Fox's settlement with Dominion isn't the first time the Murdochs paid their way out of a scandal. Here's how they made it go away last time.
David Moir/Reuters
- Rupert Murdoch is in the spotlight as Dominion and Smartmatic sue Fox in defamation lawsuits.
- Murdoch survived the phone-hacking scandal. In settling with Dominion, it seems he's done it again.
- Dominion said Fox will pay $788 million to settle claims that it aired baseless conspiracy theories.
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 have sought a total of more than $4 billion in lawsuits in Delaware and New York — and yesterday, Dominion bagged $787.5 million in a settlement, about half of its initial demand, just as the case was about to go to trial.
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 wanted to call Murdoch to testify in the trial that is set to start later this month, which would have put the mogul directly in the spotlight.
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 an even bigger lawsuit from Smartmatic, 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.
Fox was in a tough spot going into its trial against Dominion. In March, one of its own producers claimed that she was coached to give false testimony. The Delaware judge overseeing the case made blistering comments and negative rulings, and indicated a desire to investigate claims that Fox had hidden evidence.
Until the last, Fox and Dominion were defiant. Fox said Dominion's case was built on "irrelevant and misleading information," inflated damages estimates, and a narrow reading of the First Amendment. Dominion insisted that it was poised for growth until Fox aired "baseless lies" about its business.
After the settlement was announced, Dominion's lawyer Justin Nelson told reporters that it represented "vindication and accountability." Fox said it was glad to put the case to rest.
"We acknowledge the Court's rulings finding certain claims about Dominion to be false," a Fox spokesperson said in an email. "This settlement reflects FOX's continued commitment to the highest journalistic standards. We are hopeful that our decision to resolve this dispute with Dominion amicably, instead of the acrimony of a divisive trial, allows the country to move forward from these issues."
Smartmatic's lawsuit against Fox, which is taking place in New York, has lagged Dominion's Delaware lawsuit and hasn't resulted in the disclosure of as many juicy details. Smartmatic has also sought sanctions against Fox for not sharing the same material it provided to Dominion.
"Dominion's litigation exposed some of the misconduct and damage caused by Fox's disinformation campaign. Smartmatic will expose the rest," Smartmatic's attorney J. Erik Connolly said on Tuesday.
Fox News is a cash cow
In financial terms, everything is not at stake for Fox News or the Murdoch family with the two defamation cases. Even if Dominion had won the billion-plus dollars it sought, Fox News remains a money making 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 had 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, in an interview before the Dominion settlement. "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 could have had a years-long path before they recover any judgments they might win. By taking a deal, Dominion likely stands to get paid much sooner.
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.
Update: April 19, 2023 — This article has been updated following the April 18 settlement agreement between Fox and Dominion.
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