Phone Hacking: US Authorities Preparing to Subpoena News Corp

Saturday, July 23, 2011 by The Guardian/UK
Investigation launced into whether News Corp broke anti-bribery and hacking laws in US

by Ed Pilkington in New York 

 

The judicial screws are tightening on Rupert Murdoch's empire in America as the US justice department prepares to subpoena News Corporation in its investigation into whether the company broke anti-bribery and hacking laws on both sides of the Atlantic.

The Foreign Corrupt Practices Act forbids US-based companies from profiting from bribery in other countries. The news that subpoenas are being drawn up, reported by News Corp's flagship newspaper the Wall Street Journal, comes a week after attorney general Eric Holder said he was launching a preliminary investigation into the media group as a result of the UK phone-hacking scandal.

According to the Journal, the subpoenas will be broadly cast to draw information from the company relevant to the investigation, though final approval has yet to be granted by top justice department officials. In addition, it has emerged that federal prosecutors have begun probing allegations that News Corp's advertising arm in the US hacked into a computer of a competitor as part of a campaign to crush its rival.

A lawyer for the smaller company, Floorgraphics, told NBC he was visited by two federal prosecutors and an FBI agent. News Corp declined to comment on the legal moves.

Mary Mulligan, a former federal prosecutor in the southern district of New York that handles many of the big corporate cases of this sort, said there were numerous directions in which the probe of News Corp could go. "This is a complicated investigation, and a very important matter that's being looked into." She said the FBI and other federal agents would be guided by what they found.

"The facts are going to drive any charges that arise – what was accessed, how it was accessed and where."

One specific allegation that the FBI is investigating is whether News of the World journalists tried to access the phone records of 9/11 victims. The claim was raised in the UK's Daily Mirror, though, so far, no solid evidence has emerged to support it. If the accusations are confirmed, News Corp could be susceptible to prosecution under Title 18 USC 2701, involving unlawful access to stored communications, or 2703 and 2704 if the mobile phone messages are found to have been stored on a separate server.

News Corp also faces a possibly lengthy and costly federal probe into whether it broke anti-bribery laws as part of the illegal News of the World phone hacking in the UK.

The company is potentially liable under the Foreign Corrupt Practices Act (FCPA), which bans US-based companies from profiting from bribery and corruption in other countries.

News Corp is a US-based firm, its headquarters on Sixth Avenue in Manhattan.

FCPA experts have suggested that it could be brought under the auspices of the act because News of the World journalists bribed police officers in the UK in search of exclusive stories that in turn increased sales and generated profits.

It is not a defence for News Corp executives to argue that they were unaware of the bribery. Under the FCPA, a company can still be penalised if it should have known – what is called "willful blindness".

News Corp could also come under the scrutiny of the US Securities and Exchange Commission (SEC), which is jointly responsible with the justice department for policing the FCPA.

The SEC will want to know whether News Corp properly declared all its activities in its accounts or whether it tried to hide any bribes made within the UK under false accounting returns.

It is not known precisely what information investigators are seeking from News Corp under the subpoenas, but it could include News of the World accounts which would then be examined by forensic accountants.

News Corp itself seems to be most anxious about the FCPA side of the federal investigations, judging from the legal team it has assembled – some of the heaviest hitters in American legal affairs.

They include Brendan Sullivan, a formidable trial lawyer once described as "the legal equivalent of nuclear war", and Mark Mendelsohn, who used to head the justice department section that decides which FCPA cases to prosecute. He is joined by Michael Mukasey, a former US attorney general, and his legal partner Mary Jo White, who represented Siemens in one of the largest FCPA cases ever.

The Siemens case underlined how serious an FCPA prosecution could be for News Corp. In 2008, the engineering company admitted bribing foreign officials around the world and paid a record $800m (£490m) in settlement. That included $350m in disgorgement – a repayment for the profits it was estimated to have made as a result of the bribery.

No figure exists for how much money News of the World made out of its phone hacking activities. Under the FCPA, a rough calculation would be made which News Corp could be forced to disgorge.

Obama Asserts FBI Can Get Phone Records Without Oversight

Saturday, February 12, 2011 by the McClatchy Newspapers
by Marisa Taylor
WASHINGTON — The Obama administration's Justice Department has asserted that the FBI can obtain telephone records of international calls made from the U.S. without any formal legal process or court oversight, according to a document obtained by McClatchy.

That assertion was revealed — perhaps inadvertently — by the department in its response to a McClatchy request for a copy of a secret Justice Department memo.

Critics say the legal position is flawed and creates a potential loophole that could lead to a repeat of FBI abuses that were supposed to have been stopped in 2006.

The controversy over the telephone records is a legacy of the Bush administration's war on terror. Critics say the Obama administration appears to be continuing many of the most controversial tactics of that strategy, including the assertion of sweeping executive powers.

For years after the Sept. 11 attacks, the FBI sought and obtained thousands of telephone records for international calls in an attempt to thwart potential terrorists.

The bureau devised an informal system of requesting the records from three telecommunications firms to create what one agent called a "phone database on steroids" that included names, addresses, length of service and billing information.

A federal watchdog later said a "casual" environment developed in which FBI agents and employees of the telecom companies treated Americans' telephone records so cavalierly that one senior FBI counter-terrorism official said getting access to them was as easy as "having an ATM in your living room."

In January 2010, McClatchy asked for a copy of the Office of Legal Counsel memo under open records laws after a reference to it appeared in a heavily excised section of a report on how the FBI abused its powers when seeking telephone records.

In the report, the Justice Department's inspector general said "the OLC agreed with the FBI that under certain circumstances (word or words redacted) allows the FBI to ask for and obtain these records on a voluntary basis from the providers, without legal process or a qualifying emergency."

In its cover letter to McClatchy, however, the OLC disclosed more detail about its legal position, specifying a section of a 1978 federal wiretapping law that the Justice Department believes gives the FBI the authority. That section of the law appears to be what was redacted from the inspector general's report and reveals the type of records the FBI would be seeking, experts said.

"This is the answer to a mystery that has puzzled us for more than a year now," said Kevin Bankston, a senior staff attorney and expert on electronic surveillance and national security laws for the nonprofit Electronic Frontier Foundation.

"Now, 30 years later, the FBI has looked at this provision again and decided that it is an enormous loophole that allows them to ask for, and the phone companies to hand over, records related to international or foreign communications," he said. "Apparently, they've decided that this provision means that your international communications are a privacy-free zone and that they can get records of those communications without any legal process."

That interpretation could be stretched to apply to e-mails as well, he said.

However, Bankston said, even if the law allows the FBI to ask for the records — an assertion he disagrees with — it would prohibit the telecommunication companies from handing them over.

Meanwhile, the refusal to provide to McClatchy a copy of the memo is noteworthy because the Obama administration — in particular the OLC — has sought to portray itself as more open than the Bush administration. The decision not to release the memo means the details of the Justice Department's legal arguments in support of the FBI's controversial and discredited efforts to obtain telephone records will be kept from the public.

The FBI and Justice Department have refused to comment on the matter.

For years, the Bush administration had refused to release the memos that provided the legal underpinning for harsh interrogations of overseas terror suspects, citing national security, attorney-client privilege and the need to protect the government's deliberative process.

In April 2009, the Obama administration released four of the Bush-era memos that detailed many of the controversial interrogation methods secretly authorized by the Bush administration — from waterboarding to confining prisoners in boxes with insects.

Experts that track government spying and the Freedom of Information Act said the refusal to release the FBI memo to McClatchy appears to be improper and contrary to the intent of FOIA.

Since the memo appears to be exclusively on the OLC's legal justification for getting the phone records, the Justice Department should be able to release at least portions of it, experts said.

"It's wrong that they're withholding a legal rationale that has to do with the authorities of the FBI to collect information that affects the rights of American citizens here and abroad," said Michael German, a former FBI agent of 16 years who now works for the American Civil Liberties Union. "The law should never be secret. We should all understand what rules we're operating under and particularly when it comes to an agency that has a long history of abuse in its collection activities."

Sens. Richard Durbin, D-Ill., and Ron Wyden, D-Ore., demanded more than a year ago that Attorney General Eric Holder release a copy of the memo.

The Justice Department has responded, Wyden said this week, but he declined to elaborate on the exchange.

"I do think the level of secrecy that surrounds the executive branch's interpretation of important surveillance law is a serious problem," he told McClatchy, "and I am continuing to press the executive branch to disclose more information to the public about what their government thinks the law means."

When President Barack Obama authorized the release of the interrogation memos, he said at the time that he was compelled to release them in part because of an open records lawsuit by the ACLU.

"While I believe strongly in transparency and accountability, I also believe that in a dangerous world, the United States must sometimes carry out intelligence operations and protect information that is classified for purposes of national security," he said.

Obama said he'd concluded the documents could be released because they wouldn't jeopardize national security and because the interrogation techniques described in the memos had been widely reported. By then, the practices were no longer in use.

The FBI's activities discussed in the most recent and still secret OLC memo also have been widely publicized. An inspector general report that revealed the existence of the FBI memo was one in a series on the FBI's informal handling of telephone records and it concluded the bureau had committed egregious violations of the law.

When revealing the existence of the OLC memo, the inspector general described it as having "significant policy implications that need to be considered by the FBI, the Department, and the Congress."

Since 2006, it appears the bureau has refrained from using the authority it continues to assert, according to another heavily redacted section of the inspector general's report.

"However, that could change, and we believe appropriate controls on such authority should be considered now, in light of the FBI's past practices and the OLC opinion," the inspector general warned.