Fox mogul Rupert Murdoch survived the phone-hacking scandal. Dominion's $1.6 billion lawsuit will test whether he can do it again.
David Moir/Reuters
When billionaire media tycoon Rupert Murdoch was forced to answer questions from UK lawmakers in July 2011 about claims that his newspapers had illegally hacked into the voicemail boxes of hundreds of celebrities, royals, and ordinary people to dig up dirt, he was apologetic.
"Invading people's privacy by listening to their voicemail is wrong," he said, pledging to help with the police investigation and adding that he was "shocked, appalled and ashamed."
"This is the most humble day of my life," Murdoch said.
But two years later — when he appeared before two dozen employees of his newspaper The Sun who were still facing legal heat — he sang a different tune. He thundered against "incompetent" police for dragging out their investigation and showing up to arrest journalists at their homes.
He said he wished his company hadn't cooperated with police. After one journalist read a letter about the impact the arrests had on their families, Murdoch said he'd like to stuff the message down the throats of the corporate lawyers who advised him to play nice.
The phone hacking affair cost Murdoch dearly. In 2011, News Corp. abandoned its effort to take over the TV network Sky over fears that the UK government would block it. One industry publication calculated that News Corp. faced about $1.4 billion in legal fees, settlements and other costs in connection with the scandal.
Now, two voting-technology companies, Dominion Voting Systems and Smartmatic, want to make another Murdoch media property pay even more for Fox News's role in spreading election denial. The two companies are seeking a total of more than $4 billion in lawsuits in Delaware and New York, and the situation has gotten worse and worse for Fox since February.
Murdoch is once again reputationally and financially exposed. Internal messages from Fox News hosts and Murdoch himself showed them careening through what one executive called an "existential crisis" after angering Donald Trump and his supporters with accurate coverage of Joe Biden's victory. Attorneys for Dominion want to call Murdoch to testify in the trial that is set to start later this month, putting the mogul directly in the spotlight. Even a settlement would likely result in Fox shelling out a hefty payment.
But the phone-hacking scandal showed how Murdoch has weathered challenges to his power before. Through a mix of loyalty and ruthlessness, he emerged still holding the reins of the media empire that he'd grown into maybe the most influential publisher in the English-speaking world. Even at 92-years-old and facing potentially billions in damages, there's good reason to believe this isn't the end for Murdoch or his flagship channel.
How Rupert Murdoch survived the phone-hacking scandal
For more than a decade, British newspapers run by a subsidiary of the Murdochs' News Corp. paid private investigators hundreds of thousands of pounds to help them dig up dirt. In 1999, one of the investigators, Jonathan Rees, was caught on a recording paying crooked cops and bank employees for information and bragging about how much the News of the World, run by the subsidiary News International, was willing to pay for the information he was digging up, the Guardian reported.
Starting around 2003, the News of the World began to rely heavily on an investigator named Glenn Mulcaire to dig through trash bins and do whatever else it took to get information that its reporters couldn't, the Independent reported. One method of generating stories, which he shared with reporters so they could do it themselves, was hacking into voicemail boxes of the famous — celebrities, royals like Prince William, and their associates.
In 2006, Mulcaire and News of the World reporter Clive Goodman were arrested and criminally charged, but News International insisted that phone-hacking was not a widespread practice. In the years that followed, however, the Guardian published reports suggesting there was more to uncover, exposing more than £1 million in settlements that had been paid to victims of phone hacking. The scandal grew to engulf numerous tabloids beyond the News Corp.-owned papers, including The Daily Mirror and Daily Mail.
Some of the News of the World payments to PIs were made in cash, with vague expense claims filed to cover them up. But some of the settlements the company paid required sign-off by executives including Murdoch's son James, then-chairman and CEO of News International. Nathan Sparkles, who leads the UK group Hacked Off, said senior editors and business leaders at the company essentially pleaded ignorance.
"Why did no one ask these questions about massive amounts of money being handed out to people for essentially no reason?" he said.
The Murdochs quickly found themselves in the crosshairs of UK lawmakers and cracks emerged in Rupert's empire. In the weeks leading up to the testimony of Rupert Murdoch and James in UK Parliament, the Guardian reported that Mulcaire had hacked the voicemails of missing UK teenager Milly Dowler, who was later found to have been murdered. Three days after that report, the News of the World announced its closure. News Corp. announced that it was ending its takeover bid for Sky that same month.
In Murdoch's version of events, he was let down by his subordinates. He would not step aside, he told Parliament, because he was the best person to clean up the mess. When asked by a lawmaker who he blamed for scuttling his plans for corporate expansion, Murdoch pointed the finger at his competition for their coverage of the scandal.
"They caught us with dirty hands, and they built hysteria around it," he said. "A mood developed which made it really impractical to go ahead."
In addition to shuttering News Of The World, the scandal led to layoffs and eventually to James Murdoch's resignation.
None of it shook News Corp. shareholders' faith in Rupert Murdoch, who cast himself as the victim of a cover up. Three months later, 85% of them voted for him to remain on the company's board.
"Murdoch was 10 years younger, Fox News was in its apex of power," said Angelo Carusone, who leads Media Matters, a left-wing organization that monitors conservative media. "They were able to contain the fallout."
Murdoch is once again under pressure, but the Dominion lawsuit is different
The crisis that confronts Murdoch and his businesses in the US today is very different from the one he survived in the UK.
While the illegal newsgathering efforts of News UK's papers took years to come to light, Fox News and its parent Fox Corp. were sued just months after the 2020 election for repeatedly airing far-fetched conspiracy theories to millions of viewers.
And while the phone hacking scandal came at what was arguably the zenith of Murdoch's empire, Fox is closer than ever to handing off the reins to a successor. Murdoch is approaching his mid-90s, and according to Vanity Fair, he has suffered from a number of serious medical issues in recent years. At the wedding of his granddaughter last summer, the day after he was released from the hospital for a bout of COVID-19, his son, the Fox Corp. CEO Lachlan Murdoch, was holding him up the whole evening, according to the Vanity Fair report.
Dominion Voting Systems sued Fox News in March 2021, including 20 examples of damaging claims that pro-Trump guests like Sidney Powell and Rudy Giuliani made in interviews with Tucker Carlson, Lou Dobbs, Maria Bartiromo, Sean Hannity and other Fox News stars. Hosts and their guests, the lawsuit claimed, made Dominion's name synonymous with corruption and criminality among millions of viewers.
"Fox took a small flame and turned it into a forest fire," the lawsuit said. "As the dominant media company among those viewers dissatisfied with the election results, Fox gave these fictions a prominence they otherwise would never have achieved."
Another key difference from the phone-hacking scandal is the presence of written records that show Fox execs knew exactly what was going on. Texts and emails among Fox producers, on-air talent, and executives, including Murdoch himself, showcased their anxiety that reporting that Donald Trump had simply won fewer votes than Joe Biden in battleground states would lead viewers to change the channel or lose faith in elections.
In an email to his son Lachlan, Murdoch said the network managed to duck "a Trump explosion." Other messages showed Murdoch wondering whether hosts Sean Hannity and Laura Ingraham "went too far," and stressing the need for Republican victories in the Georgia Senate runoffs.
"Everything at stake here," Murdoch wrote in a message to Fox News CEO Suzanne Scott.
The reaction of the White House to the Dominion revelations has been muted compared to the UK government's response to phone-hacking reports — an interview snub here, a snarky email there. UK lawmakers, by contrast, threatened a multibillion-dollar acquisition, suggesting that Murdoch may not meet the "fit and proper" standard to hold broadcast licenses. US law has no such requirement.
Carusone, of Media Matters, predicted that would change after the Dominion trial.
"I think you're gonna start seeing issues with the Armed Forces Network, on military bases," he said, referring to the government channel that rebroadcasts content from a variety of outlets. Of Democrats, he said, "They're not turning it into a partisan issue when it could be."
Last month, Fox's legal position became more perilous after Abby Grossberg, a top producer for Bartiromo who moved to Carlson's show and alleged she was a victim of sex discrimination, claimed that she had been coached to give false testimony. She recently claimed that Fox News withheld secret recordings of Giuliani and Powell. Fox disputes her claims.
And earlier this month, a Delaware judge ruled that it was "CRYSTAL clear" that none of the statements by Fox that Dominion challenged in its lawsuit were true, reducing what Dominion would have to prove at trial.
Fox argues that its platforming of Trump surrogates who made conspiratorial claims about Dominion was protected by the First Amendment. If jurors disagree, though, Fox's attorneys appear ready to go on the attack against Dominion's damages claims, with a Fox lawyer saying at a hearing last week that Dominion had a strong 2022.
"While Dominion has pushed irrelevant and misleading information to generate headlines, FOX News remains steadfast in protecting the rights of a free press, given a verdict for Dominion and its private equity owners would have grave consequences for the entire journalism profession," Fox Corp. chief communications officer Brian Nick said in a statement.
Dominion, meanwhile, argues that Fox's actions are not protected by the first amendment and were defamatory. It also states that the company's business was harmed by the conspiratorial statements that Fox aired, and intends to prove that the broadcaster was reckless in its promotion of dubious claims about Dominion.
"The evidence will show that Dominion was a valuable, rapidly growing business that was executing on its plan to expand prior to the time that Fox began endorsing baseless lies about Dominion voting machines," a spokesperson for Dominion told Insider in a statement. "Following Fox's defamatory statements, Dominion's business suffered enormously, and its claim for compensatory damages is based on industry-standard valuation metrics and conservative methodologies. We look forward to proving this aspect of our case at trial."
Dominion's lawsuit is set to go to trial on April 17. The lawsuit brought by Smartmatic in New York is not as far along.
Fox News is a cash cow
In financial terms, everything is not at stake for Fox News or the Murdoch family. Even if Dominion wins the billion-plus dollars it's seeking, and especially if it settles for a smaller number, Fox News remains a moneymaking machine.
In the last quarter of 2022, Fox Corp. netted $321 million on $4.6 billion in revenue. Nearly all of the company's profits in its last fiscal year came from the cable network programming segment that houses Fox News. As of the end of last quarter, Fox Corp. is sitting on more than $4 billion in cash — about the sum total of what Dominion and Smartmatic have asked for.
"There's a lot of reasons to think it might not be a financially material problem for Fox," said Barton Crockett, an analyst with Rosenblatt Securities. "It's a large company with a lot of cash on its balance sheet."
The same can't be said for Newsmax and OAN, the small cable networks that enjoyed a brief ratings bump among Trump loyalists after the 2020 election. Not only are those networks also facing defamation lawsuits related to the election, but they are in a fight for their lives after DirecTV, which they rely on for distribution, opted to stop carrying them.
Fox has made the same boilerplate statements about "vigorously" defending itself that many businesses do in the face of big legal threats. In February, it added the line "including through any appeals" to its statement about its defense plans, indicating that Dominion and Smartmatic may have a years-long path before they recover any judgments they might win.
The polarized nature of the 2020 election dispute may also insulate Murdoch and Fox News from the kind of reputational blowback that took place during the phone hacking scandal. While there was widespread public outrage and castigation from UK lawmakers across the political spectrum, conservative media and politicians in the US have largely ignored the case.
Even if Fox's balance sheet comes out intact and the average Fox News viewer goes unaware of the scandal, the employees responsible for airing falsehoods could still be punished. Murdoch said in his deposition that executives who "knowingly allow lies to be broadcast" should be "reprimanded, maybe got rid of."
But so far — despite speculation that Scott, Fox's CEO, may be shown the door — no heads have rolled. And during the phone-hacking scandal, Murdoch showed fierce loyalty.
In the 2013 recording of a conversation with journalists who were being investigated, Murdoch pledged his "total support" for staffers not just charged, but even convicted of criminal acts. He even kept the door open to rehiring them.
"I won't say it, but just trust me," he said.
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