vince Cable was hard to handle.
Simply, he refused to have anything to do with them. Following his phone conversation with James Murdoch on 15 June, Cable’s officials warned him that, in deciding how to react to the bid, he was required to act in a ‘quasi-judicial’ role, applying the law without any form of political consideration. Cable duly cancelled his plans to go to News Corp’s annual summer party the next day and closed his door to the Murdochs.
At first, this caused only a little worry to the News Corp camp. James was convinced that Cable could not possibly call in Ofcom and ignored close advisers who implored him to make a public case for the bid. ‘They have no right to review this,’ one adviser recalls him declaring. ‘If they do refer it, we’ll sue them in court.’
For a while, he seemed to be right. Fred Michel bypassed Vince Cable’s closed door by speaking to Cable’s colleagues and officials, reporting back that all seemed well. Indeed, it emerged, Cable’s officials had written Cable a briefing paper which advised that he had no grounds to intervene. James Murdoch visited the new Secretary of State for the media, Jeremy Hunt, who had remained close to News Corp. Hunt was coy about the relationship. On his way to meet James for dinner after a reception in May, he had tried to hide behind a tree to avoid a group of journalists. Now – just as Cameron had met Rupert Murdoch in secret – he chose to meet James without any officials to
record a minute. In New York, Rupert Murdoch dined with David Cameron and found him as amiable as ever. Cameron may well have noticed that Murdoch’s Australian newspapers had just engaged in an aggressive campaign which had helped to oust his opposite number in Canberra, Kevin Rudd.
It was early in August when the mood began to change. Vince Cable received a twenty-page brief from Enders Analysis, a specialist media consultancy in London run by a sharp-witted American, Claire Enders. She warned that the bid would not only reduce the number of news owners but would also allow News Corp such a powerful commercial advantage – merging their news operations, outbidding rivals for the rights to sports and films, offering cut-price deals for advertisers – that they could squeeze the life out of other media companies, thus further reducing the number of news owners. She urged him to ask Ofcom to review the bid. Cable – as he later explained to the Leveson Inquiry – began to worry.
By mid-September, with some encouragement from Claire Enders, a group of media organisations had formed a loose alliance to oppose the bid. Fear of retribution from the Murdochs made this difficult. Virgin Media, who had just signed a new deal to swap output with BSkyB, refused to join. Channel 4 nearly joined and then backed out. The BBC joined and then found themselves on the receiving end of such a caterwauling scream of protest from the Murdoch papers, that they backed out. The Guardian, the Mirror Group, the Financial Times and British Telecom (who were involved with pay TV) all joined the alliance, with the Mail and the Telegraph nervously agreeing to help as long as they did not have to say anything in public.
Fred Michel began to pick up worrying signals. The New York Times had published its big story about phone-hacking, and Tom Watson and other MPs, including some of Vince Cable’s Lib Dem colleagues, were beginning to link the scandal with the BSkyB bid. The new media alliance were sending letters to Cable, who decided to commission an independent lawyer to tell him whether he had the power to bring in Ofcom.
News Corp turned up the temperature. The owner of the Daily Mail, Lord Rothermere, found himself on the end of an angry phone call from James Murdoch. One of Vince Cable’s fellow Lib Dem MPs, Norman Lamb, had a conversation with Fred Michel which so alarmed him that he immediately wrote a note about it: ‘An extraordinary encounter. FM is very charming … They have been supportive of coalition. But if it goes the wrong way, he is worried about implications. It was brazen. Vince Cable refers case to Ofcom – they turn nasty.’ Michel later told Leveson that, while Lamb may have felt a threat, he had not intended to deliver one. The power of fear.
Fred Michel started trying to find ways to get round Vince Cable’s closed door. He suggested that they ask the editor of The Times, James Harding, and the European editor of the Wall Street Journal, Patience Wheatcroft, to speak to Cable’s close ally, Lord Oakeshott – a potentially improper abuse of the journalists as political agents. Alternatively, he suggested, The Times editor might interview Vince Cable himself and then he – Fred Michel – could ‘pop in at some stage to give him an update’ on the bid. The fact that Cable had made it very clear that this would be a breach of his quasi-judicial role made no apparent difference. At the Conservative Party conference, early in October, Michel and Rebekah Brooks lobbied senior ministers, including Jeremy Hunt, whose office continued to send News Corp signals of encouragement. Rebekah Brooks, staying close to David Cameron, was a guest at his private birthday party on 9 October.
The power of News Corp’s lobbying briefly became public in mid-October as Cameron moved against the Murdochs’ old enemies, Ofcom and the BBC. The government took away 28.2% of Ofcom’s budget for the next four years, nearly a fifth of its staff and some of its most important legal powers. They then froze the BBC’s licence fee for six years, effectively cut its budget by 16%, removed 25% of the funding for its website (which was particularly disliked by News Corp) and made it close most of its magazine business. Both of the Murdochs’ target organisations were deeply weakened.
But there were limits to News Corp’s power. They had no formal deal with Cameron, only their special relationship which allowed them to push hard for what they wanted but which was countered by other pressures. Ofcom lobbied energetically against them, warning that the attack on them was too brazen to be accepted by the public, and succeeded in persuading Cameron not to fulfil his promise to abolish the regulator altogether. James Murdoch had loudly demanded Ofcom’s death and is said to have been furious at Cameron’s compromise.
The BBC had originally been confronted by Jeremy Hunt with the threat of even deeper cuts in their spending, but Hunt had to recognise the popularity of the BBC and had been forced to give ground when he was told that the director general, Mark Thompson, the chair of the BBC Trust, Sir Michael Lyons, and every other member of the trust would resign together in protest if he persisted.
Then Vince Cable moved. The independent lawyer to whom he had gone for specialist advice had given him clear advice that he had the right to intervene and, on the evening of 3 November, he announced that he was asking Ofcom to review the bid for BSkyB on the grounds, as he later told Leveson, that ‘the Murdochs’ political influence had become disproportionate’. Ofcom had to report back by 31 December, and, if they said there was a problem, Cable could then refer the bid to the Competition Commission for an investigation which would be slower, deeper and far more expensive for News Corp to deal with.
Cable received loud support the next day from numerous members of the House of Lords, including the former director general of the BBC, John Birt, who recalled how he had once met a government minister who was due to go to see Rupert Murdoch and ‘I do not exaggerate: the minister was actually shaking at the prospect.’
James Murdoch again was furious. He instructed lawyers to try to sue the government but then dropped the plan. He went to the prime minister at Chequers, and complained bitterly. Soon afterwards, Rebekah Brooks called the executive director of the Telegraph, Guy Black, told him he was an ‘arch plotter’, angrily insisted that he must disband the media alliance opposing the bid and claimed that Cameron had told James that the bid would go through. Black checked, found this was not true and resisted the instruction.
James’s troubles were deepened by the fact that he was now effectively at war with his father. After months of vilification, he had succeeded in forcing Gary Ginsberg, the director of communications in New York, to resign. But when James tried to engineer his right-hand man, Matthew Anderson, into Ginsberg’s position, his father angrily blocked him.
There was another round of friction over a bizarre project to spend $30 million on a poultry and cattle business in Western Australia. Rupert was backing it because the business belonged to an old friend and ally, Ken Cowley. In the beginning James also backed it: he is politically green around the edges and planned to turn the land into forest, to sell carbon credits to improve the company’s environmental record. His father’s advisers derided what they called the ‘chicken farm’ and, when finally James recognised that the project was a non-starter, he agreed to go to his father to urge him to abandon it. Told of this, the older man refused to see him. ‘Fuck James,’ he said, according to one of his closest advisers.
Two sources who were close to the Murdochs say that at around this time, the feud between the two men became so bad that advisers from both camps persuaded them to hold a summit meeting. This idea itself rapidly became part of the dispute. They say Rupert reluctantly agreed to a meeting but said James must come to him in New York. James also agreed to meet – but insisted that his father come to his HQ, in London. The advisers moved in like a flock of nannies dealing with kids fighting over a toy and are said to have finally succeeded in persuading the two men to meet in the middle – literally in the middle, of the Atlantic. In the Azores.
So it was, according to the two sources, that the old man and the young pretender flew in to the remote islands from their respective encampments, and the old mogul took charge and dictated his terms: ‘You’re coming to New York. Nobody
else is going to run Europe and Asia. It’s being disbanded. And if you don’t agree, you’re fired.’ James, they say, decided he had overplayed his hand and agreed to be simultaneously promoted and brought to heel, accepting that in the following year, he would be given the new title of deputy chief operating officer and that he would move to his father’s side in Manhattan.
Meanwhile, New York executives noticed ‘a smiley man’ who suddenly started turning up at some of their meetings, sitting, observing, noting and saying nothing. This proved to be a family therapist, hired to attempt to disentangle the emotional knots which bound together Rupert Murdoch and his children.
There was one other problem bubbling in the background: the hacking scandal. By sheer fluke of timing, at the same time as Vince Cable called in Ofcom in November 2010, Mr Justice Vos in the High Court was ordering News International, the police, and Glenn Mulcaire to disclose more and more material. This ran into a potentially significant problem. For several years, the IT department at News International had been warning that their servers were overloaded and suggesting that a mass of old emails must be deleted from the company’s vast electronic archive. From December 2007, some 9 million messages were purged in batches as part of scheduled maintenance. In 2009, it was agreed that there would be a major clear-out of hardware and software in the autumn of 2010 when News International were due to move into their new office in Thomas More Square, known internally as TMS.
Then the policy shifted. Some tens months before the move to TMS, on 20 November 2009, an internal email recorded that ‘the senior executives are looking to introduce a more aggressive purging policy’. This message went on to list the aims of the policy, which included: ‘To eliminate in a consistent manner across NI (subject to compliance with legal and regulatory requirements) emails that could be unhelpful in the context of future litigation in which an NI company is a defendant.’ This was written four months after the Guardian’s story about Gordon Taylor, while Max Clifford was still suing the company for hacking his phone and insisting that he would flush the truth out into the open.