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More strife for the Murdochs as lawyers scrap over who did what and Liz Murdoch’s $214m Shine windfall is revealed

What you really don’t want in a long-running and damaging dispute is to fall out with various firms of lawyers you’ve hired but News Corporation seems in danger of doing so as two new law firms, Farrer & Co (the Queen’s solicitors) and Burton Copeland have been dragged into the phone hacking scandal.

Both were retained by News Corp to advise it on various issues relating to the company’s own ‘investigation’ and the settlements it reached with some hacking victims including PFA boss Gordon Taylor. Another law firm Harbottle & Lewis has already disputed News Corp’s version of its role in the affair, calling its evidence ‘misleading’, which is pretty seismic for establishment lawyers.

At best it looks as though News Corp’s extensive use of lawyers was primarily an exercise in trying to kick the scandal into the very long grass. If Farrer and Burton Copeland reveal precisely what James Murdoch asked them to do (as they’ve been asked to by the Commons media, culture and sport committee) we may finally find out if there was a cover-up or not.

At the same time it has been revealed that Rupert Murdoch’s daughter Elizabeth personally received $214m for her stake in independent production company Shine which News Corp has bought for $673m.

This has annoyed some American shareholders who have called the deal ‘nepotism.’

Shine is a highly successful production company, making shows like the Tudors (which may be dodgy history but has sold well) and MasterChef, which has become a bizarre global phenomenon.

But critics of the deal claimed that Shine was always bound to succeed simply because of the Murdoch connection. News Corp was a minority shareholder in Shine and Rupert Murdoch’s Fox and BSkyB broadcasters were always buyers of last resort for its products, an advantage not enjoyed by rival indie producers.

Added to this is that the price looks toppy (which has clearly benefited Liz) and Murdoch’s broadcasters are quite capable of making their own programmes. So did News Corp really need Shine anyway?

News Corp, which is a quoted company although it doesn’t always act like one, has also revealed in broad terms the damage it might suffer from the phone hacking scandal: “We are not able to predict the ultimate outcome or cost of the investigations. Violations of law may result in civil, administrative or criminal fines or penalties. It is also possible that these proceedings could damage our reputation and might impair our ability to conduct our business,” it says.

The scandal has already cost it the deal to buy all of BSkyB, which would have increased its profits by $1.6bn or some 50 per cent at a relatively modest cost of $8bn for the 61 per cent it doesn’t own.

It has also closed the profitable News of the World newspaper leaving it with hefty redundancy payments for the paper’s 200 staff and its legal bills must be running into many millions.

None of this will worry Rupert Murdoch as much as the increasing likelihood of son James losing the planned succession to the top job as he becomes more embroiled in the phone hacking scandal.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.
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